Organizations can be paralyzed by the prospect of irreversible change. But “no way back” isn’t as big a barrier as it seems, says Duke behavioral economist Dan Ariely.
The fear that there is no way back can seem an insurmountable barrier to churches or other organizations facing great change. But their leaders need to remember that it is not as big an obstacle as it might appear, said Dan Ariely, a behavioral economist at Duke University.
“There’s something about changing the whole future of the organization,” Ariely said. “But there’s also something about just experimenting.” Rather than being paralyzed by fear, organizational leaders should test their assumptions, try different things and see what works, he said.
“You need to be incredibly courageous to say, ‘I’m going to take a very different tack and approach things very differently,’” Ariely said.
As a behavioral economist, Ariely studies how people actually behave -- using experiments that sometimes include toys such as Legos and Bionicles. What he finds, contrary to classical economic theory, is that they are not always rational. In his best-selling book, “Predictably Irrational,” Ariely discussed the many biases that lead people into making unwise decisions. In his latest book, “The Upside of Irrationality,” he examines the positive and negative effects of irrationality.
Ariely is the James B. Duke Professor of Behavioral Economics at Duke University. He has an M.A. and a Ph.D. in cognitive psychology from UNC-Chapel Hill and a Ph.D. in business administration from Duke University.
Ariely spoke with Faith & Leadership about “The Upside of Irrationality” and lessons for institutional leaders. The video clip is an excerpt from the following edited transcript.
Q: What is behavioral economics?
In standard economics, we make assumptions about how people behave: people are rational; they compute everything; they always work in their best self-interest. Starting from that perspective, you make conclusions about how people would behave and how institutions should be built and so on.
In behavioral economics, we have no assumptions about how people behave. Instead, we put people in different situations and observe how they behave. We often find that they don’t behave as you would expect, and they don’t behave rationally.
Q: But as your book title suggests, that’s not necessarily bad, right?
That’s right. If you could create people that are completely rational, would we want to live among them? The answer is that some things we would want to eradicate, but there are some things that are actually quite precious about human irrationality that we would want to encourage.
Imagine you walk down the street and you find a wallet full of money, and nobody sees you or has a chance to catch you and there are no consequences. What would a rational person do? They would take the money and go home, right? The fact that people often give the money back or try to find the person who lost it is irrational, but it’s wonderful.
You would really want to live in a world like this. You would not want to live in a world where everybody’s just trying to maximize their immediate benefit. Imagine how it would be if you thought that everybody would steal as much as they can. The fact that you trust people, while being irrational, is incredibly useful.
There are many examples like that where people actually behave nicer than what economic theory would predict: trust, the ability to love our kids, help our neighbors, fall in love with our own ideas, find dedication and caring in what we do. All these things are inherently irrational but very useful.
Q: You found that meaning and purpose is an important motivator, more powerful in many ways than money. What does that mean for organizational leaders?
I gave a talk at a big software company to 80 engineers who had worked for two years developing a new product. The week before, they showed it to the CEO and the CEO said, “I’m canceling the project.” They were the most deflated people I’ve ever seen in my life, because they worked really hard and, suddenly, somebody took the rug [out from] under their feet.
They said, “We feel that all the things we’ve been working on were just destroyed in front of our eyes.” I asked them if they now behaved differently, and they said they show up late to work. They leave early. They just don’t care. Then I asked them what the CEO could have done to help them find some meaning in their work.
They came up with lots of suggestions. They said, “What if he allowed us to give a talk in front of the whole company? What if we took the product that we were going to create and think about technologies that could be used for other parts of the organization? What if we build some demos and see how it works for the long term?”
All these would have taken time and money from the CEO, but they would have created meaning. Often people in high positions say, “It’s not worth it,” because they don’t understand how crucial meaning is in motivation. If they did, they would spend more time trying to impart it.
Q: So how do leaders connect people with a broader sense of meaning?
Think about people who write blogs. If you write a blog and you know that nobody will ever read your blog, it’s impossible to write anything. But if you think somebody might read it and give you a comment back, that’s an incredibly motivating element.
It’s about the fact that the fruits of our labor have some kind of survival beyond their pure existence. Somebody else would appreciate it, somebody else would benefit from it; somebody else would appreciate us because we have created it. All these things play a huge role in how we view our own labor.
But if the first part is how to create more meaning, the second is at least don’t suck the meaning out of work, which is what the software CEO did. I think we actually do that a lot.
Q: How so?
Think about a young religious leader who comes to a difficult environment, and they want to maintain their connection with the big church, its meaning and mission. The organization around them can either help them facilitate that or it can choke that.
