so in 2008 a gallon of gasoline hit $4 it was the highest price had ever been
it was the highest price had ever been
it was the highest price had ever been and like many of you I was interested in
and like many of you I was interested in
and like many of you I was interested in trying to use less gas partly because of
trying to use less gas partly because of
trying to use less gas partly because of the cost but also because of the
the cost but also because of the
the cost but also because of the long-term effect on the environment and
long-term effect on the environment and
long-term effect on the environment and so a colleague at Fuqua Jack Saul and I
so a colleague at Fuqua Jack Saul and I
so a colleague at Fuqua Jack Saul and I started to carpool in his hybrid and one
started to carpool in his hybrid and one
started to carpool in his hybrid and one of the interesting features the hybrid
of the interesting features the hybrid
of the interesting features the hybrid had was a cool screen that you see in
had was a cool screen that you see in
had was a cool screen that you see in the middle of this picture that showed
the middle of this picture that showed
the middle of this picture that showed the MPGs we were getting as her driving
the MPGs we were getting as her driving
the MPGs we were getting as her driving to work so we both like numbers and he
to work so we both like numbers and he
to work so we both like numbers and he started to ask me quizzes about mpg and
started to ask me quizzes about mpg and
started to ask me quizzes about mpg and one of one example of it was imagine you
one of one example of it was imagine you
one of one example of it was imagine you drove uphill for a hundred miles and you
drove uphill for a hundred miles and you
drove uphill for a hundred miles and you got 10 miles per gallon and then imagine
got 10 miles per gallon and then imagine
got 10 miles per gallon and then imagine you turned around and drove back the
you turned around and drove back the
you turned around and drove back the same hundred miles downhill but got a
same hundred miles downhill but got a
same hundred miles downhill but got a hundred miles per gallon what was your
hundred miles per gallon what was your
hundred miles per gallon what was your average miles per gallon so this is he
average miles per gallon so this is he
average miles per gallon so this is he was giving me little quizzes like this
was giving me little quizzes like this
was giving me little quizzes like this it turns out I was failing the quizzes I
it turns out I was failing the quizzes I
it turns out I was failing the quizzes I was not doing the right math with mpg
was not doing the right math with mpg
was not doing the right math with mpg and it led us both to think about well
and it led us both to think about well
and it led us both to think about well what information do we have available to
what information do we have available to
what information do we have available to make smart energy energy decisions and
make smart energy energy decisions and
make smart energy energy decisions and can we improve that information and
can we improve that information and
can we improve that information and that’s what I’m going to talk to you
that’s what I’m going to talk to you
that’s what I’m going to talk to you about today now mpg is very familiar to
about today now mpg is very familiar to
about today now mpg is very familiar to Americans and in fact because we think
Americans and in fact because we think
Americans and in fact because we think it’s important to reason with mpg the
it’s important to reason with mpg the
it’s important to reason with mpg the EPA in the 1970s said every new car
EPA in the 1970s said every new car
EPA in the 1970s said every new car needs to have it on the side of the
needs to have it on the side of the
needs to have it on the side of the vehicle and anyone who’s bought a new
vehicle and anyone who’s bought a new
vehicle and anyone who’s bought a new car has seen an updated version of this
car has seen an updated version of this
car has seen an updated version of this sticker that’s now been around for a
sticker that’s now been around for a
sticker that’s now been around for a long time so can we make good decisions
long time so can we make good decisions
long time so can we make good decisions of mpg that’s essentially the challenge
of mpg that’s essentially the challenge
of mpg that’s essentially the challenge now the idea of studying good
now the idea of studying good
now the idea of studying good decision-making really has this
decision-making really has this
decision-making really has this interesting history because two
interesting history because two
interesting history because two different disciplines have focused on
different disciplines have focused on
different disciplines have focused on our decision-making and really they
our decision-making and really they
our decision-making and really they worked in separation for many years so
worked in separation for many years so
worked in separation for many years so one is economics where economics assumes
one is economics where economics assumes
one is economics where economics assumes that we’re very rational as we make
that we’re very rational as we make
that we’re very rational as we make decisions we’re fully informed we
decisions we’re fully informed we
decisions we’re fully informed we calculate everything correctly we’re
calculate everything correctly we’re
calculate everything correctly we’re going to maximize the money for
going to maximize the money for
going to maximize the money for ourselves at the same time psychology
ourselves at the same time psychology
ourselves at the same time psychology was studying many questions about
was studying many questions about
was studying many questions about decision making but they were taking
decision making but they were taking
decision making but they were taking different assumptions to it that we rely
different assumptions to it that we rely
different assumptions to it that we rely a lot on our intuition
a lot on our intuition
a lot on our intuition that we don’t have full information
