The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics

In today's conversation, I am joined by Leigh Caldwell, the founding partner of Irrational Agency. He is a behavioral economist and pricing expert with more than 10 years of experience in applying behavioral science commercially. He is the creator of the System 3 Methodology (which we will talk about a lot in today's episode) as well as being the author of The Psychology of Price, and a frequent speaker at academic and industry conferences. That is actually how Leigh and I met in person -- while we were both speaking at IIEX Europe in Amsterdam this past summer. We had been connected on LinkedIn prior to that, and it was so great to chat in person a bit, and then follow up after for a virtual coffee, which of course led to this episode. My conversations with Leigh really got me thinking about what I believe, what I'm familiar with, and what it might mean to open up and consider how...things might not be exactly as they seem. So, what I encourage you to do as you listen to today's episode, especially if you have been familiar with behavioral economics and behavioral science for a long time, is to be open to this idea. Be open to something that goes against what you believe to be true and wonder, "What might that look like?" I think if you allow it to be, this is one of those ideas and episodes that will really stick with you for a long time -- and I love that! Show Notes: [00:39] In today's conversation, I am joined by Leigh Caldwell, the founding partner of Irrational Agency. [03:02] Leigh shares his background and more about who he is. He describes himself as a mathematician above anything else. [04:29] He realized there was something in the world about how people were buying and it wasn't logical or rational. [06:20] There were two directions he went after learning about behavioral science. One was pricing because he felt there was a gap in the market with helping businesses set their pricing. [08:15] Second was that world of what is going on inside the head and what our imagination is made of. This really fascinated him. [09:27] When it comes to pricing, first understand the value that you are providing as perceived by the customers. Then look at the alternative routes to solve the same problem and how much those cost. [11:43] What is it worth to the customer to solve this problem and how can you capture as much as possible of that value? [14:49] You are not your ideal client or customer, so how much you would pay for the thing is not how much the person who needs your services would pay. You often undervalue it. [16:26] One thing that attracted Leigh to economics was the idea of being able to use math to model human behavior. [19:12] When you are using a linear path to predict something complex, you are going to end up in a difficult spot. [21:44] We have to be building, growing, and changing as the field of behavioral science is moving forward. [24:19] System 1 thinking is fast, automatic, and unconscious - things that really are a gut reaction. System 2, the deliberate mind, is meant to be logical and calculating. [25:05] There is another kind of thinking that is not captured by either one, and that is the thinking we typically do when we are daydreaming or watching a movie. It is the activity of imagination. [27:12] Leigh calls this other type of thinking System 3. [29:25] Melina reads the story from a paper he wrote to help us better understand System 3. In the story, what we are experiencing doesn't have the logic of System 2 and it is not a learned reaction in System 1. [31:34] We as humans can generate imaginary emotions and imaginary sensory feelings. [34:20] If you want to understand people's real experiences, you have to allow them to bring in all of the accidental influences that occur in real life and the different places that their minds can wander to. [36:02] There can be real value in how the imaginative process can be useful to brands. [38:11] Choices are important, but narratives are just as important. [40:48] By uncovering the existing connections in people's heads we can show brands how to tap into those stories and play their own part in that customer's narrative. [43:07] By uncovering how people really perceived their client's product they were able to help them tell the right story in their marketing that was consistent with the story that the people already had and wanted. [44:45] You have to understand who you are talking to and what it is you want them to do. [47:41] People need to find ways and the right stories to help them through this challenging period, but brands also need to be able to find how they can play a part in customers' stories even in these challenging times. [48:35] Melina shares her closing thoughts. [49:30] I don't know if there is a System 3 for sure, and what the field might adapt to in the coming years, but it is so cool to realize that we are on the forefront of something amazing. Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: The Psychology of Price, by Leigh Caldwell Branding That Means Business, by Matt Johnson and Tessa Misiaszek Blindsight, by Matt Johnson and Prince Ghuman Nudge, by Richard Thaler & Cass Sunstein Predictably Irrational, by Dan Ariely Connect with Leigh: Leigh's Website Leigh on Twitter Leigh on LinkedIn Top Recommended Next Episode: Leveraging the Power of Prefactual Thinking (episode 232) Already Heard That One? Try These: Status Quo Bias (episode 142) Questionstorming at KIND/Mars with Beatrix Daros (episode 215) Nudging for Good at Walmart with Sarah Wilson (episode 206) Behavioral Bartending with Maker's Mark, featuring Greta Harper (episode 207) Anthropology, Market Research & Behavioral Economics with Priscilla McKinney (episode 196) Anchoring & Adjustment (episode 11) Relativity (episode 12) The Truth About Pricing (episode 5) Neuroscience and Psychology in the Business World, An Interview with Matt Johnson (episode 160) Employee Engagement and Branding, with Tessa Misiaszek (episode 235) What is Value? (episode 8) Time Discounting (episode 51) Do Nudges Work? with Michael Hallsworth (episode 218) Counterfactual Thinking (episode 68) Disney (episode 144) The Power of Story, an Interview with Dr. Michelle Auerbach (episode 145) The Power of Metaphors for Brands with Olson Zaltman's Malcolm and Hannibal Brooks (episode 181) Defaults: The "D" in NUDGES (episode 38) Priming (episode 18) Confirmation Bias (episode 102) Familiarity Bias (episode 149) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter

Today's episode is all about prefactual thinking. Prefactual thinking is closely related to counterfactual thinking, which was episode 68 of the podcast, and this episode originally aired as number 71. In its simplest form, counterfactual thinking is our "what ifs" and "if onlys" where we look back and wonder what might have been if only something had been different. This can be from outside factors or things within ourselves that might have changed an outcome, and our brains are really good at coming up with idealized scenarios where things would have been amazing and perfect "if only" this one thing had been different. Prefactual thinking is when we do something very similar but are looking into the future. Why did I hand pick this episode for you to listen to and reflect upon today? This coming Friday, my guest in episode 233 is Leigh Caldwell. He will talk about why he believes there is actually a System 3. You've heard me talk about System 1 and 2 (or rather, the subconscious and conscious processing of the brain...our elephant and rider) and Leigh says there is something else in there that should be its own category altogether. It has to do with imagining and thinking into the future, so it felt like a good idea for you to