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Health & Fitness

Nassim Taleb

How to be anti-fragile when the virus hits the economy? (update 22/03)

By | Government & Politics, Health & Fitness

Update 18/03

We are now 8 days further into this crisis and the world has gone into various forms of lockdown. There’s a big debate on whether this is the right strategy. It could be the worst of two worlds: We will harm the economy and when shit will hit the fan, we’ll be even more vulnerable. Nassim Taleb takes – as always – a radically different approach. He argues in this paper that lockdown could literarily wipe the virus out in 2 or 3 months. Hopeful.

Update 22/03

I have added a couple of nuances at the end of this blog on austerity.

Update 23/03

Nassim Taleb (the subject of this post) argues that this pandemic is NOT a Black Swan. This doesn’t contradict this blog below. I have included the implication of this argument below.


 

As I’m writing this piece (March 10th 2020), the virus is raging through the economy. Stock markets are heading towards catastrophic losses, and governments are forced to take draconic measures. The virus is going to hit the economy hard. How do we make sense of this all? And what’s the best way to respond as businesses and as a society?  The most useful mental models that come to mind are the concepts of ‘Black Swan Events’ and ‘Anti-fragility’ by Nassim Nicolas Taleb.

Nassim Taleb

Nicolas Nassim Taleb

Covid-19 s a classic Black Swan Event

In The Black Swan, Nassim Nicolas Taleb argues that we humans assume that the world is a fairly predictable place. We believe the stock market will keep on growing. We act upon the belief that the world will keep on evolving towards more prosperity. We assume interests will remain so low; you’d be crazy not to borrow. We keep pumping CO2 into the atmosphere because we believe that nature will keep on absorbing most of the damage we inflict upon her. Taleb argues that we all think we live in Normalistan, and we make all of our decision based on a firm believe in Normalistan. This conviction works very well,… until it doesn’t.

Taleb argues that Normalistan is an Illusion. Once in a while, an extreme and unexpected event happens that turns everything on its head. The classic example is a crash of the stock market. In 2008 everyone was drunk with optimism about the ludicrous profits they could make on the stock market and in the housing market, until the day that Lehman fell.

Taleb calls these events’ Black Swan Events’: Highly improbalistic events that instantly reshuffle everything we thought we knew about the world. People always thought all swans are white until one-day explorers brought a black swan from Australia. This urged us to revise our understanding of the world instantly. Taleb himself made a fortune as a trader betting against ‘black swan events’. He took insurance against the crash of stocks, waited for years until the stock market crashed and got incredibly rich. For a similar story; Watch the Big Short on Netflix.

Poster of the film The Big Short

The Big Short – On Netflix

 

How to deal with black swans: Anti-fragilty

After writing the Black Swan, Taleb followed up with the book ‘Antifragile: Things that Gain from Disorder‘, in which he came up with strategies to deal with Black Swan Events. He argues that most systems cannot cope very well with disorder or unexpected events. Big corporations, for instance, are very robust, which works very well in times of economic booms. However, robustness becomes highly problematic in times of crisis or the face of technological disruption and rapid market transformation. A big corporation is like a tanker, that has a significant advantage in calm, open waters, but is hopeless when it needs to manoeuvre fast and agile.

The opposite of a fragile system is a system that gets stronger from disorder. For instance: Netflix runs the Chaos Monkey on their servers. The chaos monkey is a script that attacks servers or groups of servers. Netflix inflicts constant unexpected attacks upon itself to get stronger when it has to deal with attacks from the outside world. Taleb calls these systems anti-fragile.

Antifragile systems benefit from disorder, obstacles, unexpected events, or change. Silicon Valley, for instance, is very anti-fragile, because it counts on lots of startups to fail because they expect a tiny group of startups to become massively successful. By allowing lots of failure to happen, it increases its chances of stumbling upon success.