that we don’t have full information
that we don’t have full information therefore that we have complex interests
therefore that we have complex interests
therefore that we have complex interests and we take a lot of shortcuts and
and we take a lot of shortcuts and
and we take a lot of shortcuts and what’s interesting about these two
what’s interesting about these two
what’s interesting about these two parallel fields was they eventually
parallel fields was they eventually
parallel fields was they eventually started to speak to each other and there
started to speak to each other and there
started to speak to each other and there was a recognition that we really have to
was a recognition that we really have to
was a recognition that we really have to work in a space between the rational
work in a space between the rational
work in a space between the rational assumptions and economics and these
assumptions and economics and these
assumptions and economics and these problems that psychology identified and
problems that psychology identified and
problems that psychology identified and so the field of behavioral economics
so the field of behavioral economics
so the field of behavioral economics emerged which really looks at the
emerged which really looks at the
emerged which really looks at the overlap let’s accept the people don’t
overlap let’s accept the people don’t
overlap let’s accept the people don’t make great decisions what can we do to
make great decisions what can we do to
make great decisions what can we do to help them make better decisions now
help them make better decisions now
help them make better decisions now Daniel Kahneman was a Nobel Prize
Daniel Kahneman was a Nobel Prize
Daniel Kahneman was a Nobel Prize winning a psychologist who happen to win
winning a psychologist who happen to win
winning a psychologist who happen to win the Nobel Prize in Economics and he did
the Nobel Prize in Economics and he did
the Nobel Prize in Economics and he did it because he essentially spoke to
it because he essentially spoke to
it because he essentially spoke to economists and gave them systematic
economists and gave them systematic
economists and gave them systematic evidence that people are systematically
evidence that people are systematically
evidence that people are systematically deficient to how they make decisions and
deficient to how they make decisions and
deficient to how they make decisions and in a 2011 book called Thinking Fast and
in a 2011 book called Thinking Fast and
in a 2011 book called Thinking Fast and Slow he coined a phrase Wiz iottie
Slow he coined a phrase Wiz iottie
Slow he coined a phrase Wiz iottie which simply means what you see is all
which simply means what you see is all
which simply means what you see is all there is and by that he meant to say
there is and by that he meant to say
there is and by that he meant to say that when people get information they
that when people get information they
that when people get information they get trapped by it they do a poor job of
get trapped by it they do a poor job of
get trapped by it they do a poor job of figuring out how to convert it into
figuring out how to convert it into
figuring out how to convert it into something they really care about and
something they really care about and
something they really care about and they just try to work with whatever they
they just try to work with whatever they
they just try to work with whatever they see and what I’m gonna do today is try
see and what I’m gonna do today is try
see and what I’m gonna do today is try to give you four principles for getting
to give you four principles for getting
to give you four principles for getting better information when you make a car
better information when you make a car
better information when you make a car buying decision and in fact general
buying decision and in fact general
buying decision and in fact general decisions about energy use and it
decisions about energy use and it
decisions about energy use and it creates an acronym of course
creates an acronym of course
creates an acronym of course cor e so I’m going to tell you to focus
cor e so I’m going to tell you to focus
cor e so I’m going to tell you to focus on consumption metrics which I’m going
on consumption metrics which I’m going
on consumption metrics which I’m going to illustrate for you that you should
to illustrate for you that you should
to illustrate for you that you should know your objectives meaning and then
know your objectives meaning and then
know your objectives meaning and then you don’t care about gas you care about
you don’t care about gas you care about
you don’t care about gas you care about costs and the environment so know what
costs and the environment so know what
costs and the environment so know what you’re trying to achieve and get
you’re trying to achieve and get
you’re trying to achieve and get information on it there’s a value of
information on it there’s a value of
information on it there’s a value of relative comparisons it’s often hard to
relative comparisons it’s often hard to
relative comparisons it’s often hard to make sense of numbers without knowing
make sense of numbers without knowing
make sense of numbers without knowing how big or small they are compared to
how big or small they are compared to
how big or small they are compared to something else then finally expand
something else then finally expand
something else then finally expand outcomes don’t think about this week’s
outcomes don’t think about this week’s
outcomes don’t think about this week’s gas consumption but think about the
gas consumption but think about the
gas consumption but think about the effect of owning one vehicle over
effect of owning one vehicle over
effect of owning one vehicle over another over the course of a year or
another over the course of a year or
another over the course of a year or seven years all right
seven years all right
seven years all right let’s do a quick quiz so imagine a
let’s do a quick quiz so imagine a
let’s do a quick quiz so imagine a family has two vehicles they drive both
family has two vehicles they drive both
