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Leveraging psychology

07.12.10 | 2 Comments


CATEGORIES corporate sponsors, funding and support, non-profit theatre, social media, sponsorship, storefront theatre

If you are part of an active participant organization with a shot at the top 200 in Chase Community Giving, you might want to read this tomorrow, after your adrenaline levels have returned to normal. This is likely to just annoy you and distract you from getting votes, and it’s long. But if you want to know more about manipulation of human cognitive biases, read on!

As we near the end of the Chase Chase, many of us connected to Chicago storefront theater are in the final sleepless stages of a get-out-the-virtual-vote campaign. ChaseCommunityGrabbing.com is not working so well, given last-day server strain, so I can think of at least 5 people who’s heads have probably exploded. Others watch the exploded bits of skull and brain fly past with mounting disdain. Nearly all of us will be very relieved at 11pm tonight when voting closes.

2amt has previously explored the effects on supporters and audience members, and there is a wide spectrum of assumption about just how annoying Chase Community Giving is to those extremely important people. But for participants, this has become an enormous burden, spurring us to contact distant acquaintances, old flames, friends of friends, and anybody we think might have a Facebook account, to beg, wheedle, connive, and trade for votes. I’m on the Board of one Chicago storefront theater that has stayed in the top 200, mostly, for the last few weeks. The only way to stay in the top 200, and to finish in the top 200, is to constantly bring in more votes. A fellow Board member is a political science professor; he is giving us tactical get-out-the-vote strategy tips. I would bet that a fair number of us are doing things today to get votes that we would have preferred not to do at the start of the competition.

But maybe that’s how Chase wants it. After all, they structured this competition to keep us grasping and planting little blue hand prints all over Facebook right to the last minute, with increasing fervor. How? By playing on our cognitive biases, framing the competition in such a way as to reverse our own preferences: to turn us from people focused on building our relationships with others to get a piece of this wonderful money-pie-from-the-sky into people focused on exploiting our relationships out of fear of losing something we don’t even have yet.

This is how it works. When we humans face potential gain, an improvement over our current situations, we tend to be risk-seekers. When we face a potential loss, we tend to be risk averse. And, because we are fallible humans, the very same situation can be made to look like a gain or loss, to spur us onto one kind of action or another. Consider this question, taken from a 1981 paper by Amos Tversky and Nobel Laureate Daniel Kahneman, Israeli-American psychologists who pioneered the study of cognitive biases.

Imagine that the United States is preparing for the outbreak of an unusual Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the program are as follows.

Program A: If Program A is adopted, 200 people will be saved.

Program B: If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.

Which of the two programs would you favor?

If a rational machine were to choose mathematically, it would say either choice is the same. Mathematically, 200 lives will be saved either way (expected lives saved under Program B = 600 lives x 1/3 probability + zero lives x 2/3 probability = 200 lives, unless you see this as a Schrödinger’s cat problem, in which case, I can’t help you). But most humans choose Program A when asked this question. After all, we’re talking about a loss of life here, we don’t want to gamble.

Consider a second similar question.

Imagine that the United States is preparing for the outbreak of an unusual Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the program are as follows.

Program C: If Program C is adopted, 400 people will die.

Program D: If Program D is adopted, there is a one-third probability that no one will die and a two-thirds probability that 600 people will die.

Which of the two programs would you favor?

(questions reprinted as quoted in Judgement in Managerial Decision Making, 7th Ed., by Max Bazerman & Don Moore)

Now, if you apply any scrutiny, you quickly see these are the exact same options as in the first question. But if you hadn’t read the first question recently and critically, how would you have responded? Most humans choose Program D this time, even if they chose Program A in the first question. Why? In the first question, the emphasis was on preventing death, or preventing loss. We get very risk-averse in this situation. In the second question, however, we’ve framed the lives saved as a gain, by wording the options in such a way as to make mass death almost certain. The base expectation in the second question is that many will die, so what should you do to save people? Most people choose Program D, because to gain something, we are more risk-seeking. Whereas, to prevent a loss, we are more risk-averse (so we choose Program A in the first question). The only difference is where you perceive your starting point to be. Are you sure to see people die, and can do something to save some of them? Or are you able to prevent currently alive people from dying? Same question, different emphasis.