Antifragile by Nassim Taleb

Antifragile by Nassim Taleb

Covid-19 is a Black Swan Event

This brings me to the Corona virus. This is a classic black swan event. Out of nowhere, it suddenly threatens the global economy, the unstoppable rise of China, the American elections, etc. Trillions of dollars of values already evaporated in the course of days. And we’re just getting started.

The virus is ruthless in bringing to the surface which systems are anti-fragile and which ones are not. Let’s look at some observations of how obviously fragile our economy is:

  • The world economy, with its just-in-time delivery of goods and services, is very vulnerable. All industries that depend on Chinese production capacity are now screwed.
  • The obsession with ferocious growth through enormous amounts of corporate debt, suddenly becomes highly problematic, now that investors want to get out of high-risk value papers as soon as possible. Debt-filled companies don’t have reserves for dealing with crises.
  • Most health care systems in the world are utterly unprepared for a pandemonium. In our collective free-market obsessions with cutting away redundancies, we optimized to cope with Normalistan. If the spreading of the virus continues as it does today, the US will run out of hospital beds within two months. 
  • Lot’s of SME’s are rapidly getting into trouble: Orders get cancelled, and incomes drop sharply, while at the same time it’s not that easy to cut costs quickly. You can’t fire your staff with a snap of your fingers.
  • The travel industry is not anti-fragile. Airlines are getting big blows. The first airline Flybe has already gone bankrupt. Airline margins are very low, competition is killing, and the business model can only function through continuous growth.

The efficiency maffia holds a firm grip on the economy. And they usually get away with it, until they get surprised by a black swan event. They collectively shout in despair that they had never seen in coming.

The problem is: There are always going to be Black Swan Events. You never know when, but they’ll happen. We have to design our systems – society, work, our personal lives,… – with the expectation of black swan events at heart.

 

Anti-fragility in the face of Corona

What do anti-fragile systems look like? Who will get stronger from this virus-induced economic recession in the making? Here are a couple of principles

  1. The ability to change course fast: anti-fragile systems benefit from a capability to coordinate for rapid change. Singapore got much credit for being the world standard for how to deal with the virus. The government has set up a massive fever-surveillance system, so nearly nobody can remain under the radar for too long (and infect others). Their capability for massive mobilization makes them slightly less fragile.
  2. Companies that have no debts and healthy cash reserves: In times of optimism, it’s very tempting to listen to your accountant and pay dividends. I’m glad we nearly always politely listen to our accountant and then do the exact opposite. We try to protect ourselves against our own optimism bias. We expect bad times to happen and plan for it.
  3. A diversified product offering: Airlines are very vulnerable because, in the case of a pandemonium, people will stop flying for business. But they’ll still need to talk to the business partner they were going to visit in the first place. If airlines would have invested in high quality video conferencing, they might have helped a lot of companies and event organizers to solve a huge problem. The Job-to-be-done of business traveling is not the journey, but to facilitate high-value meetings. It’s not because people stop traveling, that their underlying motivation for traveling has disappeared. For more on Job-to-be-Done: See our post on The Influence Framework.
  4. A Culture of Experimentation: This is a unique moment in time to experiment with video conferencing and collaboration software. Companies that are already used to working from home and video conferencing have an advantage. We are now rapidly experimenting with software tor virtual classrooms and for virtual sprints. If people can’t travel, then we’ll have to redesign our learning experience within a couple of weeks.
  5. Speed up innovation: If your staff now suddenly has time on their hand, then use this opportunity to invest in your content, brand, reputation. Never waste a good crisis, because it allows you to invest in the things you usually don’t have the time for while the economy was going strong.
  6. Take a lot of small risks, instead of one big risk. When the world becomes highly unknown, embrace fast experimentation. Prototype ideas, run pilots and try to get promising signals as soon as possible.

I don’t know how this crisis will evolve, and of course, we didn’t see this one coming. And to be honest, there’s no way to tell if this will play out well. We have to embrace it and practice anti-fragility.

