This study of field and lab data strongly suggests that people do not necessarily make better decisions when the stakes are very high. Results highlight the potential economic consequences of cognitive biases.
Despite decades of research on heuristics and biases, empirical evidence on the effect of large incentives—as present in relevant economic decisions—on cognitive biases is scant. This paper tests the effect of incentives on four widely documented biases: base rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning in the Cognitive Reflection Test. In laboratory experiments with 1,236 college students in Nairobi, we implement three incentive levels: no incentives, standard lab payments, and very high incentives that increase the stakes by a factor of 100 to more than a monthly income. We find that response times—a proxy for cognitive effort—increase by 40 percent with very high stakes. Performance, on the other hand, improves very mildly or not at all as incentives increase, with the largest improvements due to a reduced reliance on intuitions. In none of the tasks are very high stakes sufficient to de-bias participants, or come even close to doing so.
Full Working Paper Text (pdf)
Working Paper Publication Date: March 2021
HBS Working Paper Number: 21-102
Faculty Unit(s): Negotiation, Organizations & Markets
Twitter will rely on data to determine whether to keep the new 280-character limit. According to the blog post announcing the experiment, English users of the platform hit the current 140-character limit 9 percent of the time. Whether that group makes use of the extra space, along with many other factors, will determine the experiment’s fate.
3. Scope creep derails the initial experiment. Scope creep refers to experiments that grow beyond their initial objectives (it can also refer to times when clients ask for so much extra work, the initial quote no longer covers the cost of labor).
According to the Standish Group’s CHAOS Manifesto 2012, 43 percent of projects go over budget, beyond the deadline or beneath the promised results. When scope creep begins, projects can end up costing much more than their initial projections. As ROI shrinks and maintenance costs rise, consider how well the experiment is progressing. Some projects deserve extra investment; others should be cut.
4. Users are pushing back. User testing and interviews are critical components of successful experiments. Negative feedback merits a closer look.
Do users genuinely dislike the experiment, or are they simply afraid of change? Jakob Nielsen recommends using five-person test groups to get an accurate assessment. Fewer than five people could skew results, while more than five could become prohibitively expensive.
Related: When to Selectively Listen to Feedback and Ignore What Users Say
User satisfaction is key to any successful experiment. Customers 2020, a study from Walker, estimates that the customer experience will become more important than the price or product features by 2020. Listen to users, judge the merit of their responses and halt the project if they have too many shared complaints.
Related: The 3 Biggest Roadblocks in Product Development
Experimentation is the heart of innovation, but not every experiment will pan out. The solution isn't to stop experimenting, though; it's to recognize early which ideas are worth pursuing and which should be shut down.How Success Happens is a podcast featuring polar explorers, authors, ultra marathoners, artists and more to better understand what connects dreaming and doing. Linda Lacina, Entrepreneur.com's managing editor, guides these chats so anyone can understand the traits that underpin achievement and what fuels the decisions to push us forward. Listen below or click here to read more shownotes.
Not everyone would combine the Japanese art of paper folding with a love for the outdoors, but Anton Willis did. As a kayaker in San Francisco, he couldn’t fit his boat in his tiny studio apartment. But as an architect, he wondered if there might be a design solution that could get his boat out of storage.
After reading a story in the New Yorker about a physicist who became a full-time origamist, Willis began thinking about the possibilities of the folding paper art and whether it could be applied to solve the problem of the collapsible kayak.
He began to tinker. His first design was created with an 8 1/2 x 11 sheet of printer paper. This design led to another and another until his living room turned into an origami workshop, and he was spending his nights and weekends working on this project, blocking out nearly everything else.
“I got weirdly attached,” says Willis. “I kept digging into it, creating better and better prototypes.”
Related: Kathryn Minshew of The Muse: Decide Who You Are, or Have it Decided for You (Podcast)
The 25th prototype would help build Oru Kayak, a collapsible boat company whose kayaks fold up to be stowed in a closet. Today, Willis, as the chief design officer, still starts new prototypes with a single sheet of paper and still understands the importance of making space for obsessions.
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