family has two vehicles they drive both the same distance over the course of a
the same distance over the course of a
the same distance over the course of a year and they can trade in one and they
year and they can trade in one and they
year and they can trade in one and they want to get a more efficient one one
want to get a more efficient one one
want to get a more efficient one one possibility would be to trade in a 10
possibility would be to trade in a 10
possibility would be to trade in a 10 MPG vehicle for a 20 mpg vehicle and the
MPG vehicle for a 20 mpg vehicle and the
MPG vehicle for a 20 mpg vehicle and the other is to trade in a 20 mpg vehicle
other is to trade in a 20 mpg vehicle
other is to trade in a 20 mpg vehicle for a 50 mpg vehicle now which of these
for a 50 mpg vehicle now which of these
for a 50 mpg vehicle now which of these trade ins do you think will
trade ins do you think will
trade ins do you think will more gas for the family so raise your
more gas for the family so raise your
more gas for the family so raise your hand how many think a would save more
hand how many think a would save more
hand how many think a would save more gas alright how about B okay I think I
gas alright how about B okay I think I
gas alright how about B okay I think I saw more hands for B and that’s in fact
saw more hands for B and that’s in fact
saw more hands for B and that’s in fact what most people say B is very
what most people say B is very
what most people say B is very attractive because it’s a bigger
attractive because it’s a bigger
attractive because it’s a bigger difference 2250 s a thirty mile per
difference 2250 s a thirty mile per
difference 2250 s a thirty mile per gallon difference and it’s a bigger
gallon difference and it’s a bigger
gallon difference and it’s a bigger percentage improvement if you’re trying
percentage improvement if you’re trying
percentage improvement if you’re trying to think in percentage terms it turns
to think in percentage terms it turns
to think in percentage terms it turns out that’s wrong a in fact saves more
out that’s wrong a in fact saves more
out that’s wrong a in fact saves more gas in fact it saves almost twice as
gas in fact it saves almost twice as
gas in fact it saves almost twice as much gas as B does now here’s the math
much gas as B does now here’s the math
much gas as B does now here’s the math that helps make that clear in this table
that helps make that clear in this table
that helps make that clear in this table on the left hand side is miles per
on the left hand side is miles per
on the left hand side is miles per gallon and they’re not spaced equally
gallon and they’re not spaced equally
gallon and they’re not spaced equally and you’ll soon see why that’s the case
and you’ll soon see why that’s the case
and you’ll soon see why that’s the case the right hand column tells you how much
the right hand column tells you how much
the right hand column tells you how much gas you’re going to use driving a
gas you’re going to use driving a
gas you’re going to use driving a hundred miles with a vehicle that has
hundred miles with a vehicle that has
hundred miles with a vehicle that has that MPG and the math is simple you just
that MPG and the math is simple you just
that MPG and the math is simple you just divide the hundred by the mpg and you
divide the hundred by the mpg and you
divide the hundred by the mpg and you get the gallons of gas but the clear
get the gallons of gas but the clear
get the gallons of gas but the clear thing that pops out here is that every
thing that pops out here is that every
thing that pops out here is that every mpg improvement in the teens tends to be
mpg improvement in the teens tends to be
mpg improvement in the teens tends to be very helpful in reducing a gallon of gas
very helpful in reducing a gallon of gas
very helpful in reducing a gallon of gas that’s being used and if you look at the
that’s being used and if you look at the
that’s being used and if you look at the change then from 10 to 20 as I had
change then from 10 to 20 as I had
change then from 10 to 20 as I had proposed in the slide before you can see
proposed in the slide before you can see
proposed in the slide before you can see you’re going from using 10 gallons of
you’re going from using 10 gallons of
you’re going from using 10 gallons of gas down to five you’re saving five
gas down to five you’re saving five
gas down to five you’re saving five gallons of gas with that trade-in if you
gallons of gas with that trade-in if you
gallons of gas with that trade-in if you look at the twenty to fifty improvement
look at the twenty to fifty improvement
look at the twenty to fifty improvement you’re going from using five gallons
you’re going from using five gallons
you’re going from using five gallons down to two that’s only a three gallon
down to two that’s only a three gallon
down to two that’s only a three gallon savings and it’s just very
savings and it’s just very
savings and it’s just very counterintuitive to people that there’s
counterintuitive to people that there’s
counterintuitive to people that there’s such a curvilinear eighty which I’ll
such a curvilinear eighty which I’ll
such a curvilinear eighty which I’ll also show in the next graph but but one
also show in the next graph but but one
also show in the next graph but but one striking thing here is that a 10 to 11
striking thing here is that a 10 to 11
striking thing here is that a 10 to 11 improvement is about the same magnitude
improvement is about the same magnitude
improvement is about the same magnitude of benefit as a 33 to 50 they saved the
of benefit as a 33 to 50 they saved the
of benefit as a 33 to 50 they saved the same amount of gas one gallon every
same amount of gas one gallon every
same amount of gas one gallon every hundred miles and so those of you who
hundred miles and so those of you who
hundred miles and so those of you who are more visual and think in terms of
are more visual and think in terms of
are more visual and think in terms of graphs this is a graph of miles per
graphs this is a graph of miles per
graphs this is a graph of miles per gallon along the x-axis and then the