Update 22/03/20

On several occasions I have been writing against fiscal austerity. In my argument, I followed the classic Keynsian argument that governments should do the exact opposite of what people need to do when in debt: spend more. This argument has been defended by Nobel Prize Laureates Joseph Stiglitz and Paul Krugman and has been argued for, both with strong data-support and with a highly entertaining Scottish accent by Mark Blyth, the author of the book “Against Austerity”. (must watch lecture).

However, in the wake of this epic crisis, you could also argue that running a surplus in good times wasn’t a bad idea after all. Both the Dutch and the German government now turn out to have deep pockets for both supporting their economy and lend astronomical amounts of money. The Germans are waking up with the realisation that Merkel wan’t crazy after all.

This is what Economics Professor Tyler Cowen writes on his blog (which really is the essential go-to place during their crisis):

Of course the content of the spending matters a great deal, but this is in principle the right thing to do.  But here is the catch: out on social media, and in the old days of the blogosphere, there was so much Merkel hatred: “the austerity queen who killed thousands,” etc.  But now she has been vindicated.  We all can agree that a government should (on average) run surpluses in good times and deficits in bad times.  Well…2011-2012…those were the good times.  Yikes.

Merkel goes up in status with this, big time.  And of course it is no surprise that a bunch of Germans would have a better sense of what the bad times really can look like.

Update 23/03/20

Nassim Taleb insists that this is NOT a black swan. For the simple reason that the outbreak of a  global pandemic was a highly probable and predictable event. We were warned for it by leading scientists for decades, and we had multiple occasions where we could have tested our capacity to deal with it  (e.g. the SARS-outbreak). He is therefore very harsh on companies that decided to use the abundant availability of cheap capital in the last decade to buy back their own stocks, which would drive up the value, that in turn lead to bonuses dividends for management and shareholders. Taleb on Twitter:

“Explain to me why we should spent taxpayer money to bailout companies (airlines) who spent their cash buying their own stock so the CEO gets optionality, instead of having a crisis buffer. We should bail out individuals based on needs, not corporations”.

BTW: this is the theme of his latest book, called “Skin in the Game”, in which he argues that a lot of terrible decision making could easily be avoided if the ones who took the decision can be both awarded and punished for their decisions. This crisis might teach shareholders something about expecting more skin in the game from the management of the companies they invest in.

Also read: Live like a Hydra: how to practice antifragility in your personal life.

Watch the complete overview of our blogs on behavioural design.

Contact me: tom@suebehaviouraldesign.com.

 

Prototyping happiness

By | All, Health & Fitness, Self Improvement

If I asked you to think about the secret of life, love and happiness, the answer you’d probably least expect would be… prototyping. And yet, I want to argue why prototyping is the open gate to living a happier life. Psychologist Todd Kashdan claims that the number one driver for living a happy life is the pursuit of curiosity. Curious people experience new things, meet new people, experience success, develop new skills, get surprised, etc.

Fear of failure kills curiosity

However, when it comes to the pursuit of curiosity, fear of failure is the big elephant in the room. Our daily life, as well as our professional life,  is filled with a near panic fear for failure: Fear of embarrassment, fear of being held accountable, fear of being confronted with our limitations, the fear of imposter syndrome, etc. The sole purpose of most meetings is to cover the risk of taking risky new decisions.

My co-founder and wife Astrid have a simple mantra to break this pattern. It’s called prototyping. Our default answer to exciting new ideas is: “Great idea, let’s prototype it”. Prototyping comes down to experimenting with a minimal version of something, to figure out what works and what doesn’t work. You can apply this to startups, marketing, but also to your professional and personal life.

Eric Ries argues in the Lean Startup that we shouldn’t think of startups as mini-enterprises, but rather as learning projects. A startup is an experimentation lab in which the founders need to figure out how to generate paying customers before the money runs out. They do this through frantic tweaking with the product, service, proposition, marketing and communication.

