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The Things We Do

The things we do: How your mobile phone records can predict your creditworthiness

Roxanne Bauer's picture

Jinotega, NicaraguaRisk is a financial term that can mean life or death for a budding entrepreneur.  Many entrepreneurs need to take out loans from banks in order to have enough money to start their businesses.  Banks, though, need to be able to reliably determine which of these potential entrepreneurs will repay the loans and which will default. In developed countries this is usually accomplished through credit reports, which contain an individual’s credit history as reported to a credit bureau by lenders. This system, however, can be problematic in developing countries where many people do not have bank accounts, don’t interact frequently with formal institutions, or are paid informally in cash.  As a result, banks often lack verifiable information on the probability that a loan applicant will be successful. 

Interestingly, one set of data that is available in most countries is mobile phone records.  By the end of 2015, there will be more than 7 billion mobile cellular subscriptions, with a penetration rate of 97%, up from 738 million in 2000.  Due to the incredible market saturation of mobile phones and the ability of mobile phone operators to keep records of call activity (even with prepaid plans), operator records can provide rich information about individual behavior and social networks.  For example, phone records indicate whether or not an individual keeps their balance top-upped so that they can make calls in case of an emergency, how many people they call during the day, how long their calls last, and so on.

Daniel Björkegren, an economist at Brown University and Darrell Grissen of the Entrepreneurial Finance Lab (EFL) wondered whether these phone records could reveal insights into an individual’s behaviors that could be applied elsewhere- specifically whether this information could determine an individual’s creditworthiness.

The things we do: Why work does not depend on demand

Roxanne Bauer's picture
Bureaucracy - MagritteWhen was the last time you finished a job in less time than was allocated to it?  Have you ever moved from a smaller to a larger home and discovered that your big, new home is somehow filled with stuff after a while? How about car parks or real estate developments that start out small, enlarge, and end up just as packed as before?

It’s human nature to fill the time and space available to us. This phenomenon, known as Parkinson’s Law, states that, “Work expands so as to fill the time available for its completion.” 

Other variations of the principle includeThe more money you earn the more money you spend,” or “The bigger the available space, the more junk it can hold.”

This principle comes from the opening line of a humorous essay by Professor Cyril Northcote Parkinson published in The Economist in 1955.  

The essay explains the results of a study he conducted of the British Civil Service. The British Civil Service grew between 1914-1928, with a noticeable rise in administrative positions and a concurrent decline in ‘fighting’ positions. In 1914 there were 2,000 Admiralty officials with this number growing to 3,569 in 1928, creating “a magnificent Navy on land.” The interesting part of this shift, however, is that this growth was unrelated to any possible increase in their work.  The British Navy during that period had diminished by a third in men and two-thirds in ships. From 1922 onwards it was limited by the Washington Naval Agreement, signed among the major nations that had won World War I, which limited naval construction to prevent an arms race. Thus, the number of people employed in the bureaucracy increased even as the British Empire collapsed — an event that decreased the amount of work available.

The things we do: Self-command takes practice

Roxanne Bauer's picture

Also available in: العربية

Following prolonged conflict, it is often difficult to reestablish security and reduce crime and violence, especially among poor young men. In Liberia, development experts have been researching the most effective ways to support high-risk individuals, and they may have found an effective approach combining therapy with cash.

Cognitive Behavior Therapy and Cash Transfers on High-Risk Young Men in LiberiaOne of the most pressing concerns in post-conflict settings is how to help individuals transition back into a peaceful life. After a conflict has subsided, small arms are usually very common, local and national economies have been destroyed, and the emotional stress of the violence begins to take on new forms. Former soldiers, in particular, have trouble with the transition as they struggle with the pain and horror of what they experienced, and many do not remember how to participate in community life anymore.  In response, the international development community often tries to “enable” these men by creating jobs for them. The theory is that if people are busy working they will not have the time or the inclination to commit crime.
However, simply providing jobs is rarely enough. The Network for Empowerment & Progressive Initiative (NEPI), an organization operating in Monrovia, Liberia, challenges this paradigm and seeks to support men formerly engaged in the country’s two civil wars by rehabilitating them through therapy.  
Klubosumo Johnson Borh, the founder of NEPI, was as a Liberian teenager when he was recruited for Charles Taylor‘s infamously brutal rebel army. Borh was made a commander and oversaw soldiers who were even younger than he was. By the end of the conflict, which lasted from 1989 through 2003, nearly 10% of the population had been killed, and thousands of child soldiers were now grown men.  Many of these men had trouble shaking the violent behaviors they had learned in war so Borh helped start NEPI in an effort to reform these and other troubled men.