gallon along the x-axis and then the
gallon along the x-axis and then the amount of gas you use per hundred miles
amount of gas you use per hundred miles
amount of gas you use per hundred miles on the y-axis and the same problem that
on the y-axis and the same problem that
on the y-axis and the same problem that we just saw 10 to 20 reduces the gas
we just saw 10 to 20 reduces the gas
we just saw 10 to 20 reduces the gas that you use by five gallons 20 to 50
that you use by five gallons 20 to 50
that you use by five gallons 20 to 50 reduces it by only three and so the
reduces it by only three and so the
reduces it by only three and so the implication of this is think in terms of
implication of this is think in terms of
implication of this is think in terms of consumption of gas not mpg but instead
consumption of gas not mpg but instead
consumption of gas not mpg but instead this measure of gallons per hundred
this measure of gallons per hundred
this measure of gallons per hundred miles because then you can actually get
miles because then you can actually get
miles because then you can actually get an accurate picture of how much gas
an accurate picture of how much gas
an accurate picture of how much gas you’re going to use when you compare one
you’re going to use when you compare one
you’re going to use when you compare one vehicle to another so that’s principal
vehicle to another so that’s principal
vehicle to another so that’s principal when I’m
when I’m
when I’m look at consumption look at gallons per
look at consumption look at gallons per
look at consumption look at gallons per hundred miles now a second principle is
hundred miles now a second principle is
hundred miles now a second principle is be aware of what your objectives are and
be aware of what your objectives are and
be aware of what your objectives are and make sure you get information that helps
make sure you get information that helps
make sure you get information that helps you figure out whether you’re achieving
you figure out whether you’re achieving
you figure out whether you’re achieving those objectives in a set of studies
those objectives in a set of studies
those objectives in a set of studies with other colleagues we had people
with other colleagues we had people
with other colleagues we had people think about the trade-off between buying
think about the trade-off between buying
think about the trade-off between buying a cheaper car let’s say $20,000 vehicle
a cheaper car let’s say $20,000 vehicle
a cheaper car let’s say $20,000 vehicle that gets 20 miles per gallon and a more
that gets 20 miles per gallon and a more
that gets 20 miles per gallon and a more expensive car $25,000 car but one that
expensive car $25,000 car but one that
expensive car $25,000 car but one that gets 30 miles per gallon is that mpg
gets 30 miles per gallon is that mpg
gets 30 miles per gallon is that mpg improvement which means you’re gonna
improvement which means you’re gonna
improvement which means you’re gonna have lower gas costs in the future worth
have lower gas costs in the future worth
have lower gas costs in the future worth the additional costs upfront now the
the additional costs upfront now the
the additional costs upfront now the objectives that people care about are
objectives that people care about are
objectives that people care about are things like costs and also the
things like costs and also the
things like costs and also the environmental impact and one of the
environmental impact and one of the
environmental impact and one of the insights we had was that we thought that
insights we had was that we thought that
insights we had was that we thought that when people just use mpg they may not
when people just use mpg they may not
when people just use mpg they may not know the full implications for those
know the full implications for those
know the full implications for those other things the costs and the
other things the costs and the
other things the costs and the environmental impact and so we did a
environmental impact and so we did a
environmental impact and so we did a study where we measured people’s
study where we measured people’s
study where we measured people’s attitudes about the environment are they
attitudes about the environment are they
attitudes about the environment are they essentially kind of hostile to the
essentially kind of hostile to the
essentially kind of hostile to the environment low in terms of their
environment low in terms of their
environment low in terms of their pro-environmental attitude or their very
pro-environmental attitude or their very
pro-environmental attitude or their very high and on the x-axis on this graph you
high and on the x-axis on this graph you
high and on the x-axis on this graph you can see it’s ranging from a red minus
can see it’s ranging from a red minus
can see it’s ranging from a red minus sign up to a green plus sign so this is
sign up to a green plus sign so this is
sign up to a green plus sign so this is our way of trying to capture their prior
our way of trying to capture their prior
our way of trying to capture their prior attitudes toward the environment and
attitudes toward the environment and
attitudes toward the environment and when we told them the kind of choice
when we told them the kind of choice
when we told them the kind of choice that you just saw and we look to see are
that you just saw and we look to see are
that you just saw and we look to see are they willing to buy the more efficient
they willing to buy the more efficient
they willing to buy the more efficient car we found that they weren’t acting on
car we found that they weren’t acting on
car we found that they weren’t acting on their attitudes these environmental
their attitudes these environmental
their attitudes these environmental attitudes they seemed to be kind of no
attitudes they seemed to be kind of no
attitudes they seemed to be kind of no matter what your attitudes were you had
matter what your attitudes were you had
matter what your attitudes were you had a favorable attitude toward the car but
a favorable attitude toward the car but