The biggest threat to startups is the “reality distortion field” of the founders: the ability to convince themselves and their stakeholders that they have a killer product. But too often, they only discovered too late they were building a solution in the search for a problem.

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Prototyping everything

The cool thing about prototyping is that you can never fail. You can only learn. That’s why Astrid and I prototype everything in our life: From working at home to working where it’s summertime. From the creation of a presentation deck to the development of a new training programme for the Behavioural Design Academy. From running half a marathon to living plant-based and going for zero-emission. We slice the problem into its smallest components, try out a minimally viable version and try to figure out what we could learn. Failure is not an option because every outcome of the experiment is exciting and can help us to make better decisions.

There are only two psychological barriers that cripple innovation: the fear of failure and the ego desire to be seen as an expert. They both block curiosity and hence the road to mystery, excitement, discovery and a little wiiiiii when you discover that something works.

Book a 60-minutes with SUE

Do you consider hiring SUE to learn how we could help you to imrpove your product, service or marketing through behavioural psychology? Book 60-minutes with SUE. Get a Behavioural Design perspective on your challenge. Who knows where it could lead to…

How to create change by design

By | All, Citizen Behaviour, Health & Fitness, SUE Amsterdam & Behavioural Design Academy originals

It’s hard denying we as humankind are facing serious problems today, and things need to change. Global warming is happening as we speak, obesity is overtaking smoking as the number one cause of death.

And for most of us, it isn’t that we don’t care about these problems. Sometimes we care a great deal. Who wasn’t shocked after seeing Before the Flood, the stunning climate change documentary starring Leonardo DiCaprio? Who wasn’t moved by Jamie Oliver’s quest to start a Food Revolution knowing children didn’t even recognize real food like an ordinary tomato?

And even if you weren’t aware of these two specific examples: We all know some serious issues are going on.

It’s a framing game

But the interesting question is why don’t we act? Is it because the issues are too big to comprehend? Or do we feel too powerless to make a change? Might very well be, because they are, at least if you frame them as a problem for humankind or the world.

But if you look at global warming or obesity from a different frame, you come to realize they have one thing in common.

People.

You and me.

We eat sugar. We don’t go to the gym. We save time by buying processed foods in the supermarket. We drive cars. We take flights. We buy loads of packaging and forget to recycle. We love taking long showers and binge watch Netflix on the couch while eating crisps.

This way, you realize that the significant issues we’re facing in the world right now can be brought back to simple daily human behaviour. Things we can comprehend. Things which we could change.

So, why don’t we do it? Why don’t we cook with fresh fruit and vegetables? Why don’t we work out? Why don’t we go out and walk more often, for instance to the recycle container? The answer is simple: Because we don’t. It’s that plain simple. We can play the guilt trip or blame game for a much more extended period, but it isn’t relevant, and it surely doesn’t do us any good. Not us as people. Or us as humankind.

We’re all just irrational.

The only relevant question to ask ourselves is: How can we help people adjust this daily behaviour? How can we nudge people into making better choices on an everyday basis?

I believe the answer is behavioural design. If you want to change behaviour, you need to understand behaviour. You need to know how people make decisions. Why they do things and why they don’t. You need to understand human psychology.

Recent years the understanding of behavioural psychology has skyrocketed. We now know more about the human brain than ever before. To me, the biggest eye-opener was that we all are entirely irrational. Not just a little bit, but for the most part.

We all think we consciously make decisions, we all believe that we control our thinking. But in fact, most of our decisions are made through shortcuts – such as heuristics and biases – and have nothing to do with a rational or controlled thinking process. As one of the groundbreaking researchers in behavioural psychology Daniel Kahneman has put it:

We are very influenced by completely automatic things that we have no control over, and we don’t know we’re doing it.