The things we do: Stop multitasking and start focusing

Roxanne Bauer's picture

Many believe that multitasking is the art of the productive. However, social science reveals that humans don't really multitask, but rather they rapidly switch among tasks. It's a cognitive illusion that actually results in less productivity and may harm the brain's natural abilities.

caffeinating, calculating, computeratingIn June of this year, a Chinese motorist was caught driving while undergoing intravenous therapy and talking on the phone.  A needle providing the intravenous therapy was stuck in the back of his right hand, which had been holding his phone, while he used his left hand to hold the iron pole with the intravenous fluid bag and also the car’s steering wheel.  Police in the city of Wenzhou in southeastern Zhejiang province, China were on patrol on June 20 when they saw the motorist driving at 80km/h.

The driver told police he was rushing to carry out some urgent matters so had left a health clinic before his infusion was complete. He claimed that it was not dangerous for him to be driving at the time because he was good at multitasking. The police didn’t buy his multitasking defense and fined the driver 150 yuan and deducted four points from his driving license for dangerous driving and using a mobile phone while driving.

In a famous study of drivers chatting on mobile phones, David Strayer and Frank Drews found that diving while using a mobile phone is as dangerous as driving while drunk.

The problems of multitasking don’t end with driving.  Harvard Medical School knows first-hand that multitasking increases the number of mistakes people make— a resident doctor nearly killed a patient after a text message distracted her from updating a prescription. 

These and other examples point to an undeniable truth: multitasking can be dangerous at its worst and inefficient at its best. Even simple can produce a kind of ‘attention interference’ when performed simultaneously.

The things we do: How money can buy you happiness

Roxanne Bauer's picture

People have been arguing for centuries about whether or not money can buy happiness. New research provides a fuller understanding of the relationship between what we earn and how we feel.

ambodian farmer, Khout Sorn, stands in front of his banana trees in Aphiwat Village, CambodiaIt may seem a bit obvious: people with higher incomes are, generally speaking, happier than those who struggle. They worry less about paying their bills, they have greater choice in where they live or how they work, and they can provide creature comforts for themselves and their loved ones.  However, wealth alone is not a golden ticket. Indeed, what kind of money one has and how they spend it matters a lot more than a large income. 

The basics on happiness
When looking at all of these research results, it’s important to understand what is meant by the term ‘happiness’. Those in the field of happiness research divide it into two components, and individuals need both to be truly happy. But only one of those components keeps improving the more you earn. The other tops out after a certain point.

The things we do: The logic behind instant gratification

Roxanne Bauer's picture

Learning to give preference to long-term goals over more immediate ones is known as deferred gratification or patience and considered a virtue in many cultures.  However, there is logic behind asking for rewards immediately, and those who live in poverty know this all too well.

A woman tries to decideThe comedian Jerry Seinfeld, once joked “I never get enough sleep. I stay up late at night because I’m ‘night guy’. ‘Night guy’ wants to stay up late. ‘What about getting up after five hours of sleep?’ ‘Oh, that’s morning guy’s problem. That’s not my problem—I’m night guy! I stay up as late as I want.’

Such decisions are described by the theory of intertemporal choice, the idea that decisions have consequences that come at different points in time. People weigh the relative trade-offs of getting what they want in the immediate future with the trouble associated with waiting but potentially getting something better.

We all face these kinds of decisions in our day-to-day lives, from deciding to work now or later or save or spend money, to whether or not we should stay up late to enjoy the night or go to bed early to feel better the next day. In each of these cases, a decision maker needs to assess the utility (or value) of one outcome that is will occur sooner with another one that is more distant in the future. 

The things we do: Mobilize your potential through self-talk

Roxanne Bauer's picture

Also available in: العربية

People often talk to themselves.  This was once thought to be a hallmark of the self-absorbed.  Social science research, however, suggests it may be a powerful way in which we can motivate and cheer ourselves on.

thinkingHave you ever spoken to yourself?  Have you spoken to yourself in third person? Most of us have done so, but we may not have considered why we do it.

In 2013, Malala Yousafzai appeared on the Daily Show and Jon Stewart asked her when she realized the Taliban had made her a target. She begins her answer in first person but switches to third person part-way through, saying “When in 2012 I was with my father and someone came and she told us ‘have you seen on google if you search your name that the Taliban have threatened you?’ I could not believe it. I said ‘No, it’s not true.’ Even after when we saw it, I was not worried about myself that much. I was worried about my father because we thought the Taliban are not that cruel that they would kill a child because I was 14 at that time. But then later on, I started thinking about that. I used to think a Talib would come and kill me. But then I said, ‘If he comes, what would you do, Malala?’ Then I would reply to myself that, ‘Malala, just take a shoe and hit him.’ But then I said, ‘If you hit a Talib with a shoe then there would be no difference between you and the Talib.’ ”

Ethan Kross, a psychologist at the University of Michigan, studies self-talk, the introspective conversations we have with ourselves about ourselves, and believes that speaking to or about ourselves in the third person may be one way in which we help ourselves cope.