a favorable attitude toward the car but you weren’t sensitive to your own
you weren’t sensitive to your own
you weren’t sensitive to your own preferences but we realized that if we
preferences but we realized that if we
preferences but we realized that if we can actually give people something other
can actually give people something other
can actually give people something other than fuel cost as the indicator of how
than fuel cost as the indicator of how
than fuel cost as the indicator of how efficient the car is and we gave them
efficient the car is and we gave them
efficient the car is and we gave them greenhouse gas emissions and
greenhouse gas emissions and
greenhouse gas emissions and environmental income suddenly people
environmental income suddenly people
environmental income suddenly people then begin to act on their stable
then begin to act on their stable
then begin to act on their stable internal attitudes toward the
internal attitudes toward the
internal attitudes toward the environment and we think of this as a
environment and we think of this as a
environment and we think of this as a kind of sign post effect it sometimes
kind of sign post effect it sometimes
kind of sign post effect it sometimes have to be reminded about where you want
have to be reminded about where you want
have to be reminded about where you want to go and how to get there and so
to go and how to get there and so
to go and how to get there and so there’s a value then to having cars
there’s a value then to having cars
there’s a value then to having cars labeled not just with MPG and fuel costs
labeled not just with MPG and fuel costs
labeled not just with MPG and fuel costs but with the greenhouse gas ratings so
but with the greenhouse gas ratings so
but with the greenhouse gas ratings so that people remember to act on it and
that people remember to act on it and
that people remember to act on it and know how to act on it okay
know how to act on it okay
know how to act on it okay if you got a natural gas bill and you
if you got a natural gas bill and you
if you got a natural gas bill and you found out that you were using 163 therms
found out that you were using 163 therms
found out that you were using 163 therms of natural gas would you know whether
of natural gas would you know whether
of natural gas would you know whether this is a bad or a good thing
this is a bad or a good thing
this is a bad or a good thing let’s people have no idea what a therm
let’s people have no idea what a therm
let’s people have no idea what a therm is so it’s hard to know whether this is
is so it’s hard to know whether this is
is so it’s hard to know whether this is a lot or a little whether you’re doing
a lot or a little whether you’re doing
a lot or a little whether you’re doing well or doing poorly and so a third
well or doing poorly and so a third
well or doing poorly and so a third basic principle is the value of a
basic principle is the value of a
basic principle is the value of a relative comparison for energy numbers
relative comparison for energy numbers
relative comparison for energy numbers because we often don’t know what’s big
because we often don’t know what’s big
because we often don’t know what’s big and what’s small and one of the
and what’s small and one of the
and what’s small and one of the interesting pioneers in this space it
interesting pioneers in this space it
interesting pioneers in this space it really has made a lot of progress
really has made a lot of progress
really has made a lot of progress helping us understand the psychology of
helping us understand the psychology of
helping us understand the psychology of how people make these decisions is a
how people make these decisions is a
how people make these decisions is a company called oak power which took
company called oak power which took
company called oak power which took social psychology research from about 10
social psychology research from about 10
social psychology research from about 10 years ago redesigned the kinds of labels
years ago redesigned the kinds of labels
years ago redesigned the kinds of labels and feedback sheets that we get in our
and feedback sheets that we get in our
and feedback sheets that we get in our mail about our energy use and
mail about our energy use and
mail about our energy use and essentially created a comparison for
essentially created a comparison for
essentially created a comparison for where you are where all of your
where you are where all of your
where you are where all of your neighbors are and then in some cases
neighbors are and then in some cases
neighbors are and then in some cases where the most efficient neighbors are
where the most efficient neighbors are
where the most efficient neighbors are in terms of their overall energy use and
in terms of their overall energy use and
in terms of their overall energy use and what’s clever about this is because it’s
what’s clever about this is because it’s
what’s clever about this is because it’s a comparison to your neighbors it means
a comparison to your neighbors it means
a comparison to your neighbors it means that they live in the same climate as
that they live in the same climate as
that they live in the same climate as you they tend to live in the same size
you they tend to live in the same size
you they tend to live in the same size house and age house and so it’s a fair
house and age house and so it’s a fair
house and age house and so it’s a fair apples to apples comparison and now in
apples to apples comparison and now in
apples to apples comparison and now in the case of this example if you find out
the case of this example if you find out
the case of this example if you find out that you’re using 163 therms you find
that you’re using 163 therms you find
that you’re using 163 therms you find out that you are actually worse than the
out that you are actually worse than the
out that you are actually worse than the average neighbor and it might lead you
average neighbor and it might lead you
average neighbor and it might lead you to reflect on what am I doing
to reflect on what am I doing
to reflect on what am I doing differently what could I do to become