have a nice refresher on prefactual thinking today so you are all set and ready to be thinking about this possible System 3 question on Friday. So, as you listen today, think about the possibilities and what might come, and be ready to reflect on this when you tune in for episode 233. (And, if you haven't already, now is a great time to subscribe to the podcast to be sure you don't miss it!) Show Notes: [00:38] Today's episode is all about prefactual thinking. Prefactual thinking is closely related to counterfactual thinking. [01:25] While counterfactual thinking is looking back at how things in the past might have been different "if only"...prefactual does something similar, but looking into the future. [03:39] Goals are so important. As the year is ending you are looking back at what you did, and what you could have done, and also looking forward to what you can do in the future. [04:33] Counterfactuals are looking back at something that has already happened and essentially undoing it in some way in your mind. Prefactuals are when you look to the future and think about what could be. [05:54] When you think about what could happen or how you might succeed in the future, studies show you can actually have great benefits in all sorts of tasks. [07:06] Your brain is driven by its desire to get these chemicals and there are different rewards with each. [08:15] The treat for the brain is in the build-up, the prefactual, so it wants to think through scenarios over and over and it isn't always wired to do this in a positive way unless you put in some interventions. [09:26] Melina shares a real-world email example. [12:05] There are countless examples because our brains dwell on stuff all the time – they are wired for it. And they don't happen in isolation; it is easy to jump from counterfactual to prefactual and back again. [13:18] To use prefactuals for positive behavior change you want to look at the "if / then" and future outcome action ties. [14:04] The specifics give your brain something to process and remember in the future. [16:12] After she received an email letting her know about the error, Melina was able to take some time to think about what could happen (prefactual) and because she didn't dwell too much on what might have been (counterfactual) she could take steps to make it better. [17:38] One key to using counterfactuals and prefactuals for your benefit is to look for the learning opportunity. [20:56] Knowing the true impact is really important before you send anything out. Your brain is going to blow anything out of proportion with the tools it has in its arsenal. [22:25] Breathe, assess, question, action, and reflection. [23:19] Studies have found that people perform better on a task after doing prefactual thinking even if they have no prior experience. This is why role playing and visualization techniques are so important. [25:34] Moving out of the negative counterfactuals and prefactuals into the positive space is such a useful and versatile skill for everyone. [26:35] There is always something to learn and always a way through to the other side. You will get there faster and easier if you structure your counterfactuals and prefactuals to the positive. [26:49] Melina's closing thoughts Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and Support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: The Psychology of Price, by Leigh Caldwell Get it Done, by Ayelet Fishbach How to Change, by Katy Milkman Thinking, Fast and Slow, by Daniel Kahneman Nudge, by Richard Thaler & Cass Sunstein Top Recommended Next Episode: Counterfactual Thinking (episode 68) Already Heard That One? Try These: Get Your D.O.S.E. of Brain Chemicals (ep 123) Expect Error: The "E" in NUDGES (ep 39) The Overwhelmed Brain & Its Impact on Decision Making (ep 32) Peak-End Rule (ep 97) Priming (ep 18) How to Set, Achieve & Exceed Brainy Goals (ep 70) The Power of Habit (ep 22) Availability Bias (ep 15) Framing (ep 16) How To Set Up Your Own Experiments (ep 63) The Top 5 Wording Mistakes Businesses Make (ep 2) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter How to Break the Negative Cycle of 'What If' Thinking Correction: Improving Physical Task Performance with Counterfactual and Prefactual Thinking When Thinking It Means Doing It: Prefactual Thought In Self-handicapping Behavior Fixing Your Brain: A Guide to Balancing Neurotransmitters

Today I am very excited to have Dr. Matt Johnson back on the show to talk about Branding That Means Business, a new book he has co-authored with Dr. Tessa Misiaszek (who will be on the show in a few weeks talking about her background and the aspects she brings to this fascinating project). Matt was on the show in 2021 talking about his other book, Blindsight (which he co-authored with Prince Guhman, who was also on the show last year.) Matt is a professor, researcher, and writer, who received his Ph.D. in Cognitive Psychology/Neuroscience from Princeton University in 2013. His focus now is on bridging the gap between science and business; to accomplish this, he works across several fields including behavioral economics, consumer neuroscience, and experiential marketing. A contributor to major news outlets including Forbes, Entrepreneur, Business Insider, and VICE, and a writer for Psychology Today, he regularly provides expert opinion and thought leadership on a range of topics related to the human side of business. He advises both start-ups and large brands and has served as an expert-in-residence to Nike's Innovation Team in Portland, Oregon. Matt is so much fun and a wealth of fascinating information. We are going to talk about so many awesome things today so you don't want to miss it. Show Notes: [00:42] Today I am very excited to have Dr. Matt Johnson back on the show to talk about Branding That Means Business, a new book he has co-authored with Dr. Tessa Misiaszek. [02:48] Melina and Matt share the similarities in their lives. [04:08] Matt shares his background and how he found himself in the world of neuro and behavioral science. [05:53] His second book, Branding That Means Business is written for the business practitioner on how to build brands and how companies can create enduring brands with consumers and markets. [08:49] One of his goals when writing a book is to write for as broad of an audience as possible within popular science, but also for very niche behavioral science readers. [11:11] Every experience you have consuming content is potentially going to be featured in some sort of written word. [12:22] Twitter can be an amazing resource. Incredible business minds and academics are sharing on Twitter. [15:15] The rule of the brand is to create trust. Trust is an absolute game changer when it comes to consumer dynamics. [17:55] When information or an advertising claim comes from a brand you trust it is much more System 1 oriented and it changes the decision-making process to be much easier and free-flowing. [19:59] Building a brand is like building a house. The goal isn't to just build the house and structure, but ultimately to build a home that creates a positive emotional experience and a sense of warmth and belonging. [22:39] Interactions within the brain and how you feel about it — those associations are so key. [23:16] A brand is an element of the company. It is a tool of the company that adds unique value above and beyond the products themselves and it helps the company differentiate itself from industry competitors. [26:36] We need to know what our brand associations are so we can change them or embrace them. [27:46] How the brand is sculpted at the level of the brain and the consumer and how that is aggregated over the entire market can be very different. [30:36] After research, KitKat completely changed its marketing in Japan and it