How can digital technology help us to make decisions?

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Digital technology is changing how we work in ways that would never have been imagined 30 years ago. Sophisticated information systems now drive the rostering arrangements of Walmart employees, with every store’s timesheet now produced by a computer in Arkansas, and thousands of volunteers around the world now ‘donate’ idle CPU processing time to fight cancer and other diseases through distributed computing projects such as Folding@home.

However, digital technology also has its uses in the ‘soft sciences’, such as psychology. Combined with data, digital technology can be used to bring about behavioural change and help humans make better decisions by delivering informed, tailored and relevant feedback to those who need it.

‘Bounded rationality’ and the limits of human decision making

Herbert Simon’s ‘bounded rationality’ principle, the idea that humans are constrained in their decision making abilities by the information available to them and their cognitive effectiveness, is as relevant today as it was when first espoused in the 1950s.

Since Simon’s research in this field, further research has shown that humans are also bound by a number of other factors; various cognitive biases such as prospect theory and status quo bias being prime examples. However, despite these constraints, people typically want to have good decision making skills.

‘Digital nudges’ are electronic tools that can be used to assist people in overcoming these constraints. These ‘nudges’ are not thought-prescriptive or explicitly instructional in nature. They are designed to help shape the context in which a person makes a decision to help them make a better one.

Robert Thaler and Cass Sunstein (2009) listed five such nudges, all of which can be adapted to a digital form: incentives, understanding mappings, defaults, giving feedback, and expecting errors.

Setting and measuring goals

Of Thaler and Sunstein’s five nudges, feedback is nominated as the single most effective means of improving performance. A large body of research shows that those with clearly defined goals achieve more, and Thaler and Sunstein posit that consistently delivered feedback can improve outcomes against these goals.

Perhaps the clearest example of how digital nudges have been used to improve people’s lives is in the field of personal health and fitness.

Health measurement devices, such as Nike+, Stikk.com and Pebble, as well as online tools such as Calorie Counter, have lowered the barrier to entry for those seeking to improve their fitness. These tools measure and store data relating to heart rate, skin temperature, and in the latter example, even track energy intake to make predictions on weight loss. Personalised feedback is delivered instantly to users, enabling them to use this information to motivate themselves and make better decisions on future habits.

Long-term use of such health measurement devices have been proven to lead to better health outcomes compared to traditional health routines, with those study subjects receiving tailored data relating to their goals outperforming those who did not.

The tyranny of choice

The Internet and globalisation have brought greater choice for consumers in retail purchases. However, as the number of purchasing choices for consumers increase, so does the number of irrelevant product attributes. This can make it difficult for consumers to quickly decide what product they would like to purchase.

Consumers prefer more choice, not less, even though increased choice can diminish a consumer’s confidence in their decision making and lead to dissatisfaction with their eventual decision.

Digital technology enables choices to be narrowed down by filtering out irrelevant options, so that consumers can make better decisions.

For example, eliciting preferences from consumers and using these to tailor the choices provided can reduce the number of undesirable options presented and theoretically assist a consumer in making a better decision. This is evident in online dating sites. Match-making models and tailored search functions enable users to filter their search to find a more suitable mate.

However, at this stage in the development of digital technology, it is not possible to definitively conclude that the use of digital nudges in narrowing down choices is the best means of assisting consumers to make better decisions.

With dating sites, for example, there are limitations to using search functions and interaction tracking when tailoring a narrow list of choices. Quantifiable attributes, such as age, income, height, weight, etc. may not be accurate in determining the most suitable personality match for a user.

Conclusion

‘Libertarian paternalists’ argue that behavioural nudges are an effective means of assisting people to make better decisions without explicitly directing the outcome. Digital technology has enabled these nudges to be used more widely, and with lower barriers to entry for the average person.

Quantifiable and measurable goals are excellent examples of how digital nudges can be used effectively to bring about better outcomes, such as in health, fitness and education.

However, given many elements of the human experience, such as interpersonal relationships, cannot be comprehensively transposed into such quantifiable models, it is unlikely that such nudges can completely substitute human interaction at this stage of development.

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About the Author

Gence

My name is Gence Emek and I’m a tech enthusiast currently living in London. I love to travel and I’ve been to over 30 countries but still haven’t been to the US. My goal for 2015 is to see New York and San Francisco. Other than London, my favourite city is Istanbul.

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