Choice Architecture Explained: How To Remove Human Bias From Your Business Today

Choice Architecture Explained: How To Remove Human Bias From Your Business Today process.st/choice-architecture October 28, 2019

How rational do you think you are?

According to Richard Thaler and Cass Sunstein, the answer is not very.

Thaler and Sunstein were pioneers who developed the choice architecture framework.

According to them, humans are prone to hundreds of proven biases causing us to both think and act irrationally.

For our prehistoric ancestors, these biases saved time and cognitive effort. In our modernday, business world, however, cognitive bias can impose significant drawbacks. Choice architecture is a framework that acts to prevent the negative repercussions of cognitive bias.

In this article, before we do anything, we will time-hop backward to discover the history of choice architecture. From knowing this history, we at Process Street will reveal what choice architecture is. We will then consider the elements (common human biases) that the choice architecture framework acknowledges.

Finally, we examine the challenges choice architecture faces and ways those challenges can be resolved through the use of alternative methods. Just read through the sections below: 1/12

Let’s get started.

Choice architecture: A brief history To begin exploring what choice architecture is, let us travel back to 1968, arriving at the Hebrew University of Jerusalem.

Here we meet Amos Tversky and Daniel Kahneman, rising stars of the universities psychology department. Cramped up in a small seminar room, the two began talking about the rational human mind. It is the 60’s, so we have mot tops, drainpipe jeans, and a consensus understanding that humans are rational thinkers.

However, this consensus understanding was slowly being chipped away.

Psychologists such as Herbert Simon were beginning to scrutinize human rationality.

For Kahneman and Tversky, work began after Kahneman attended a seminar presented by Tversky. Tversky detailed cutting edge experiments reporting how people learn from given information. The experiments characterized human decision-making processes as close to rational. Every human was portrayed as some sort of intuitive statistician.

However, Kahneman was skeptical. To him, the experiments lacked the scientific rigor needed for plausible results. He went after Tversky hard – as people do in academic environments.

At this point, most people would mope over their flawed investigations. Tversky didn’t.

Instead, Tversky took failure in his stride and teamed up with Kahneman to explore human rationality further.

What followed was a period of extraordinary creativity. Between 1971 and 1979, Kahneman and Tversky published work that would win them the Noble Prize in Economics.

The essence of their publication showed that humans are not rational in our decisionmaking processes. We are the opposite. We are irrational. Their work composed the Prospect Theory.

The rise of this new wave of thinking – humans are not always rational beings – coined a new era of behavioral studies that led to behavioral economics. It was from Kahneman and Tversky’s work, that choice architecture was born.

What is choice architecture Choice architecture is the design of the different ways to present choice options to a chooser. This presentation will influence the final choice made.

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To explain what choice architecture is further, we will time-hop forward from 1968 to 2008. I want you to come with me to a dinner party hosted by the famous American economist, Richard Thaler.

As the evening begins, we notice that there is a large bowl of cashew nuts put out before us. We have three choices: A. Eat a few nuts B. Eat all of the nuts C. Eat no nuts Now, if you are anything like me, choice number C is a right-off – I lack self-control when it comes to food. Choice number A is plausible but unlikely. Choice B would be the one I would choose.

In this situation, you would watch me devour an entire bowl of cashew nuts, with postponed regret as I force down the main course on a nutty stomach.

It is comforting to know, however, that I would not have been alone in this scenario.

As it becomes obvious that the nut bowl is being consumed in its entirety, Thaler removes the bowl. With the bowl gone, his guests will maintain a sufficient appetite to enjoy all of the food that was to follow.

I sigh in relief, along with every other person in the room.

The question is, how could we all possibly be relieved when our choice to eat the nuts had been taken away? In the land of economics, it is against the law for us to be happy about this.

If the bowl of nuts was left, all nuts would have been consumed. When the bowl was taken away, we all sighed in relief over the fact we had no nuts to eat. How could we change our mind in the space of say fifteen minutes or so in regards to what we wanted?