had a huge impact. [31:50] So often companies and people end up really making things so much harder for us than they have to be. If you let go and have the current take you then you can get somewhere more meaningful. [34:28] Our job as the brand manager is not to be the guardians of the brand image but as the caretaker of it. [36:20] Micro and nano influencers have smaller audiences, but because they are very engaged followers that can be very effective. [38:14] Many people are willing to partner with brands that mean something to them. [40:26] Among younger consumers there is a "learned allergy" to top-down advertising. This is one of the reasons why TikTok has been so huge with product advertising. [43:22] Organic marketing and integrated content are becoming more and more attractive. [46:14] If it is perceived to be a small brand the expectations are that it is going to be a brand that you really know, you could directly interact with it, and you could possibly co-create with the brand. This differs from big brands who should adopt this different strategy. [47:59] Differentiation and consumer perception are important. It really matters to consider consumer perceptions in terms of those expectations. [50:31] Melina shares her closing thoughts. [52:20] Knowing what is going on in the world and finding how you can relate your brand to the current conversation is so key to using branding effectively in your business. Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: Branding That Means Business, by Matt Johnson and Tessa Misiaszek Blindsight, by Matt Johnson and Prince Ghuman Semiotics in Retail, by Rachel Lawes The Speed of Trust, by Stephen M.R. Covey What Your Customer Wants and Can't Tell You, by Melina Palmer Connect with Matt: Matt's Website Matt on Twitter Matt on LinkedIn Top Recommended Next Episode: Neuroscience and Psychology in the Business World, An Interview with Matt Johnson (episode 160) Already Heard That One? Try These: Why We Like the Things We Like, with Prince Ghuman, coauthor of Blindsight (episode 172) The Power of Story, an Interview with Dr. Michelle Auerbach (episode 145) The Speed and Economics of Trust, an Interview with Stephen M.R. Covey (episode 148) Using Semiotics in Retail with Rachel Lawes (episode 191) Priming (episode 18) Novelty and Stories (episode 54) Framing (episode 16) How to create a brainy brand (episode 230) Social Proof (episode 87) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter The Atlantic Annie's Newsletter

Today's episode is all about branding — and specifically, my insights for how to incorporate brain science and behavioral economics insights so you can have a brainy brand that resonates better with your potential customers, clients, members, etc., and is one of those coveted "favorite brands" in the mind of your consumer. When your brand is thinking about becoming a beloved "favorite" it is important to consider the experience people have with you. Becoming a favorite is a lot like dating and marriage. On a first date, you are looking for all sorts of data to help categorize someone as a hero or a zero — you want to be able to cut your losses before you invest too much. It's the same with brands. It is important to not make mistakes. You especially want to be on your best behavior early on in the customer relationship to build up that "favorite" status. The tips in this episode will help you leverage behavioral economics to do just that (including what your brand needs to learn from your favorite actors). Now is a great time to be thinking about your brand and goals for the next year. What changes can your brand make and where is it worth the investment in becoming a more brainy and beloved brand? Keep that in mind as you listen today. Show Notes: [00:41] Today's episode is all about branding — and specifically, on my insights for how to incorporate brain science and behavioral economics insights so you can have a brainy brand that resonates better with your potential customers, clients, members, etc., and is one of those coveted "favorite brands" in the mind of your consumer. [01:26] When your brand is thinking about becoming a beloved "favorite" it is important to think about the experience people have with you, and becoming a favorite is a lot like dating and marriage. [04:14] A brand can take a generic item and turn it into something more. [05:37] Marketing and branding are not the same things. Marketing is all the one-off things that you do to get your name out there. [07:45] A brainy brand knows what it is trying to achieve and builds quantitative and qualitative research projects to test, learn, and grow. [08:26] Truly great marketers (like great scientists) are great questioners. [10:55] Our brain makes associations whether we ask it to or not. [12:35] Priming is really related if you want to make sure you have a brainy brand. You want to make sure you are associating your brand properly with the right things. [15:01] It is important to be strategic and thoughtful about what it is you are doing for your company. [16:51] You need to use the associations of the brain to make it as easy as possible on the customer. Be strategic. Think about how you can make it easy, as well as where they might make an error so you can help them avoid missteps and make the right choice. [18:31] Above all, a brainy brand knows that everything matters. [19:47] Brands have personalities just like people and for good reasons. Known personalities create expectations in our brains. [21:09] Smart brands know the work is never done. [24:04] Method acting is a lot like business branding because they both require a lot of preparation and understanding of things that may never be brought up. [25:16] Brainy brands know everything about who their brand is as if it were a person or a character. [26:31] The other important thing to remember if you want a brainy brand is that perception is reality. [27:28] Brainy brands need to have everyone on board rowing the boat in the right direction. [28:35] Behavioral economics and other studies of the brain look into why people do the things they do and how to use insight to predict what they might do in the future. [29:14] Melina's closing thoughts Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and Support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: Branding that Means Business, by Matt Johnson & Tessa Misiaszek What Your Customer Wants and Can't Tell You, by Melina Palmer Blindsight, by Matt Johnson & Prince Ghuman Contagious, by Jonah Berger How Brands Grow, by Byron Sharp Top Recommended Next Episode: Matt Johnson (episode 227) Already Heard That One? Try These: Why We Like the Things We Like, with Prince Ghuman, coauthor of Blindsight (episode 172) Peak-End Rule (episode 97) Priming (episode 18) How to Set, Achieve & Exceed Brainy Goals (episode 70) The Power of Habit (episode 22) Availability Bias (episode 15)) Framing (episode 16) Surprise and Delight (episode 60) Reciprocity (episode 23) Disney: A Behavioral Economics Analysis (episode 144) Apple Card: A Behavioral Economics Analysis (episode 42) Starbucks: A Behavioral Economics Analysis (episode 73) Questionstorming at KIND / Mars with Beatrix Daros (episode 215) The Overwhelmed Brain and Its Impact on Decision Making (episode 32) Get Your D.O.S.E. of Brain Chemicals (episode 123) Expect Error: The "E" in NUDGES (episode 39) How To Set Up Your Own Experiments (episode 63) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter Unconventional Wisdom How to Make Your Content Go Viral Dogs on the Street, Pumas on Your Feet: How Cues in the Environment Influence Product Evaluation and Choice 15 Actors Who Went to Seriously Extreme Measures for a Role HR and Marketing: A Natural Partnership

