Optimizing Choice Architecture

September 14th, 2016 | Posted in Clarity, Effectiveness, Fit Leader, Leadership Fitness, Reading List, success by

In life, there are often situations where we want to do the right thing, and yet our choices seem directed in a way that produces unintended outcomes.

Walking through a cafeteria line, we have good intentions to select healthy and nutritious foods, and yet when the desserts are placed at the front of the line, we often grab what is in front of us instead.

In years past, many employers required employees to “opt-in” to a 401(k). As a result, the percentage of employees signing up for these plans (even when free money was on the table from employer matching contributions), remained surprisingly low.

In some companies today, employees are automatically enrolled in a 401(k) plan, and if they later choose not to participate they need to “opt-out”. By simply changing the default from opt-in to opt-out, participation rates have increased significantly.

In each of the above cases, choice architecture was optimized to encourage people to do the things that many of them know are the right things to do anyway.

In Nudge, Richard Thaler (University of Chicago) and Cass Sunstein (Harvard), introduce us to ways of preventing the countless bad mistakes we make in our lives.

Whether it pertains to how we invest our money, what foods we eat or a myriad of other decisions, choice architecture can nudge people toward better decisions without restricting freedom of choice.

This approach, known as libertarian paternalism, encourages individuals to make better decisions without mandating or forcing them to choose in a certain way.

While the words libertarian paternalism may seem oxymoronic, these two aspects of choice architecture actually can lead to desired improvements in our experience.

By libertarian, we mean simply that people should be able to do what they want (smoke cigarettes, eat a lot of candy, choose an unsuitable health plan or fail to save for retirement).

By paternalistic, we mean that in some cases it is appropriate to influence people’s behavior in order to make their lives longer, healthier and better.

Libertarian paternalism means never forcing someone to behave in a certain way, while at the same time nudging them to do the things that will best serve them, now and in the future.

For more examples of how the private sector and government are already optimizing choice architecture to create better decision making and improved outcomes, pick up Nudge.

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