Initially, I along with the rest of the group chose choice B over C. Later we chose choice C over B. Our decision was being made in an environment where there are many features – both noticed and unnoticed – influencing our final choice. In this scenario, Thaley architected the environment, to create new surroundings. With no cashew nut bowl, we all decide choice C was the better (and healthier) option.

This is the essence of what choice architecture is, and is defined with the below definition: 3/12

Choice architecture refers to the physical and symbolic environment that faces decisionmakers at the point where they make a decision. The decision-making environment can have a significant impact on the choices made. Choice architecture can be designed to contain a default option that is applied if the individual takes no-decision. Defaults can be set up to improve welfare – such as having low-fat milk as the default option when buying a coffee.

Behavioral economists are interested in how choice architecture can be manipulated by policymakers to improve economic welfare. – Economics Online, choice architecture Thaler and his colleague Cass Sunstein came up with the idea of choice architecture. They published their book in 2008 book titled Nudge: Improving Decisions about Health, Wealth and Happiness.

In their book, Thaler and Sunstein endorsed a thoughtful design of choice architecture.

Their design was to improve consumer decision-making processes. Individuals are ”nudged” towards choices that are in their best interests.

In business, choice architecture can design the surroundings in which consumers are presented with a choice. This architected presentation of choice, impacts consumer decision-making processes, by targeting common biases. For example: The above can all influence consumer choice. By targeting common human bias, bounded rationality – which is the notion that rationality is limited when individuals make decisions – is removed.

Choice architecture is part of a common movement called libertarian paternalism. This is the idea that it is both possible and legitimate for private and public institutions to affect consumer behavior. But only whilst freedom of choice is respected with the implementation of an idea.

In Thaler and Sunstein’s book, they thoughtfully designed choice architecture to remove erroneous decisions. By erroneous decisions, we mean decisions that are not in the chooser’s best interest when taking a broader perspective. For example, the consumer may choose an unhealthy option over a healthier option – as occurred in the cashew nut scenario above.

Thaler and Sunstein describe common human biases as the elements of choice architecture.

The following section explains these elements.

The elements of choice architecture The six choice architecture elements are: 1. Reducing choice overload 4/12

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Defaults Choice over time Partitioning options and attributes Avoiding attribute overload Translating attributes

Choice architecture as a concept was born from the discipline of behavioral economics. This discipline shows that individuals tend to be subject to predictable biases. As mentioned above, these common and predictable biases are termed as elements.

Choice architecture element 1: Reducing choice overload In classical economics, more-is-better is the general thought when providing consumer options. However, here we refer to behavioral economics. In behavioral economics and choice architecture, more is not necessarily better.

Choice architecture looks into how the presentation of choice influences consumer decisions. In this instance, it is the presentation of too much choice, otherwise known as choice overload. With choice overload, consumer motivation drops with satisfaction.

The architect – the individual influencing the decisions – can remove choice overload from a decision-making process. They can do this by either limiting alternatives or presenting decision support tools.

Google is an example of a decision support tool. With Google, information around a specific product or service can be found quickly. This helps the chooser sieve out their needs from all the choices available.

There is usually an ideal number of choices. Above this number, the cognitive effort required to make a decision creates diminishing returns from the consumer. Below this ideal number, too little choice is provided, the consumer’s ideal is not met. This ideal is determined by: The cognitive effort to evaluate each choice The heterogeneity of needs The preferences across consumers Considering choice overload, you can find the ideal number of choices offered for your product or service. This will allow the consumer to make a choice that best suits their needs, increasing their satisfaction with what you have to offer.

Choice architecture element 2: Defaults 5/12

A default is a choice frame that is already pre-selected so that individuals have to then take active steps to select another option. With all things being equal, consumers are more likely to choose this default option.

The automatic enrollment of college students is an example of a default.

Several mechanisms have been used to explain the influence of default options. This includes cognitive biases and the associated effort needed to opt-out of the default.