differently what could I do to become
differently what could I do to become more efficient and save money and help
more efficient and save money and help
more efficient and save money and help the environment whatever my concerns are
the environment whatever my concerns are
the environment whatever my concerns are so there’s just a recognition that if we
so there’s just a recognition that if we
so there’s just a recognition that if we give people comparisons it can motivate
give people comparisons it can motivate
give people comparisons it can motivate them to catch up with their neighbors
them to catch up with their neighbors
them to catch up with their neighbors and then the value of having the
and then the value of having the
and then the value of having the efficient neighbor number which of
efficient neighbor number which of
efficient neighbor number which of course here is very low meaning it’s
course here is very low meaning it’s
course here is very low meaning it’s very good allows those who are already
very good allows those who are already
very good allows those who are already better than average to have yet another
better than average to have yet another
better than average to have yet another goal to strive for and want to catch up
goal to strive for and want to catch up
goal to strive for and want to catch up with so the comparison helps motivate us
with so the comparison helps motivate us
with so the comparison helps motivate us to do a better job all right
to do a better job all right
to do a better job all right and then a final principle is the value
and then a final principle is the value
and then a final principle is the value of looking at larger numbers and
of looking at larger numbers and
of looking at larger numbers and thinking in terms of expanded outcomes
thinking in terms of expanded outcomes
thinking in terms of expanded outcomes rather than kind of small ones and I’m
rather than kind of small ones and I’m
rather than kind of small ones and I’m gonna use a non energy example to
gonna use a non energy example to
gonna use a non energy example to illustrate this because it does a good
illustrate this because it does a good
illustrate this because it does a good job of illustrating it and then come
job of illustrating it and then come
job of illustrating it and then come back to energy so a few colleagues and I
back to energy so a few colleagues and I
back to energy so a few colleagues and I presented subjects with a choice of two
presented subjects with a choice of two
presented subjects with a choice of two cellphone plans plan a
cellphone plans plan a
cellphone plans plan a a higher price per year but it had fewer
a higher price per year but it had fewer
a higher price per year but it had fewer dropped calls per hundred calls and you
dropped calls per hundred calls and you
dropped calls per hundred calls and you can think of drop calls as being a
can think of drop calls as being a
can think of drop calls as being a quality measure so you want fewer of
quality measure so you want fewer of
quality measure so you want fewer of them you don’t want to get disconnected
them you don’t want to get disconnected
them you don’t want to get disconnected so plan a had 4.2 drop calls per hundred
so plan a had 4.2 drop calls per hundred
so plan a had 4.2 drop calls per hundred for a price of 300 $84 Plan B had more
for a price of 300 $84 Plan B had more
for a price of 300 $84 Plan B had more dropped calls 6.5 but at a lower price
dropped calls 6.5 but at a lower price
dropped calls 6.5 but at a lower price 324 dollars per year but if you look at
324 dollars per year but if you look at
324 dollars per year but if you look at these numbers the drop call difference
these numbers the drop call difference
these numbers the drop call difference doesn’t seem very large four and six
doesn’t seem very large four and six
doesn’t seem very large four and six that doesn’t seem very different and
that doesn’t seem very different and
that doesn’t seem very different and that yearly cost of sixty bucks seems
that yearly cost of sixty bucks seems
that yearly cost of sixty bucks seems pretty big so most people in this case
pretty big so most people in this case
pretty big so most people in this case favor B when they have a preference
favor B when they have a preference
favor B when they have a preference they’d rather choose the cheaper plan
they’d rather choose the cheaper plan
they’d rather choose the cheaper plan that’s going to make them suffer more
that’s going to make them suffer more
that’s going to make them suffer more dropped calls but here’s the interesting
dropped calls but here’s the interesting
dropped calls but here’s the interesting thing we gave another group of subject
thing we gave another group of subject
thing we gave another group of subject the different frame but essentially the
the different frame but essentially the
the different frame but essentially the same information in fact identical
same information in fact identical
same information in fact identical information just a rescaling of it we
information just a rescaling of it we
information just a rescaling of it we had them think about dropped calls per
had them think about dropped calls per
had them think about dropped calls per thousand so it’s 42 versus 65 and the
thousand so it’s 42 versus 65 and the
thousand so it’s 42 versus 65 and the price was expressed as per month rather
price was expressed as per month rather
price was expressed as per month rather than per year so 32 versus 27 well
than per year so 32 versus 27 well
than per year so 32 versus 27 well now the price difference looks small
now the price difference looks small
now the price difference looks small it’s only five dollars a month and boy
it’s only five dollars a month and boy
it’s only five dollars a month and boy I’m going to save twenty drop calls over
I’m going to save twenty drop calls over
I’m going to save twenty drop calls over the next thousand that I make and with
the next thousand that I make and with
the next thousand that I make and with this reframing we now have a majority of
this reframing we now have a majority of