That explains why the blame and guilt trip game isn’t beneficial. How can you be blamed or feel guilty if most of the time we’re just doing things automatically without even knowing we’re doing it? Dr. Kahneman says it even more prosaic:

We are blind to our blindness. We have very little idea of how little we know. We’re not designed to know how little we know.

To conclude behavioural psychology has given us powerful insights into the human mind.

Challenging a commonly accepted assumption

To me, a crucial part of solving the puzzle of making this world a better, healthier, happier place is the realization that behavioural psychology challenges a commonly accepted assumption that people who make poor decisions, made the conscious decision to do so. But science has shown us that’s not true.

Still, millions of euros are invested in campaigns to convince people to act differently, targeting their thinking capacity. That’s just money down the drain.

But what is the answer then? Understanding how the mind works is just one thing. But how do you translate scientific research into practice? How can it stop me from eating pizza? From buying sneakers for comfort instead of running? From buying plastic bottles instead of refilling my own? How can we apply science to daily life?

Behavioural design is the answer

I think a behavioural design is the only answer. I do realize design instantly opens up associations about the visual, about aesthetics. But if you look at design in a broader sense and if you take a closer look at what designers do, you see their job is to find new solutions to problems using creativity. And there are some fascinating things to learn from the way they work:

1. Just as behavioural psychologists, designers have always taken humans as a starting point. When designing a new chair, they want people to be able to sit on it. When designing a new fountain pen, they want people to be able to write correctly.

2. Just as a behavioural psychologist, designers do empirical testing. Designers have always used early testing with prototypes. They build scale models; they make paper cut dresses, they make beta releases. They watch how people interact, react or behave. And then measure, learn and adapt.

A lot is written about design thinking. Tim Brown, the CEO of IDEO – one of the leading innovation companies – has written a great book on the subject: Change by Design, if you want to get some more in-depth information.

Behavioural design is the symbioses between two things: behavioural psychology and design thinking.

To me, Behavioural Design is the symbioses between two things: behavioural psychology and design thinking. If you combine those two worlds, you’ll be able to come up with better products, with better ideas and better interventions that will help people make better decisions, as you take people and their irrational decision making into account when developing an idea.

Change will come

But to get back to us as humankind tackling the world’s problems, my belief is design thinking is indeed an answer. It will help you:

– See that obesity, and global warming are both behavioural problems on an individual level, making them comprehensive and tangible;

– Understand people most of the times aren’t unwilling, but unable to change their behaviour, making you realize you need ideas that enable them to make better decisions;

– Use design thinking to come up with ideas that influence people’s daily behaviour and get evidence-based results by testing them at an early stage;

– Experience that change will come

– The first step in finding wicked answers to wicked problems is reframing a question to a behavioural challenge.

 

Behavioural design teaches us that the first step in finding a great answer is reframing the question to a behavioural challenge. By doing this, you’ll automatically end up with people. You’ll end up with us. At you. And if all of us make a change on a daily basis, we make an impact. We can change the world. I am convinced.

Astrid

 

 

 


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Astrid is the founder of SUE Amsterdam and The Behavioural Design Academy. Our mission is to unlock the power of behavioural psychology to nudge people into making positive choices in work, life, and play.

In two days of high-end master classes, we train people in unlocking the powerful principles of behavioural psychology and teach them our Behavioural Design Method™ that translates this knowledge into actionable skills to influence personal behaviour or the behaviour of customers, employees, family members or the general public.

Cover image by welovecostarica.com under creative commons license.

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Lose weight using behavioural design

By | All, Food, Health & Fitness, Self Improvement

Lose weight using behavioural design

Nir Eyal – once said: “Never trust a behavioural designer who’s out of shape.” The reason is that being (or getting) in shape or losing weight is all about showing (or stopping) a particular behaviour. And the secret weapon to successfully losing some extra weight is applying some behavioural design principles on yourself. So, if you want to light up your life and shed some extra you, you simply need to unlock the power of behavioural psychology.