There are different types of defaults such as: Automatic choice selection Forced choice in which a product or service is denied until the consumer makes a proactive selection Sensory defaults in which the choice is pre-selected based upon other information that was gathered about specific consumers Default choices, and the bias tendency of an individual to go along with a default, can be used in marketing and to promote the best interests of your employees.

Choice architecture element 3: Choice over time Some choices have outcomes that will manifest in the future and are influenced by several biases. One example would be an individual who is myopic, preferring a present positive outcome at the expense of a future reaction. This would result in behaviors such as overspending or overeating.

In addition, individual projections about the future can be inaccurate. In uncertainty, it is common that an individual overestimates the likelihood of a salient or desired outcome. For instance, how many of you believe that you will have more time in the future? This is an example of assuming with optimistic thought. Many people believe they will have more time than they end up having.

This choice over time effect on decision making can be manipulated by the choice architect, for example, by drawing attention to the future outcomes of decisions, or by emphasizing the second-best option.

When you see a limited time offer, this is an example of the choice over time element of choice architecture. Limited time offers use time to nudge the individual into making a decision and reduces procrastination. This can provide you with a sales advantage.

Choice architecture element 4: Partitioning options and attributes 6/12

Options and attributes of choice frames can be grouped together, influencing the decisions made by the buyer. Both the number and the types of categories are important in the partitioning of options and attributes.

For example, when you are buying a car, you probably consider aspects such as gas, mileage, and safety. These are practical attributes and can be grouped together. Speed, radio, and style can be considered less practical characteristics, and again grouped together as such.

This partitioning of attributes for the service and products offered by your business can help you consumers make a decision about your product or service.

Choice architecture element 5: Avoiding attribute overload The entirety of a product’s attributes can be considered when deciding between different options. However, as with choice overload, deciding between different attributes is constrained by the consumer’s cognition.

Again we have a situation where there is an ideal number of attributes. Beyond this ideal number, we have attribute overload. Below this ideal number, certain attributes that a consumer cares about have not been considered. A balance is needed.

When describing the attributes of the product or service you offer, it is important to obtain this ideal number for the different attributes described. This will mean your consumer can make the best choice to meet their needs and be satisfied with your product or service.

Choice architecture element 6: Translating attributes The presentation of information about attributes can reduce the cognitive effort required to compare those attributes. This could mean presenting data with equal metrics, which would require metric conversion. For example, non-linear metrics can be converted to linear metrics.

Other examples could include food labels, detailing, say, salt content as h igh vs low. Or explicitly calculating a consequence, such as the level of greenhouse gas emissions exuded.

By translating attributes when displaying the product or service that you offer, you can make it easier for the consumer to make a decision on what they want.

Choice architecture in action Now we understand what choice architecture is, and the common biases the concept covers, we can look at a few real-life examples of choice architecture in action.

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Choice architecture in action: Change the recycling-bin-to-garbagebin ratio

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Take a look at the image above. These two bins were taken from Austin, Texas. I hear you, �why are you showing me a picture of dustbins?� I pulled up this image as an example of choice architecture in action. The blue bin is for recycling, and the green bin is for garbage.

Options and attributes of the bins are partitioned. That is, the two bins are partitioned in size, to influence your decision in favor of recycling.

Our business world is changing. There is an increasing focus and pressure on corporations to be sustainable and balance the environmental, social and economic aspects of this. With this example, you can see how choice architecture can be used to influence business decisions made by your employees and consumers to help create a more sustainable business.

Choice architecture in action: Organ donation

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Organ donation provides an example of choice architecture using default elements. The blue bars in the graph above represent presumed consent, opt-in being the default choice.

The brown bars show explicit consent, opt-out being the default choice. You can observe how having a default choice influences the decisions that are made. More people register to be organ donors with opt-in as a default.

You can use the same principle applying a default in your business operations. For instance, looking at your email marketing campaigns, using opt-in and opt-out defaults can help you collect marketing details, legislation permitting.