So if you say, “What is the role of the umbrella organization of any religious organization?” -- it’s to maintain the connection and meaning. But in the same way, the organization can just choke that meaning by giving signals that they are not particularly important.
For example, you might ask to move to X and I decide to move you to Y. If I spend time and I explain it to you, you might understand why this is important, and I could say, “Look, right now you’re in this stage of your life, and these people in this particular community need somebody like you.”
I can do what I think is efficient, but the moment I don’t explain to you why, your whole sense of purpose might be eroded. Organizations have a lot to do in maintaining or, sadly, in eroding a sense of purpose, mission and connection that people can have.
Q: The book also has some interesting findings about the importance of apology. Tell us about that.
Apology is very interesting on multiple grounds. First of all, if somebody offends you, it turns out that apology really works. In one of our experiments, we offended people in coffee shops (by having a test administrator talk on a cell phone while collecting their papers), and we examine what they do. People retaliate. They basically steal money from us when they have a chance to do so if we upset them. If we say “sorry,” they forgive us quite quickly. There’s something very basic about saying “sorry.” In most religions, people say “sorry” multiple times. In Judaism, every prayer almost has an element of request for forgiveness and apology.
Q: In the last chapter of the book, you wrote about the decision you had to make whether to allow surgeons to remove your arm. And you used that as way to talk about “endowment effect” and “loss aversion” -- we overvalue what we have and we tend to want to keep things the way they are. What does that mean for churches and other large institutions?
The basic principle is very simple. We fall in love with what we have. It’s the starting point. It’s the way we frame our lives, and getting more of it is good and getting less of it is terrible.
Every time you get to a certain state you get used to it, and you look at it as that’s your starting point, and more is good and worse is terrible, but you don’t evaluate your overall success. You take for granted what you have right now.
The issue of what we call loss aversion is that we look differently at going down and differently in going up. We’re much more upset when we lose money, for example, than when we gain money. I think this is kind of the ultimate way of looking at the empty half of the glass. Twenty percent of the people could believe in your faith, and that would be wonderful. You could lose 2 percent, and rather than saying, “My goodness, I have 18 percent,” you look at the 2 percent that you lost.
The second thing, of course, is that I think religious organizations in this day and age understand that they need to change. They need to appeal in different ways and have a slightly different message and connect to people in different ways. This change is incredibly painful because it’s a deviation from what you’re doing. It’s not always loss or gain. It’s not the same issue, but it’s really hard to change. You need to be incredibly courageous to say, “I’m going to take a very different tack and approach things very differently.”
I describe in the book how changes that are irreversible are particularly painful. I talk in a sense about cutting my hand. There’s no way back, right? Clearly, there’s no way back; but even, I think, religious -- organizational religious -- changes, some of them have basically no way back. Once you go a certain way, you can’t change what you’re doing. And to understand that this is a barrier that is perceived as bigger than it really is, I think, is very important.
The fear of going over barriers that we think there’s no return back is so high that even when it’s a really good decision to do that, we might be prevented from doing that.
Q: So what does any large organization that’s facing tremendous change do -- whether it’s a church, a university or General Motors?
That’s the thing, right? Organizations of this magnitude or even smaller ones have incredible resistance to change. It’s stifling them, and it’s slowing them down. It’s all about how we’re fixed on where we are.
The other thing, kind of a very different direction, is that we find that organizations are very reluctant to try things. There’s something about changing the whole future of the organization. But there’s also something about just experimenting. So imagine, for example, the Catholic Church could say, “We don’t know how religion will look in the future. Why don’t we take three communities and change some rules?”
You can decide what you’re going to change. It’s a really strange thought, right? But without it, how would you ever know if that works better or worse? Imagine that your goal is to appeal to more people, to make people happier, whatever your goal is -- how do you know what changes will lead you to that goal? The only answer is to try it out.
Q: You suggest in the book that people test their assumptions, push and probe and ask questions.
That’s right, because without it, you will just work on your intuition, and if religious leaders are used to a certain world, they might not even have good intuitions about the world. Imagine that you’re a 60-year-old religious leader and you’re asking yourself, “What appeals to college-aged students these days?”
How good are you at that? What you could do is you could take three universities and you could change the structure of religion in those three universities and see what happens. It could be that it was a huge mistake, and 10 years later you will discover that all of those people became Buddhist or whatever you think is not a good outcome. It could be that you just created a huge benefit.
The biggest lesson from behavioral economics is that our intuitions about the world are often wrong, that we don’t really have a good understanding of why people behave the way they do, and because of that, we shouldn’t rely on our intuition too heavily.
Instead, what we need to do is understand that we might not know the answer and leave it to empirical research, try different things and see how they turn out.