Cognitive Design

 According to leaders in behavioral finance (scientific study of how cognitive biases shape our economic decision making) the answer is NOT that we don’t make enough money.  Instead, the reason we fail to save is that we are not cognitively wired to do it. I have a number of biases that block savings behaviors including:

1. an aversion to risking or giving up current gains (so I don’t want to commit  any of my current income to a regular savings program)
2. a strong belief that I will save more tomorrow (so that I don’t need to save today) and other faulty mental models
3. underestimating the value of a resource in the future (I cannot wrap my brain around the time value of money so I am not swayed by the logic of saving soon and often)
4. a strong visceral factor that drives me to maximize consumption in the present (it is hard to delay gratification)
5. an aversion to thinking about being old and eventually dying.  

These are very powerful (often overwhelming) effects that lead to poor decisions and inaction. And it gets worse- the design of the products makes it very hard (intellectually and emotionally) to consume them:

· The products are complex so I have to do a lot of mental work to understand and use them (very high cognitive load) this decrease the relative motivation to participate, triggers a mental state of procrastination and leads to inaction

·  small print and legal jargon can invoke feelings of doubt.

In short, retirement products and services don’t fit the way we think and feel so we tend not to consume them appropriately despite the fact that it is in our best interest to do so. 

Actually, they score 1 out of 5  (at the very bottom) in terms of cognitive fit and literally agitate cognition rather that support or enhance it. The design of retirement and saving products and services is an area of big opportunity for cognitive designers.  And there has been a lot of action: Pension plans that literally let you save more tomorrow by allocating a portion of future earnings (you avoid having to part with anything today and it plays off of the fact that you undervalue future resources), credit cards that allow you to spend and save for retirement at the same time, pension plans that automatically enroll employees and require them to opt out if they don’t want to participate (having the status quo bias work in our favor), 401k plans that come with services that pick specific funds for you to invest in (lower cognitive load) and so on.  We will cover all these products and the research that drives them in this blog.

You might complain that you don’t design financial products or services so what can you learn from this? Look at the list of biases again.  They (or very close variants of them) are involved in the customer or employee cognition around almost every type of product or service that involves behavior change. So if you are in the behavior change business the lessons learned should be useful to you. 

Over the last few years there has been a small flurry of books and papers on the “new science of happiness” – an attempt to use neuropsychology and cognitive science to understand what makes us happy and why. Good stuff for cognitive designers interested in creating artifacts that invoke happiness in users.

Check out the Jan-Feb 2007 issue of Harvard Magazine for recent overview.  It covers all the basics and highlights how Harvard’s class on Happiness 101 (actually titled Positive Psychology) was the most popular in 2006 pulling in over 800 students.

A somewhat dated but still excellent source with findings specific enough to guide design can be found in a Time Magazine article The New Science of Happiness.

So what do you do if you what to design artifacts to put users in the mental state of happiness?  You can include features and functions that:

1. Involve or trigger a remembrance of friends and family.  For example, personalization of your PC desktop with a family or baby photo, discount calling plans for friends and families and adding online social networking features to your software product or content.

2. Allow users to otherwise engage in an acts of kindness or altruistic acts.  Interesting recent examples include XO (the give one get one laptop) and Free Rice (play a vocabulary game and for each word you get right they donate 20 grains of rice through the UN to help end World hunger).

3. Naturally limit (but not eliminate) the number of choices the user must make to use the product (too much choice is the enemy of happiness). For example, some financial services companies have adopted the “option packages” strategy from the automotive industry to bundle decisions about many choices into one (lifestage asset allocation funds or feature bundles for life and annuity policies).

4.  Allow users to express their blessings or joys in an authentic and meaningful way. For example, a comfortable way of expressing thankfullness for a spouse or family member in public.

Adding features and functions that stimulate happiness in users is one way to approach cognitive design.