Did I say simply? Yes, I did! The uplifting news is: You can quickly learn how to lose weight by using some simple behavioural design tricks, which you can use to effectively influence your behaviour (and I’m going to share The Golden Tip with you in a moment). Doesn’t that lift some weight off your shoulders already? Or, your bum. Or your belly. Or your second chin. Wherever you’d like. I’m all for it.

The Golden Tip

Okay, I understand you are hungry for The Golden Tip now. I can appreciate this appetite for knowledge. I need to make one more pun about eating before I move on, or are am I overfeeding you with puns already? I get it, so here you go. The Golden Rule is:

Ability eats Motivation for Breakfast

Let me explain what this means and what kind of substantial impact it can have on you realizing your goal to shed some weight. According to BJ Fogg – a Stanford professor who has studied human behaviour for years – there are two dimensions of behaviour: Motivation and Ability. For years we all only used motivation in trying to nudge our behaviour. But, most of the times it is much more effective to work on the ability axis. In plain English, making the desired behaviour easier or the undesired behaviour harder to do.

Let me give you an example. You can be very motivated to lose some weight. Most of us truly do. But most of us also don’t. It often takes the perseverance of a top athlete to stay focused and determined on that goal. Now, I ain’t no Olympic qualifier just yet, and my guess is most of you aren’t either. So, my motivation often goes down the drain, and I often switch to unwanted behaviour, like eating that bag of crisps that happens to be lying there. Or, drink that one (okay four) glasses of wine if you’re with friends. Or heating up that microwave meal after working late. No judgment here, we’ve all been there.

You can’t help your motivation from dropping now and then. But if it happens, ability is your secret weapon to success.

The secret weapon to success

But the key to successfully sticking to your weight loss plan lies exactly here. You can’t help your motivation from dropping now and then. But if it happens, ability is your secret weapon to success. By making your unwanted behaviour hard to do or your wanted behaviour easier to do, you’ll succeed. That’s behavioural design.

It may seem like an open door now, but the best ability intervention is not buying the unhealthy stuff: Don’t have any (not any) in your house, so if your motivation breaks you simply can’t eat something bad for you (making the undesired behaviour harder). Another intervention: Do food prepping. Make a healthy snack staple that will last a week, let’s say a healthy banana cake. If you get the 4 o’clock craving, you have that banana cake ready (making the desired behaviour easier). Bye, bye crisps. Something else: Put a toothbrush and toothpaste on your desk. If you get a snack attack, brush your teeth. See if you like to destroy your sweet minty breezy breath with some sugar or fat now. You won’t (making the undesired behaviour less enjoying aka harder).

These are just some examples of behavioural design by making behaviour harder or examples of making it easier. But I hope you get my point. Motivation is excellent, but the number one secret weapon for losing weight is ability.

Maybe you can come up with some more smart ability ideas yourself. I’d honestly love to hear them. Please post them on our Facebook page so that everyone can take advantage of them. I’ll put a healthy banana cake recipe on there too. To get you started.

How you can start right away

To wrap it up, the things you could do right away:

– Remove all unhealthy food from your house
– Make that banana cake or have someone make it for you
– Get yourself a toothbrush and toothpaste to put on your desk
– Analyse your behaviour: When does your motivation crack and where. And try to come up with some ability interventions for those moments (and please share them with us, ’cause we’re fellow crackers, you’re not alone in this)

Good luck!

Astrid

PS If you know someone who’s struggling to lose some weight, please share this article with him or her.

Astrid is the founder of SUE Amsterdam and The Behavioural Design Academy. Our mission is to unlock the power of behavioural psychology to nudge people into making positive choices in work, life, and play.

In two days of high-end master classes, we train people in unlocking the powerful principles of behavioural psychology and teach them our Behavioural Design Method™ that translates this knowledge into actionable skills to influence personal behaviour or the behaviour of customers, employees, family members or the general public.

Cover photo by Steve Rotman under creative commons license.

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