Choice architecture in action: At the shopping stall

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The placement of healthy food signs brings better-for-you concepts to the consumer. This is an example of translating attribute elements. The food attributes are displayed, as the food is labeled as healthy, decreasing the cognitive effort used by the consumer to make a choice.

For your business, try labeling healthy food in your canteen as such. You can group unhealthy food together to nudge your employees in picking healthier options. A healthier workplace, a more productive workplace, and better business delivery .

What do biases mean for your business?

Our brains have evolved over two hundred thousand years . As mental shortcuts, bias helped our prehistoric ancestors. However, our modern world is very different from our past, hunter-gatherer, world.

The vast set of complex information that we are bombarded with daily can drown our brains with material that needs to be processed. As a response, we resort to these inbuilt mental shortcuts, to make decisions quickly.

Thaley’s and Sunstein’s work highlights six of these mental shortcuts – explained above as elements – that have the potential to negatively influence the chooser’s decision. With knowledge of these biases, you can target them in a given business operation, to remove their negative impacts.

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Biases in the workplace can manifest in many forms, and often happen unconsciously to anyone harboring them. These biases can influence office diversity, promotion, recruiting and retention, and can shape an office culture. In addition, taking mental shortcuts to make decisions and apply knowledge means that you are not truly thinking about the decision being made. This can lead to a thinking gap that hinders innovation and creativity.

Using choice architecture, you can influence biased choices for a better outcome.

However, as with most concepts, choice architecture does not come without its challenges.

Interventions of choice architecture may fail to produce the desired result for several reasons. The first is that individual differences may lead to differential responses to information. The second questions whether choice architecture acts to improve consumer decisions 100% of the time.

With choice architecture, biases appear to be hardwired and inalterable. Attention is paid to counteract them whilst dealing with problematic thoughts, judgments or predictions. The focus has been to change behavior in the form of incentives or ‘nudges’.

One way to overcome the challenges of the choice architecture framework is by turning to alternative methods. There are other methods out there, which can be used instead of, or in combination with, choice architecture. This is where Process Street comes in.

Using processes to remove human irrationality Procedures can be organized in a way that dissuades or prevents people from acting on biased thoughts. A good example is the use of checklists for doctors and nurses, put forward by Atul Gawande in his book The Checklist Manifesto.

Another example, bringing in business processes, is employers nudging employees to contribute to their retirement plans. Choice architecture methods are often used in this process. Making savings is the default option, so the employee has to actively take steps to not participate. However, in this example, we question whether using this default choice is removing bias, or is unethically taking advantage of human laziness or inertia.

Checklists can work to guide the choice maker through a process, and can actively steer the chooser away from biased irrationality. For the retirement plan example above, using a checklist such as Process Street’s Quality Financial Plan Checklist means the user can make more of an active decision for their financial future, whilst directing them away from irrational biases.

Using Process Street’s checklists and templates, you can stay focused on the right things.

You can improve decision-making readiness by reducing the burden on our memory, attention, and cognition.

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You can create your own business templates, or use one of our pre-made templates from Process Street’s library.

Our templates have been designed to enhance efficiency, productivity and prevent mistakes and failures, whilst working to prevent human irrational to obtain the desired outcome. To do this, you will find our templates have the following features, making them superpowered: Process Street is a top business process management tool, which in this instance, can be used to remove human irrationality when making choices. This will evade the negative repercussions these biases have in the workplace.

Check out our template Unconscious Bias Training Guide to help you get started.

Click here to access the Unconscious Bias Training Guide.

Remove the negative impacts of bias in your workplace today!

In this article, we have explored what human cognitive biases are, and the impact human irrationality has on decision making. We have learned about the concept of choice architecture, and the underlying six cognitive biases that this framework works to resolve.

You can use the concept of choice architecture to prevent the negative repercussions of human bias in your workplace. However, choice architecture comes with challenges regarding its implementation. To offset these challenges, you can look at alternative methods. Checklists offer an effective alternative to steer the decision away from bias, leading to the desired choice outcome.

For further insight into the concept of choice architecture, I recommend Thaler and Sunstein’s book .

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