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The cognitive bias that even behavioural scientists suffer from

Have you ever heard of the Law of the Instrument? It’s a bias that I think affects many of us, including behavioural scientists. But we’ll come to that in a moment. 

At the recent BX2019 conference, world-renowned behavioural scientist Dan Ariely took to the stage to share his insights and recent work. 

Throughout history, he explained, we humans have been very successful at overcoming our physical limitations by inventing all kinds of technologies. We can only run so far, so we created a car. We struggle to cut things with our bare hands, so we created a saw.

But what about our cognitive limitations? Have we been as successful at finding solutions to these? Unfortunately not. In fact, this is an area that has mostly been completely neglected. Now research is demonstrating just how “limiting” these cognitive limitations are. We struggle with self-control. We discount the future in favour of the present. We struggle to reduce the bias in our decision-making. We tend to be over-optimistic. The list goes on.

That’s where behavioural economics comes in. It challenges the core assumption of traditional economics – that people are rational agents who navigate the world by constantly maximizing their utility. Instead, with a more realistic understanding of the drivers of human behavior, behavioural science can help us help ourselves (or others) to make “better” decisions.

Dan’s case studies proved the point: from reducing doctor appointment no-shows, or reducing the amount of cash withdrawn at ATMs, repeatedly, small “nudges” can make a big impact.

And this is what we’ve been finding at Swiss Re, too. Since setting up the Behavioural Research Unit in 2013, we’ve run over 200 trials, where we repeatedly seen that small, “seemingly irrelevant” changes can create significant uplifts in sales, retention or even truth-telling.

But is that as far as it goes? Not according to Dan Ariely. He closed his presentation by saying that, whilst Behavioural Economics can indeed achieve a lot with small tweaks, it could do so much more if these insights were baked firmly into new technologies, or new ideas, right from the start.

This is what brings us back to the Law of the Instrument. It’s a cognitive bias that explains why people over-rely on a familiar tool. It’s summarized by the saying: if all you have is a hammer – everything looks like a nail!

I think there is definitely a temptation for behavioural scientists to over-rely on one tool – “tweaks” – when tackling problems. We sometimes forget that sometimes a bigger impact could be achieved if the whole process, or product, was re-designed from scratch with behavioural insights in mind.

This is why at Swiss Re we’re ensuring that Behavioural Science is not only used for testing small tweaks, but also that it is integrated earlier on – I like to call this “further upstream”.

Recently, we did this on two separate projects: the re-design of an application form from scratch, and also the design of a brand new type of cyber insurance. What we found is that the starting point had been an unrealistic belief that customers would just “get it” and rationally self-navigate themselves to the logical outcome (e.g. buying a policy). Instead, sometimes what we needed to do is redesign the product/customer experience from scratch, informed by behavioural insights.

As one of my colleagues said recently: when you bake muffins, you mix the fruit into the batch from the start, rather than trying to push the blueberries into the muffins once baked!