Data overload. Analysis paralysis. Infobesity (yuck). Businesses are drowning in data. 

IDC predicts that by 2025, the world’s data will grow to 175 Zettabytes. To put that in perspective, if you attempted to download 175ZB at the average current internet connection speed, it would take you 1.8 billion years to download – a frustration anyone who remembers dial-up will be only too familiar with.  

And the same is true for us at the human level, too. In 2009, researchers found that the average American consumed 34GB of data per day; with the rise of smartphones, streaming and social media, estimates now put that number at closer to 60GB. That’s more information than an educated person would have consumed in their lifetime 500 years ago.  

What’s more, the amount of data we consume keeps growing each day. A 2021 Pew survey found that 31% of US adults are online “almost constantly”. 

Processing all that info is tough. So how do we make it easier for people to make decisions in a world that keeps feeding us more and more information? The answer might lie in embracing behavioral economics. 

The economics of behavior

According to Investopedia, behavioral economics “relates to the economic decision-making processes of individuals and institutions.” Our affinity for certain brands is an example of behavioral economics. Biases and individual preferences are too. Decisions are shaped by our context and experience – and we increasingly use those as shortcuts to help make decisions. 

“We usually think of ourselves as sitting in the driver’s seat, with ultimate control over the decisions we made and the direction our life takes,” explains psychologist Dan Ariely in his book Predictably Irrational: The Hidden Forces That Shape Our Decisions. “Alas, this perception has more to do with our desires – with how we want to view ourselves – than with reality.” 

Such subconscious decision-making is everywhere. It’s found in the layout of our supermarkets, where we are nudged to buy certain offers and promotions. It’s the difference between opt-in and opt-out marketing. It’s the tiny fly painted onto the porcelain of public urinals that encourages men to have better aim in an effort to reduce cleaning costs (gross, but an actual thing).  

And tapping into the subconscious is an increasingly effective way for organizations to nurture the types of behavior they would like to see in customers, employees and wider organizational cultures. So how do we embrace the opportunities offered by behavioral economics – whilst at the same time avoiding the pitfalls of doing so? 

Emerging best practice

It was a concept that was discussed at length at GDS Group’s recent HR Summit, where Minh Hua, Chief Talent Officer at Stanley Black & Decker, outlined what emerging best practice looks like in this space. 

“For me, there are two types of behavioral economics,” he told an audience of senior HR leaders at the event. “Choice architecture is about designing the context in which humans make decisions. Behavioral architecture is about supporting behaviors that people have chosen to take.”  

Both are important tools for today’s people management leaders. While one looks to influence the decisions that we make, the other looks to reinforce positive actions and behaviors that are already taking place. So where do you begin with designing those architectures? 

For Hua, the starting point is not where you might think. “It’s important not to jump straight into the design,” says Hua. “When you do that, you fall in love with your plans, and confirmation bias makes it extremely difficult to ask critical questions or fully appreciate contradictory data points.” 

Instead, he says, you need to start out by looking at your values. “Focusing on your values isn’t soft, weak or hokey,” he explains. “Changing demographics, the rise of social media, the #metoo movement, Black Lives Matter, LGBTQ rights, Stop Asian Hate, the pandemic: all have contributed to growing awareness of people issues and the importance of having a strong values-based culture. It’s not necessarily about picking a side; it’s about being able to have those conversations in a safe place.” 

The importance of data

With the values as a base, you can then start to use data to inform your thinking – and Hua insists that finding the empathy in what your data is telling you remains a critical element. 

“Data is so often misunderstood, it’s not just about numbers,” he says. “Quant, opinions and experience are all data too, and they all matter. Rarely is the answer found in just one type of data. Diversity is key.” 

He cites Amazon founder Jeff Bezos, who famously once said that when the anecdotes and the data disagree, the anecdotes are usually right. For Hua, it’s about using data to support an empathetic response. “So many of our conversations are not about right versus wrong,” he continues. “As HR leaders, the ethically difficult decisions are around right versus right. Hitting quarterly targets versus making layoffs; how to balance long-term versus short-term thinking; what’s good for the individual versus what’s good for the group; to vaccinate versus not to vaccinate; etc.” 

Navigating through those difficult decisions is the reason behavioral economics is so important: in a world where many of the choices we face hold equal value, we need to better support people along the decision-making process. 

“Good intentions don’t always drive the behaviors we would like to see,” says Hua. “So you need a framework to make it easier for people to make the decisions that result in the best outcomes.” 

Create the right conditions

Hua recommends looking at Stephen Wendel’s CREATE framework as a starting point to better understand the micro-behaviors that influence decision-making.  

And while we need to be cognizant of the ethics of choice architecture, Hua is equally keen to stress that a neutral state does not exist. “We are constantly bombarded by fragments of information that inform our decision-making process,” he says. “We are surrounded by biases, nudges and the structures of the past. So, to not engage in choice architecture is to leave ourselves tied to the way it has always been done.” 

Ultimately, behavioral economics is about reducing friction. Users are inundated with choice, with information. And as Hua says: “We need to make it simpler for them to make the right choices and exercise good behaviors.” 

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