To think about it another way, imagine you have $20,000 in the bank. Let’s say you can invest that $20,000 into an entrepreneurial venture with a 75% chance of doubling your money, and a 25% chance of losing it all. Or you can play the lotto with $5 per week and terrible odds. Most people will play the lotto, even though the odds are much worse. We are generally willing to take risks to get something we don’t already have, but it causes us intense anxiety to risk losing something we do already have.

Here is how this connects to Chase Community Giving. When a Chicago storefont theater, like the one I volunteer for, first decided to go for it, and join the competition, most of us felt there was little to be lost. It was OK to go for it and gamble a little bit of our energy and our friends’ tolerance to win a big prize. But now, every charity in the top 200 is in a very different situation. Instead of feeling that we are taking some risks to win, we are now faced with avoiding loss [queue ominous music]. We’ve already started to count the chickens. We are talking about what we can do with it (we have to, because Chase will require detailed applications from the winners in 10 days), and we really do think there is a good possibility we will get to the end of this and win $20,000. If we didn’t think that, we’d likely stop trying.

So, in our irrational minds, this is no longer about Chase’s money that we might win. Instead, this is our $20,000 to lose. This is a big difference, and it makes us more more anxious, and it will feel a lot worse to lose the $20,000 than it would have felt good to win it. Tversky and Kahneman and Richard Thaler (a former professor of mine) have estimated via behavioral decision-making experiments that it feels about twice as bad to lose something as it feels good to win something of the same value. This is the endowment effect (Economist article here behind paywall; dry definition here for free). We put a higher value on what we have than what we don’t have. A mug from our alma mater is worth more to us after we have it than before we had it. Yes, really. And the charities in the top 200, we kind of feel like we already have $20,000, but are at risk of losing it, and we will do almost anything not to.

That is the beauty of the Chase Charitable Giving campaign (for Chase, I mean, whose goal is to get that blue hand print and an association with generosity spread as thoroughly as possible around Facebook). It goes on for a month, so anybody who lands in the top 200 and stays there for a while starts to feel like a winner, and will do nearly anything today, the last day, to stay in that top 200 and avoid losing that status and cash. And for those clustered near the top… The prize gap between first and second place is $150,000. The gap between 5th and 6th place is $80,000. Imagine how hard the 6th, 7th and 8th place contenders are fighting right now, which forces everybody in 1st through 5th place to fight just as hard. I don’t envy them.

So if you’ve been in the top 200, and you don’t end in the top 200 tonight at 11pm, try to remind yourself that you haven’t lost anything but your time, because you never had the money to lose. And if you finish a winner, you need to put your exuberance on hold, and coldly figure out what to do with it. Mo’ money, mo’ problems.

Aaron Andersen

I'm the Sr. Budget Analyst at Chicago Symphony Orchestra, and serve on the Board of BackStage Theatre Company in Chicago as Chair. I got an MBA at the University of Chicago a couple years ago, and I spend an awful lot of time thinking about and working to enhance finance, marketing, and organizational strategy in the performing arts.

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  • Pete Miller

    Good condensation of a powerful finding of behavioral economics. Fear of loss and disappointment (and fear of causing disappointment) block or distort a lot of behaviors in the artistic as well as fund raising processes as well. When one is considering forming a new artistic relationship or embarking on a new artistic project, there is substantial fear of the “Maybe” stage, because if the maybe turns into a no, there will be disappointment and a sense of loss on all sides. Unfortunately, “Maybe” is a very useful rest stop on the road to “Yes.” Therefore a fear of saying maybe gets in the way of saying yes. It's a very close parallel to the $20,000 investment example you give in the article but with reputation and emotional capital as the stakes rather than cash.

  • Pete, that's a valuable insight. I do see arts administrators get intensely anxious in the maybe stage. We know it is a positive phase in negotiation, but it feels like torture. Loss aversion is very powerful.


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