The things we do: The connection between sleep and poverty

Roxanne Bauer's picture

It’s well-established that a lack of sleep can impair cognitive function and lead to adverse physical outcomes. But is it possible that a lack of sleep can also explain social issues, like poverty? 

YA woman naps on a hand cart, used for hauling goods around the crowded streets of Mumbaiou’ve probably heard the saying, “Work, play, sleep: pick two.” 
Unfortunately, as human beings, we cannot do everything.  Turns out, in this constant negotiation, many more people should be picking sleep over work or play. 

Researchers have demonstrated that, for most people, sleeping less than six hours a night results in cognitive impairment and a host of other health problems, including increased risk for Type II diabetes and cardiovascular disease. These diseases are also more common among the poor, which leads to some obvious questions: Does poor sleep lead to health problems and lower earnings?  Or is it the other way around- that poor health and lower earnings result in poor sleep?  Can a lack of sleep explain the income gap?

Freakonomics recently published a two-part podcast on the topic of sleep and how it may affect not just health outcomes, but also the financial outcomes for people.  It begins by discussing the puzzle over whether poverty leads to poor sleep (environmental factors, the stress of poverty, or the need to work more than one job may interfere with regular sleep) or whether poor sleep leads to poverty (the impaired cognition that results from insufficient sleep keeps us from earning our full potential).

The things we do: How technology undermines our ability to lie

Roxanne Bauer's picture

We are told, on average, around 200 lies per day.  Most of these lies are harmless and meant to protect the self-esteems of the liar or the one being lied to.  However, as technology and social media become more integral to our lives, how will our ability to deceive change?

youth using smartphonesAs technology and the so-called ‘Internet of Things’ becomes more pervasive in our lives, the amount of information we leave as online bread crumbs also expands. Online advertising companies, for instance, collect huge amounts of information about our browsing histories, which can unearth a pretty comprehensive profile of what we've been up to on the Internet— and by extension in reality. Moreover, smartphones are very sophisticated tracking and eavesdropping devices that follow our every move, from fitness tracking and location services to text messages and social media apps.
As individuals, we can manipulate our online personas so that only the best of us is shown.  We may post photographs of our vacations, tweet about our chance encounters with celebrities, or write status updates that sound optimistic and cheerful— all the while omitting our headaches and heartaches.  But what happens when our Fitbits reveal our connection to our sofas or our smartphones expose our in previously denied affection for Taylor Swift?
In a paper published in the Vanderbilt Journal of Entertainment & Technology Law in 2012 Kathryn R. Brown distilled research on social media psychology and found that users screen photographs of themselves in order to present themselves as “attractive” and “having fun”. She also found that they adjust their personas to seem “socially desirable,” “group-oriented,” and “smiling.” At the same time, “individuals are unlikely to capture shameful, regrettable, or lonely moments with a camera.”

The Things We Do: Regret can trip us up- before we’ve even begun

Roxanne Bauer's picture

Few people doubt the merits of pausing to "think things through" before making a decision. Without doing so, we fear we may end up making a decision that leads to harm and misfortune.  However, this process is itself a double-edged sword that can lead us astray.

Boy thinkingWe've all been forced to make tough decisions in life. From career progression and where to live to which route to take on a trip, we navigate life's choices by considering our options and weighing them against each other. In the context of these decisions, we attempt to predict the negative consequences from an action or decision and the likelihood that those consequences will actually occur. 

Regret- we seek to avoid it when we can

In a famous study on Regret Theory, Loomes and Sugden present the idea that in making decisions, individuals not only consider the knowledge they have and the resources at their disposal, but also the likely scenarios that will result from their choices.  They further suggest that the pleasure associated with the results of their choices depends not only on the nature of those results but also on the nature of alternative results. Individuals consider the regret their future selves may feel if they know they would have been better if they had chosen differently. Likewise, they consider the joy their future selves may feel if the consequences of their decisions turn out to be optimal. Thus, both a cause and a consequence of our desire to avoid losses (loss aversion) is our desire to avoid the pain of regret. 
According to researchers, individuals exhibit “regret aversion” when they fear their decision will turn out to be wrong in hindsight. Sometimes, we engage in regret aversion before making a decision, leading us to hem and haw and lose out on opportunities. Other times, we engage in regret aversion after a decision is already made, leading us to hold on to losing assets or undesirable positions because we don’t want to admit our choice was not the best one. Many of the interventions that behavioral economists suggest, such as automatic enrollment, default options, and providing information to consumers, are set up to reduce the ex post regret individuals will face for not doing something that’s in their interest.