Many companies and managers have prided themselves on being strong, always showing confidence in the face of any crisis, and ensuring that people never show weakness or vulnerability. But is this the best approach? Does unwavering strength make a team stronger? Does exposing your weakness increase the likelihood that people will use that against you? What is the best path for a company and how should it encourage its teams to act? That answer is coming to you as we dig into the episode and learn all about vulnerability loops and why they are so critical for fostering strong teams. Show Notes: [00:40] Today is a very exciting episode talking about something really critical for fostering strong teams – the vulnerability loop [02:46] Before we get into the model and what a vulnerability loop is, I want you to take a moment and think about the people you are most closely linked to – those you have a really strong bond with. The people you trust wholeheartedly. Those who you know have got your back no matter what. [05:05] A shared experience where the participants were vulnerable creates a trust bond that is hard to break, even after decades and otherwise drifting apart. [06:57] There are five simple steps in the vulnerability loop, a concept that is attributed to Jeff Polzer, Harvard professor in the department of organizational behavior, but was really popularized by Daniel Coyle when he included it in his book, The Culture Code. Even though they may seem random, every vulnerability loop follows the same five steps. [08:47] To make it a LOOP you can't just acknowledge their vulnerability, it isn't enough to say, "Oh? Why is that?" or something…you can do that too, but you need to reveal something vulnerable about yourself. [09:51] And you don't have to share the exact same thing, but instead it needs to be something that makes you feel a little anxious or nervous to share, you need to feel vulnerable. I get that you want to be able to get trust and closeness without exposing yourself or having that discomfort, but it doesn't work that way. [11:08] You want to hear their vulnerability and then you share a little something to let them know they are not out on the ledge alone and that you are not going to let them fall. You want to show them that you are there to support them to create that ongoing loop of trust. [13:57] The listeners feel more connected to me because I am willing to share those moments of vulnerability. It is a little uncomfortable but a really important part to be connected to all of YOU! [15:05] Well, while we don't have to share our deepest, darkest secrets with our teams or be weepy, fragile messes, being strong, silent, unwavering, and confident all the time isn't going to build real trust and bond a team. We need to be willing to get vulnerable. [15:54] As Polzer said, "People tend to think of vulnerability in a touchy-feely way, but that's not what's happening." "It's about sending a really clear signal that you have weaknesses, that you could use help. And if that behavior becomes a model for others, then you can set the insecurities aside and get to work, start to trust each other, and help each other. If you never have that vulnerable moment, on the other hand, then people will try to cover up their weaknesses, and every little microtask becomes a place where insecurities manifest themselves." [17:01] The first person has to go out on the limb, to make the vulnerable leap to start the conversation – to trust that the other person will reciprocate and catch them…and to keep the moment from stopping and falling flat. The second person is key to keeping the loop going, to opening up a little more to show that they can be vulnerable too – and while it doesn't have to be only vulnerability all the time, this is something that needs a little boost back in – a continual jolt of vulnerability – to keep the loop going. [17:57] Our eyes scan the world around us constantly for potential threats and are perpetually bringing in and processing information – 3 times per second on average. So, if you have a blurred background on (or a really bad virtual one) it is, essentially, sharing continually that you don't trust people enough to let them see the real room you are in. I know that isn't your intention but that doesn't really matter as the brain is going to make its own association. [20:29] One more piece of good news is that you don't need to be vulnerable all the time! This isn't a constant state of uncertainty and stress, but a few key moments that can be paying trust dividends over time are really important. [21:22] When there is increased trust, things take less time and cost less money. When there is decreased trust. or a lack of trust, they take more time and cost more money. Trust until people give you a reason not to and learn from it (don't be a doormat) but also have a short memory, especially for little stuff. [22:20] Trust is key to getting things done in business, and one of the best ways to build trust is with the vulnerability loop. [23:30] In this climate of people feeling undervalued at work, like they aren't appreciated and they don't matter, this is such an affordable way to help them to know that they do matter. You don't have to invest in expensive programs or wellness packages but if you don't have the budget for them it doesn't mean you can't do anything. You can encourage a little bonding and vulnerability and it can go a long way. [26:05] Coyle's questions are a good place to start as you think about question prompts for your team. But asking these types of questions were found to make people feel 24 percent closer to the strangers they went through the questions with than those who had the easier types of questions like in the first set. [26:52] Melina shares some of the questions she really likes from the list of 36, especially for teams. [29:59] You don't have to have the same exact item that you share with someone else, but the flip of that is that it is really important to not judge someone else's vulnerability. [30:28] Being the second person in the loop is key to it being able to form. Make an attempt to be more attentive to the way someone is sharing their message with you. [31:21] One other important thing to remember, is to trust first. Be ready and leap and know that the right people will catch you. Don't get discouraged if someone shuts you down – try again. Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: Influence (new and expanded), by Robert Cialdini The Speed of Trust, by Stephen M.R. Covey You're Invited, by Jon Levy What Your Employees Need and Can't Tell You, by Melina Palmer Daring Greatly, by Brene Brown Top Recommended Next Episode: Using Behavioral Science to Build Connections, with Jon Levy, author of You're Invited (episode 150) Already Heard That One? Try These: Unity (episode 216) Dr. Robert Cialdini and the (Now!) 7 Principles of Persuasion (episode 157) The Speed of Trust, with Stephen M.R. Covey (episode 148) Change Management: It's Still Not About the Cookie (episode 226) Reciprocity (episode 23) Biases Toward Others – Including Groups (episode 46) What Your Employees Need and Can't Tell You (episode 225) Game Theory (episode 62) Herding (episode 19) Social Proof (episode 87) Time Pressure (episode 74) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter How showing vulnerability helps build a stronger team Activating Teams to Fight Burnout and Create Joy in Work