this reframing we now have a majority of the people wanting to pay for the more
the people wanting to pay for the more
the people wanting to pay for the more expensive and higher quality plan but
expensive and higher quality plan but
expensive and higher quality plan but the information is identical so the fact
the information is identical so the fact
the information is identical so the fact that we can be moved around based on how
that we can be moved around based on how
that we can be moved around based on how we scale information first of all says a
we scale information first of all says a
we scale information first of all says a lot about our nature we get trapped by
lot about our nature we get trapped by
lot about our nature we get trapped by what we see this is Kahneman’s point but
what we see this is Kahneman’s point but
what we see this is Kahneman’s point but the others we can use this responsibly
the others we can use this responsibly
the others we can use this responsibly by trying to make important things
by trying to make important things
by trying to make important things bigger so we see the actual impact of
bigger so we see the actual impact of
bigger so we see the actual impact of them and so here’s what I mean in the
them and so here’s what I mean in the
them and so here’s what I mean in the sense of energy which is earlier I
sense of energy which is earlier I
sense of energy which is earlier I argued we don’t want to think about
argued we don’t want to think about
argued we don’t want to think about miles per gallon we want to think about
miles per gallon we want to think about
miles per gallon we want to think about gallons per some distance so one
gallons per some distance so one
gallons per some distance so one possible distance is a hundred miles so
possible distance is a hundred miles so
possible distance is a hundred miles so if I think about improving a car from 20
if I think about improving a car from 20
if I think about improving a car from 20 to 25 I know I’m going to reduce my gas
to 25 I know I’m going to reduce my gas
to 25 I know I’m going to reduce my gas consumption from five gallons every
consumption from five gallons every
consumption from five gallons every hundred miles down to four that’s good
hundred miles down to four that’s good
hundred miles down to four that’s good but five to four doesn’t sound that
but five to four doesn’t sound that
but five to four doesn’t sound that impressive to me and I might be fine
impressive to me and I might be fine
impressive to me and I might be fine with the five the car that uses five
with the five the car that uses five
with the five the car that uses five gallons every hundred miles now if you
gallons every hundred miles now if you
gallons every hundred miles now if you tell me over what I hope to be the life
tell me over what I hope to be the life
tell me over what I hope to be the life of my car about a hundred thousand miles
of my car about a hundred thousand miles
of my car about a hundred thousand miles that the difference is going to
that the difference is going to
that the difference is going to be from 5,000 gallons down to 4,000 that
be from 5,000 gallons down to 4,000 that
be from 5,000 gallons down to 4,000 that gets my interest I don’t want to burn
gets my interest I don’t want to burn
gets my interest I don’t want to burn that extra thousand gallons I don’t want
that extra thousand gallons I don’t want
that extra thousand gallons I don’t want to pay for it and I don’t want it to
to pay for it and I don’t want it to
to pay for it and I don’t want it to hurt the environment and now I think I’m
hurt the environment and now I think I’m
hurt the environment and now I think I’m more likely to act on it and so as we
more likely to act on it and so as we
more likely to act on it and so as we think about then improving decisions for
think about then improving decisions for
think about then improving decisions for people what information we can give them
people what information we can give them
people what information we can give them and what you want to look for the next
and what you want to look for the next
and what you want to look for the next time you’re buying a car the EPA label
time you’re buying a car the EPA label
time you’re buying a car the EPA label was redesigned in 2013 to try to offset
was redesigned in 2013 to try to offset
was redesigned in 2013 to try to offset the bad mpg number with other valuable
the bad mpg number with other valuable
the bad mpg number with other valuable information and let me highlight some of
information and let me highlight some of
information and let me highlight some of these for you
these for you
these for you so mpg is still on the label so people
so mpg is still on the label so people
so mpg is still on the label so people want it they expect it but now there’s
want it they expect it but now there’s
want it they expect it but now there’s more stuff so when is this smaller
more stuff so when is this smaller
more stuff so when is this smaller number which is the gallons per hundred
number which is the gallons per hundred
number which is the gallons per hundred miles recommendation that Jack saw and I
miles recommendation that Jack saw and I
miles recommendation that Jack saw and I made in a science article in 2008 so
made in a science article in 2008 so
made in a science article in 2008 so that gets us into consumption and away
that gets us into consumption and away
that gets us into consumption and away from mpg so that’s a step in the right
from mpg so that’s a step in the right
from mpg so that’s a step in the right direction
direction
direction they have annual fuel cost on there
they have annual fuel cost on there
they have annual fuel cost on there that’s also good it’s a translation to
that’s also good it’s a translation to
that’s also good it’s a translation to an objective we care about which is cost
an objective we care about which is cost
an objective we care about which is cost they also have greenhouse gas ratings
they also have greenhouse gas ratings
they also have greenhouse gas ratings this is that signpost of helping people
this is that signpost of helping people
