Decision Mechanics

Insight. Applied.

“Nudge Unit” leader writing book

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behavioural insights team

David Halpern leads the Behavioural Insights Team—what used to be known as the UK government’s “Nudge Unit”. It was the first government institution to use behavioural economics to encourage better decision-making.

While the concept is controversial—many people see something sinister in the so-called “libertarian paternalism”—it’s had some impressive successes. In one project they added a statistic to tax reminders that said most people in the recipient’s area had already paid. Rates of repayment rose by 15%.

It’s estimated that this alone could save £30 million per year.

Halpern is writing a book to be released this summer (2015). The title is “The Nudge Unit: Inside the government department that changed our minds and saved us billions”.

I look forward to reading it.

2015—the year of domain expertise?

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CrowdFlower have produced a thought-provoking infographic that considers what’s going to be hot in data science during 2015.

data science what's hot during 2015 infographic

It’s interesting that four of the eight topics point to the importance of domain expertise in data analysis:

  1. Integrated data scientists—people who are in the thick of the problems, as opposed to external analysis who just see numbers
  2. Rich data—focus on what is relevant, as opposed to throwing everything into the bucket
  3. Everyone loves data—user-friendly tooling allows people to analyse their own data
  4. Data scientist with a BA—recognising that you need more than technical skills to make sense of data

I regularly see data scientists struggle to derive value from data as they fail to grasp the needs of the business. There’s a belief that context-free analysis of the numbers will magically reveal incredible insights. Tragically, such a belief often leads to disappointment and the rejection of an important capability.

Business leaders need to be intimately involved with their data, guiding analysis and making sure it bring insights to real-world problems.

Let’s hope that happens in 2015.

Read more in the CrowdFlower blog post.

Crowd control via lollipops

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Closing time is generally the most annoying time for those living next to bars and clubs. Tipsy revellers pour out en masse, shouting and shrieking, into residential areas.

The City of Portsmouth in the south of England has an interesting solution. After numerous complaints about noise they suggested that one club give a free lollipop to each departing guest. Turns out that people can’t shout and suck at the same time. Noise is way down.

Designing the system to produce the behavior you desire is often the least painful solution.

Spreadsheet abuse in the twenty-first century

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Economist and author Thomas Piketty is the latest person to have been burned by spreadsheet modeling.

A Financial Times investigation into the data behind his wildly successful book “Capital in the Twenty-First Century” concluded that

In his spreadsheets, however, there are transcription errors from the original sources and incorrect formulas.

As long as analysts continue to use spreadsheets for business-critical modelling we’ll continue to see these embarrassing revelations.

Review of “You Are What You Decide”

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Regular readers of this blog will know that application always excites me more than theory. I’m always interested in applications of tools or ideas. So, when I heard Sean Brady of Prism Decision Systems was working on a book I couldn’t wait to read it.

Sean is a practitioner. It’s in his blood. I’ve lost count of the times I’ve contacted him only to hear that he was in a room with a bunch of clients helping them make a difficult decision. A tool has to work hard to get into his toolbox, but, once it’s in there, it’ll find itself at the “coal face” on a regular basis.

While the title of his book is “You Are What You Decide”, it’s the subtitle (all modern business books must have a subtitle) that describes the main thrust—”Eight Keys to Better Decision-making”. In the book, Sean distills his twenty years of experience in helping people make decisions into eight areas you need to address to improve your decision-making. He also draws on research in behavioral decision-making, as recently popularized by books such as Kahneman’s “Thinking Fast and Slow”.

The eight keys to effective decision-making are:

  1. Commit resources commensurate with the weight of the decision.
  2. Know explicitly what you are trying to achieve.
  3. Consider all possible options.
  4. Conquer your fear to make a mistake, to fail or to take a risk.
  5. Know and question all your key assumptions.
  6. Be acutely aware of and root out cognitive biases and fallacies.
  7. When making important choices, be deliberate: decide how you will decide.
  8. Act decisively, monitor closely and learn continuously.

Each key is given its own chapter in the book and Sean draws liberally from his own experience (business and personal) to illustrate his points.

While books like the aforementioned “Thinking Fast and Slow” bring theoretical ideas to a mass audience, they are still relatively technical and abstract in nature. “You Are What You Decide” takes a big step towards real-world decision-making showing, in around 70 pages, how anyone can improve their decision-making capability by adopting a few simple behaviors.

Highly recommended.

Oh, and it’s published through Leanpub, so the bulk of the money goes directly to the author (also available on Amazon). What’s not to like?