Today's episode is all about the fascinating world of game theory. This episode originally aired on August 23, 2019, and was episode 62 of the podcast. There are a couple of reasons I've selected this to be our refreshed episode this week. For one, with last Friday's episode featuring Annie Duke talking about her new book Quit…you can't think about Annie without thinking about poker, and game theory is so related to that. One of my favorite insights from game theory, which you'll hear me talk about more during the episode, is the difference between playing to win and playing not to lose. As you will hear today, these two things may seem similar, but they are actually very different. And as you reflect upon the episode today (whether it is your first time or something you're revisiting) consider your own life and work and let's build upon the lessons from Friday's episode with Annie about quitting, and how winners need to quit in order to win. Tip: understanding the rules and what it will take to win (so your emotions don't get the better of you) will help you to win any game you are playing. Show Notes: [00:37] Today's episode is all about the fascinating world of game theory. [01:46] You need to know when to be gritty and when to quit. [03:31] Humans aren't rational. Humans don't always make choices that are fully rational. We try to game the system or play the odds and choose routes that are not in our best interest – especially when we think someone may be treating us unfairly. [05:19] In behavioral game theory we need to consider how revenge, fairness, and personal gain all play to the outcomes. The 3 main games in game theory are the ultimatum game, the prisoner's dilemma, and the dictator game. [06:37] In purely rational economic terms it is best to keep the full $10 for yourself. There is no consequence for keeping it and no one will know. In reality, people would give away an average of $3. [08:19] You are playing the odds of being seen, feeling guilty, or whether or not that person will resent you. Whether or not you see each other or will see them again play a big part in your behavior. [10:18] History has a lot to play in the actions people take. Existing relationships help determine actions. [12:39] It is important to understand who has what power in each situation when you determine what to offer and think about how they might react. [14:0312] You can make an extra gesture (surprise & delight) to make a big impact. That first interaction lays a foundation for what people expect and how they feel about you in all your future interactions. [15:58 It is important to understand all the options and variables before taking an action or making an offer. [17:02] In the prisoner's dilemma, as a group they are better to both not say anything and take the one-year's sentence. If they look at their individual personal gain or personal loss they are of course better off with no prison time motivating them to say something. [19:50] As it turns out, a tit-for-tat strategy consistently did best overall. In this way, you cooperate until someone deflects. [20:31] A quick response and a short memory was the best strategy. [21:19] In most real-life scenarios most of us are likely to choose to play fair until given a reason not to. [22:40] As much as we wish it would be, dealing with people is never black and white. There is so much gray impacting every situation and decision. [23:54] Always have written contracts and agreements. Document to ensure clarity. [26:23] Game theory is truly around us all of the time. Pretty much any time you interact with another person, business, or entity game theory comes into play. We play the odds whether we realize it or not. [29:23] Companies used to be able to take advantage of customers much more if they wanted to. There wasn't an easy mechanism for them to be punished. Often the punishment hurts much more than if you did the right thing in the first place. [29:52] Melina shares a story about United playing the odds and losing big time. [32:17] When emotions take hold it can cause people to make bad decisions that they may regret in the long run so try and get some distance and perspective before acting especially if you feel really betrayed and angry. [33:19] When it comes to games many people are playing not to lose instead of playing to win. Winning is a long game. [36:02] Winners quit a lot of stuff because they know what winning looks like. They know the rules, they know the game, and they can see what is helping them reach their goals and what is a hindrance. Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: What Your Employees Need and Can't Tell You, by Melina Palmer Quit, by Annie Duke Thinking in Bets, by Annie Duke How to Decide, by Annie Duke The Speed of Trust, by Stephen M.R. Covey Top Recommended Next Episode: Quit: The Power of Knowing When to Walk Away, with Annie Duke (episode 227) Already Heard That One? Try These: Color Theory (episode 61) Anchoring & Adjustment (episode 11) Change Management: It's Still Not About the Cookie (episode 226) The Truth About Pricing (episode 5) What is Value? (episode 8) Framing (episode 16) Surprise and Delight (episode 60) Reciprocity (episode 23) Biases Toward Novelty and Stories (episode 54) Biases Toward Others – Including Groups (episode 46) What Your Employees Need and Can't Tell You (episode 225) The Speed of Trust, with Stephen M.R. Covey (episode 148) You Have More Influence Than You Think, Vanessa Bohns (episode 197) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter United Breaks Guitars The Iterated Prisoner's Dilemma and The Evolution of Cooperation Behavioral Game Theory The Ultimatum Game - Are people rational? The Dictator Game The Psychology of Revenge (and Vengeful People) An Experimental Analysis of Ultimatum Bargaining Behavioral Game Theory: Plausible Formal Models That Predict Accurately (Behavioral) Game theory

In today's conversation, I am joined by Annie Duke, a former professional poker player (widely known as one of the best female players in the world) who also has an impressive and fascinating background in psychology, which she will talk about on the show today. I've been wanting to have Annie on for ages, she has two other fantastic books called Thinking in Bets and How to Decide, and I am so delighted that she wrote this additional book, Quit, which we are talking about today (and really, she talks about all three books in our conversation). I am so honored and delighted that Annie took the time to chat with me for this interview. We had a great conversation and ended up chatting for over 90 minutes (with about 80 of those recorded). Here on the show today, we are cutting that conversation down to fit in under an hour but if you want to hear the full conversation in detail, come on over to the BE Thoughtful Revolution membership group -- it's our free community of behavioral economics enthusiasts from around the world, and you can check out the full video interview and conversation. Annie is a wealth of knowledge and insights, so you will want to glean every extra moment just like I did, I'm sure – be sure to stick around for monkeys and pedestals! Show Notes: [00:40] In today's conversation, I am joined by Annie Duke, a former professional poker player who also has an impressive and fascinating background in psychology. [03:07] Annie shares her background and how she found herself in the world of behavioral science. [04:41] Her brother was the one who suggested she play poker and she ended up playing poker for 18 years as her profession. [06:05] After eight years as a poker player she started getting asked to give talks. The first talk she gave was to a group of options traders and she talked about how poker might inform your thinking about cognitive bias. From there she started getting referrals and spending more time speaking than playing poker. [07:11] In 2012, she retired from poker to spend more time on the business side of things and started consulting and speaking full-time. [09:13] If you look at anything on Annie's journey from the time she entered graduate school, it is all decision-making under uncertainty. [11:09] The