this is that signpost of helping people who want to help the environment get
who want to help the environment get
who want to help the environment get directed in the right direction for it
directed in the right direction for it
directed in the right direction for it and then finally the the last number
and then finally the the last number
and then finally the the last number that I think is quite clever combined
that I think is quite clever combined
that I think is quite clever combined several the principles that I just
several the principles that I just
several the principles that I just proposed which is they make a comparison
proposed which is they make a comparison
proposed which is they make a comparison to an average car so it’s relative and
to an average car so it’s relative and
to an average car so it’s relative and you can see whether you’re saving money
you can see whether you’re saving money
you can see whether you’re saving money or spending extra they scale it over
or spending extra they scale it over
or spending extra they scale it over five years so it’s a bigger number it
five years so it’s a bigger number it
five years so it’s a bigger number it gets closer to the kind of lifetime of
gets closer to the kind of lifetime of
gets closer to the kind of lifetime of the car that you’re going to have and
the car that you’re going to have and
the car that you’re going to have and you can essentially then quickly size up
you can essentially then quickly size up
you can essentially then quickly size up how big an impact you’re having if you
how big an impact you’re having if you
how big an impact you’re having if you buy an SUV that has poor mileage this is
buy an SUV that has poor mileage this is
buy an SUV that has poor mileage this is no longer a savings number this is an
no longer a savings number this is an
no longer a savings number this is an extra cost number that’s getting in the
extra cost number that’s getting in the
extra cost number that’s getting in the thousands of dollars at that point and
thousands of dollars at that point and
thousands of dollars at that point and then finally as as you leave today and
then finally as as you leave today and
then finally as as you leave today and if you’re thinking about buying a car in
if you’re thinking about buying a car in
if you’re thinking about buying a car in the future Duke has put together a
the future Duke has put together a
the future Duke has put together a calculator that allows you to enter mpg
calculator that allows you to enter mpg
calculator that allows you to enter mpg numbers for maybe your current vehicle
numbers for maybe your current vehicle
numbers for maybe your current vehicle and one you might trade for or three
and one you might trade for or three
and one you might trade for or three that you’re considering and you can put
that you’re considering and you can put
that you’re considering and you can put in the mpg some distance you expect to
in the mpg some distance you expect to
in the mpg some distance you expect to drive and I’d recommend pick a big one
drive and I’d recommend pick a big one
drive and I’d recommend pick a big one like the lifetime of the car so you
like the lifetime of the car so you
like the lifetime of the car so you really see the impact of your numbers
really see the impact of your numbers
really see the impact of your numbers make a gasoline price assumption and
make a gasoline price assumption and
make a gasoline price assumption and then you can compare the vehicles to see
then you can compare the vehicles to see
then you can compare the vehicles to see how much you’re saving or how am I
how much you’re saving or how am I
how much you’re saving or how am I you’d spend depending on which one you
you’d spend depending on which one you
you’d spend depending on which one you pick so this is just zooming in you get
pick so this is just zooming in you get
pick so this is just zooming in you get a final number that’s a comparison
a final number that’s a comparison
a final number that’s a comparison between the vehicles whatever you
between the vehicles whatever you
between the vehicles whatever you whatever assumptions you want to make
whatever assumptions you want to make
whatever assumptions you want to make and you can find this easily it’s at a
and you can find this easily it’s at a
and you can find this easily it’s at a URL GPM calculator comm and it will help
URL GPM calculator comm and it will help
URL GPM calculator comm and it will help you when you make your next card
you when you make your next card
you when you make your next card decision so as you walk away then with
decision so as you walk away then with
decision so as you walk away then with this recognition of the problem of what
this recognition of the problem of what
this recognition of the problem of what you see is all there is we can help you
you see is all there is we can help you
you see is all there is we can help you make better decisions by making sure
make better decisions by making sure
make better decisions by making sure when you look at the label or use the
when you look at the label or use the
when you look at the label or use the calculator you’re thinking in terms of
calculator you’re thinking in terms of
calculator you’re thinking in terms of consumption not mpg you’re thinking in
consumption not mpg you’re thinking in
consumption not mpg you’re thinking in terms of the costs and the environmental
terms of the costs and the environmental
terms of the costs and the environmental impact you get a sense of this relative
impact you get a sense of this relative
impact you get a sense of this relative comparison across people or between
comparison across people or between
comparison across people or between vehicles and you think about the big
vehicles and you think about the big
vehicles and you think about the big outcomes over many miles of driving and
outcomes over many miles of driving and
outcomes over many miles of driving and not just 100 miles thank you
not just 100 miles thank you
not just 100 miles thank you [Applause]
”
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