more ways that you are thinking about problems and the different frames that you have to ponder these issues you end up bringing something different to the table. [12:54] Premortems can be very effective if you combine them with other good decision-making tools. [15:14] If you use prospective hindsight instead of just forward planning, research shows you will generate 30% more reasons for failure or success if you didn't do prospective hindsight. [17:14] Self-serving bias is that when bad things happen to us as individuals we tend to blame them on things that are outside of our control. [19:49] Other researchers suggest that premortems need to be done in groups to be successful. [22:42] Thinking in Bets was a book that she had really wanted to write for many years, which is about making decisions under uncertainty. [25:27] One of the things she really talks about in Thinking in Bets is resulting. Resulting is when we look at other people and assume if they have a bad outcome then they made a bad decision and a good outcome is from luck (whereas when we have a bad outcome it is luck and a good outcome is from our good decision making – this is very similar to fundamental attribution error). [26:55] She wrote How to Decide as a companion, which had more practical tools for making decisions. [28:23] Annie shares about writing her new book Quit. [30:44] Most of the decisions you make you can actually probably make faster. The way to decide if you can go faster is by looking at the consequences of getting the decision wrong. [33:01] We are really bad at exercising the option to quit when the time comes. The option to quit is very valuable. [35:02] She shares the many Zoom conversations with influential behavioral scientists she had prior to writing her new book about quitting. [36:36] Science shows that when we quit, we are usually doing it too late. [38:45] One of the problems we have is that once we set a goal we are immediately in the losses. [39:20] Annie shares about the California Bullet Train. [41:51] After getting the project approved once starting the project they realize they have two big problems… (Why didn't they "see" them before?) [44:22] Instead of stopping the project, they approved two pieces of track that don't address the gigantic engineering problems. [46:13] Monkeys and pedestals is an incredibly helpful framework for trying to figure out how you approach projects to find out the information you need to find out the fastest so you can figure out if it is something you want to stick to. [47:26] She shares the monkeys and pedestal's story. You have to start with the monkey (the hard part) of the problem first. [49:11] When you do but up against hard things you tend to turn to pedestal building rather than to quit (similar to bikeshedding). [50:28] You should definitely tackle the monkeys first. [51:51] You follow the premortem by looking at the monkeys and pedestals. You figure out what the monkeys are and then you change your plans according to that. [53:20] Kill criteria are what you could see or find out in the future that would tell you that you ought to quit. [55:01] There is no point in tackling any low-hanging fruit if you can't train the monkey. Figure out the hard problem first. [57:34] Winners quit a lot. That is how they win. Winners sample a lot of stuff, settle on a course of action, tackle the monkeys first, and if the world gives them another signal they switch. [58:41] Winners pick the right things to stick to and they abandon everything else. [60:52] Melina shares her closing thoughts. [61:08] Thoughtful quitting, stopping doing things that aren't serving you anymore isn't a failure -- that is a win. That is a sign of doing great big amazing things! If you never quit, you can never win because you will be spread too thin. Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: Thinking in Bets, by Annie Duke How to Decide, by Annie Duke Quit, by Annie Duke Superforecasting, by Dan Gardner and Philip E. Tetlock How to Change, by Katy Milkman Power of Regret, by Daniel Pink Connect with Annie: Annie's Website Annie on Twitter Annie on LinkedIn Top Recommended Next Episode: Game Theory (episode 62) Already Heard That One? Try These: Loss Aversion (episode 9) Framing (episode 16) The Most Important Step in Applying Behavioral Economics: Understanding the Problem (episode 126) 3 Steps to Better Decision Making, An Interview with Matthew Confer (episode 158) Counterfactual Thinking (episode 68) How To Change, an interview Dr. Katy Milkman (episode 51) Fundamental Attribution Error (episode 92) Planning Fallacy (episode 114) Precommitment (episode 120) Hindsight Bias (episode 167) Bikeshedding (episode 99) Status Quo Bias (episode 142) Endowment Effect (episode 139) Survivorship Bias (episode 110) Mental Accounting (episode 56) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter A Slight Change of Plans Podcast with Maya Shankar Annie's Newsletter

Today's episode is a very special one, it is our first-ever edition from the vault. What does that mean? Well, for one thing, we now have TWO episodes of The Brainy Business coming to you each week, starting with this one. It is an episode from the back catalog that I think is super relevant and timely for you right now, so it got a little refresh. Why this one and why today? Firstly, it is because change is ever-present in our lives and businesses, and in this age of The Great Resignation, quiet quitting, returning to work, hybrid offices and so much more. Managing and leading through change is something everyone seems to be talking about these days, so this episode is one I think will help a lot of people. As you will hear in this episode, change is "not about the cookie" it is more about the way a change is presented than anything else, so you have the power to influence how others react to whatever information you are presenting. Remember change is in the micro-moments, so it doesn't have to be anything big. Look for those small tweaks that could make a huge difference. Show Notes: [00:38] Today's episode is a very special one. It is our first-ever Tuesday episode (double the brainy!!) and our first edition from the vault. [02:14] Change is in the micro-moments, so it doesn't have to be anything big. Look for those small tweaks that could make a huge difference. [03:41] Melina shares the cookie story. I want you to imagine that we are walking down the street... [05:56] It's not about the cookie, the change, or the price. It is about the way the information is presented. [08:28] Change management is leading through change. [09:02] Change and getting people to change is all about selling them on your perspective and getting them to buy in and commit even when money is not being exchanged. [12:02] Our subconscious brain is like a small child. We would all like to think we have grown past this point, but much of our decision-making is still done on this level. [14:25] Consider the ripples. One small decision or word on an advertising campaign or a change conversation can have a different impact on different people and it is based on their perspectives. [16:30] The overall brand and campaign message needs to be consistent. You also need to identify what an individual in each of these groups is supposed to do when they see the message and what they need to hear to get them to take the next step. [18:46] We often run a message for consistency's sake across everything without thinking about what those people need to hear, where they are coming from, and what matters to them. We think about the group as a whole instead of considering the individuals and what they need in that moment to take the best course of action. [20:41] When confronted with change our brains are trained to revert to a place of fear and they are very good at dwelling on small items. [21:56] The endowment effect: our brains favor things they own over other things. [23:55] Studies show it takes double the joy felt by a gain to outweigh the pain felt by a loss. [26:07] When given the choice people tend to go with the status quo and favor it very heavily…especially when there are many options presented. [28:45] Change management conversations are more likely to have the brain flagged and on high alert. [31:32] Be thoughtful of the way the meeting or discussion is framed or called together. If you are delivering bad news or presenting a change you want them to buy in on, you don't want to oversell the meeting. [33:58] You want to make sure the document is outlined in a way that helps them come to the best conclusion themselves so their brain takes ownership of the change you are going to propose to them. [34:46] When you are proposing a big change you need to do your homework. When the stakes are high your prep work needs to be significant as well. [37:09] Putting in the groundwork allows you to have advocates. Having advocates is so key in branding. [38:57] When people are on edge and likely to get a fight or flight response, triggering on scarcity could work against you if not done properly. [42:49] Framing is everything when it comes to change management. It isn't what you say, it is how you say it. [43:49] You need to know why you want them to take the step, why it matters, and get them invested in the proposed outcome. [46:20] Framing the benefits and talking about the good stuff instead of helping them dwell on the bad is how you get changes to move forward. [47:49] You want them to feel comfortable coming back to you with questions. You are allies in this. [49:24] What tiny moments of change do you see around you for your next initiative in the way you will be presenting change? Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: What Your Employees Need and Can't Tell You, by Melina Palmer Nudge, by Richard Thaler and Cass Sunstein Thinking Fast and Slow, by Daniel Kahneman Quit, by Annie Duke How Minds Change, by David McRaney Top Recommended Next Episode: What Your Employees Need and Can't Tell You (episode 225) Already Heard That One? Try These: The Truth About Pricing (episode 5) Loss Aversion (episode 9) Endowment Effect (episode 139) Status Quo Bias (episode 142) How to Sell From the Stage (episode 6) Herding (episode 19) Social Proof (episode 87) Reciprocity (episode 23) Framing (episode 16) Priming (episode 18) Scarcity (episode 14) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter The Endowment Effect, Loss Aversion, and Status Quo Bias

Today is a very exciting day, as it is the last episode before I'm officially a multi-book author, because my second book, What Your Employees Need and Can't Tell You will officially be out and hitting mailboxes on Tuesday, October 11! There is something else very, very exciting kicking off on Tuesday as well, so be sure to stay to the end to hear all about that… In this episode, we are going to do a deep dive into the book. I talk about what you can expect to find within it, why I wrote it, who it is for, and (because this is quite possibly one of the things I get asked about the most these days) some fun insights into the writing process and my tips for you in creating your own content (whether it is a book or something else). Show Notes: [00:39] Today is a very exciting day, as it is the last episode before I'm officially a multi-book author, because my second book, What Your Employees Need and Can't Tell You will officially be out and hitting mailboxes on Tuesday, October 11! [02:34] This book has been in the works for a long time, really since episode seven came out of the podcast way back on August 3, 2018. My framework for change has grown and adapted a bit over the years, but even through: creating a 10-week course I teach virtually via the Human Behavior Lab at Texas A&M University, countless speaking engagements and corporate training, and the full process of writing this book…it has really kept its bones. [04:29] What are my secrets for book writing? The first secret is that I'm naturally a good writer and I've spent a lot of time writing and editing all sorts of content from 3-word ads to 70,000 word books and everything in between. I also dedicate the time I need to be able to write. [06:14] My writing is made possible by a very supportive family, especially my husband Aaron. I have dedicated both of my books to him because truly, The Brainy Business and all its content would not be possible without him. [07:38] It isn't all writing every moment of every day, the brain needs breaks. I was able to go on a few jogs by the ocean which was nice and I also had some mindless crafty entertainment. [08:47] Taking the time to let your mind exist and make connections is so so so important when working on content. Building those contemplative moments into your day is really useful. [11:30] You may have heard this one already, but you need to just get stuff out of your head and onto the paper (virtual or otherwise). My process starts with some sort of an outline. I usually do this with software that allows for virtual cards or sticky notes that I can move around. [13:07] Once you have your initial outline I recommend starting with whatever feels the easiest. In my experience, this is NOT the beginning. Whatever that easiest thing is, start there and write anything you can to get it out of your brain. [15:41] I wrote the first book in three months. For book two, I was able to start writing in December of 2021 and the full manuscript was due at the first of February; so only two months this time. [17:27] My process allows for strict priorities and focus in short bursts. This lets me give each thing my all until it is done and then move on to the next. [18:09] Done is better than perfect. Sometimes you have to let things speak to you in the moment and go with where you end up even if it is different than you intended. [21:34] I wrote the book because I could see that this concept of change and understanding biased brains and how they impact our workplace was on the uptick in businesses. I could see that this was going to be critical for businesses moving forward and if I wanted to be on the front end of that wave. [23:39] The book is for people who want to have more influence at work and to make it so change is easier for themselves and everyone around them. [25:01] This book is also set up to help teams of people work together within an organization to get a shared common language and be able to grow together to be better managers that help move a company forward. [26:01] According to Gallup, four out of five current managers do not have the talent required to excel in the job in a way that will help the company and its employees to thrive. [28:16] What Your Employees Need and Can't Tell You is here to help every manager—whether they have the natural talent for the role or not—to be excellent at leading their teams through change. If you want to put in the work to be a great manager and are willing to learn and adapt based on the science I present to you in this book, I truly believe you can achieve that goal. [30:11] This book is also segmented into three parts. [31:08] Part 1 is called Big Plans and Micro-Moments and it has four chapters within it. This part is really about understanding our brains, understanding how change works within the brain, understanding what it means to be a great manager, and how to think about change overall. [31:36] Part 2 is called Biases and Concepts. [33:18] We are all biased. We are never going to eliminate that from our lives or organizations. Instead of looking to eliminate bias, companies need to look to understand and leverage it. [36:15] A chapter in this section has one of my favorite openings of the entire book with details of the Challenger disaster and what we can all learn from it. [37:54] The last section of Part 2 is called Us vs. Them and it digs in on all the ways our brains are biased to look at people who are different from us. [38:37] The final part of the book is called Change Framework. This last part of the book brings it all together. [41:30] You can read the first chapter of the book now for free to see if it is a fit for you. [42:52] BIG ANNOUNCEMENT: We are going to be having episodes coming out twice a week starting this Tuesday, October 11th! Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let's connect: Melina@TheBrainyBusiness.com The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina's Books. Get the Books Mentioned on (or related to) this Episode: What Your Employees Need and Can't Tell You, by Melina Palmer What Your Customer Wants and Can't Tell You, by Melina Palmer The Voltage Effect, by John List How Minds Change, by David McRaney How to Change, by Katy Milkman Top Recommended Next Episode: Temptation Bundling (episode 136) Already Heard That One? Try These: Bikeshedding (episode 99) What Your Customer Wants and Can't Tell You: All About Melina's First Book (episode 147) What is Behavioral Baking (episode 155) How to Organize Your Brain with Behavioral Economics (episode 83) The Voltage Effect with John List (episode 190) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter 20 Podcasting Insights and Tips After 200 Episodes of The Brainy Business

Today we are digging in on inequity aversion – which is featured in chapter 12 of my new book, What Your Employees Need And Can't Tell You, titled "That's Not Fair!" Fairness is a fascinating topic and one that is really important in business. We strive to have fair standards in our business practices, in how we pay our employees, and in the offers we provide to customers…but should everything always be perfectly "fair"? Does it have to be fair? And…what the heck is "fair" anyway? Who decides what is fair? (and is that fair?) Tune in to hear all about it. You will also get to hear why fairness is like air, and what a bunch of capuchins can teach us about work (and why your employees might be ready to throw cucumbers). Listen in to learn all about inequity aversion, why it matters to business, and some tips for how to keep this from being a big problem in your work. Show Notes: [00:40] Today we are digging in on inequity aversion – which is featured in chapter 12 of my new book, What Your Employees Need And Can't Tell You, titled "That's Not Fair!" [02:32] Inequity aversion is a pretty easy concept on the surface. We want things to be equal (unless we are the ones getting the benefits…then we tend to be a little more lax in our demands for equality, right?) [03:19] I want to point out that fair and equal are not the same, and furthermore, equality is not the same as equity – remember this is inequity aversion, not inequality aversion. Equality means that everyone is given the same resources and opportunities. Equity recognizes that not everyone has the same circumstances and therefore provides resources in a way that can help receive an equal outcome. [06:02] What is "fair" and who gets to decide? One of my favorite quotes on this is from Mathew Liebermann who said, "Fairness seems a bit like air—its absence is a lot more noticeable than its presence." [08:22] When we realize we aren't being treated or paid fairly – or even if we just suspect that something isn't fair everything else can come to a grinding halt. [11:25] According to a Bloomberg article and research by Joblist of 15,000 workers who quit during this time, 40% said the job market was more difficult than they expected, 20% miss people at their old company (and many of them didn't think that was going to impact them as much as it did), 17% said their new job is not what they hoped for, 16% realized their old job was better than they realized, and 9% have found themselves in a company with bad culture and management. 14% of those surveyed who had quit their jobs said they regretted it. [14:01] One thing we do know is that we pretty universally dislike and reject things that are unfair, the problem (as you are seeing here) is that what is fair is relative. [16:54] This brings up another interesting facet of inequity aversion – because we hate the inequitable, unfair and unequal, we will sometimes put ourselves in harm's way or give ourselves a worse outcome to keep someone else from getting an even better one. [19:07] A perceived slight from years back could combine with confirmation bias and the focusing illusion so one employee is sabotaging themselves and your team to keep someone in their or another department from "winning" anything. [21:00] Whenever there is a question of fairness, motivation will tank. We become distracted and disengaged regardless of whether we are intrinsically or extrinsically motivated. Incentives and motivation are so important when we think about job performance. [22:01] When it comes to our aversion to inequity, the best thing to do is to make sure your practices and policies (whether it is pay or anything else) are, of course, fair, and equitable to begin with. [23:37] Remember, of course, that something may not be equal and still be fair and equitable. [24:52] Start by asking what you are trying to achieve. [26:12] Next, what are your priorities? [28:04] Understanding the why behind the decision is really important. Some people might still feel slighted, but that is ok you just need to align that with your priorities and the different groups you are working with. [29:18] You have to be looking for the worst way this could be interpreted and what you might have missed. Who aren't you thinking about? What aren't you thinking about? Do not skip this step. [30:01] Don't rush something out and expect people will give you the benefit of the doubt–it doesn't often work that way. [30:50] Be as open, clear and transparent as you can be with as much as you can. This doesn't mean you need to publicize how much everyone makes, but you can explain what the wage bands are for each role and why, or if there is an algorithm to determine who gets a bonus or what their base level salary will be or where the cap is, make that publicly known. [32:06] Once you can make it equitable, explainable, AND transparent, it allows the focus to come off of the external motivations and incentives (those grapes and cucumbers) and focus instead on the purpose of their work and hopefully doing a job they love. Everything becomes easier when people aren't concerned about fairness, inequality, or inequity. Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. I hope you love everything recommended via The Brainy Business! 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Get the Books Mentioned on (or related to) this Episode: Drive, by Dan Pink Power of Regret, by Dan Pink What Your Employees Need and Can't Tell You, by Melina Palmer How to Have Difficult Conversations About Race, by Kwame Christian Top Recommended Next Episode: Game Theory (episode 62) Already Heard That One? Try These: Availability Bias (episode 15)) Herding (episode 19) Social Proof (episode 87) Confirmation Bias (episode 75) Focusing Illusion (episode 89) Optimism Bias (episode 34) Cobra Effect (episode 220) Counterfactual Thinking (episode 68) Prefactual Thinking (episode 71) How to Have Difficult Conversations About Race, with Kwame Christian (episode 221) Other Important Links: Brainy Bites - Melina's LinkedIn Newsletter Monkey's Reject Unequal Pay Why Monkeys (and Humans) are Wired for Fairness Millions of Americans Regret the Great Resignation Anomalies: The Ultimatum Game