Site icon Dan Silvestre

How to Make Smarter Decisions by Designing Your Defaults

make smarter decisions

Do you want to make smarter decisions everyday day? You can. All you need to do is harness the power of defaults.

90% of your daily decisions happen automatically, many shaped by environment. Thus, most decisions are a habit, not a deliberate choice.

And habits can be developed by shaping the invisible defaults of your life. To make smarter choices, design smarter defaults.

Is your phone charging next to your bed while you sleep?

It’s the first object you touch immediately after waking up. A ton of notifications await. Checking social media and email easily becomes a habit as soon as you wake up. And after at least a couple of minutes of infinite scrolling, you get up.

What if, instead of your phone, you place a water bottle next to your bed? For a while, you would feel something is missing. But soon enough drinking water becomes the first habit of the day.

Once you remove the phone from the picture, suddenly a good habit — drinking water after waking up — becomes easy to perform.

And that is the power of defaults.

The Power of Defaults

Eric Johnson and Daniel Goldstein conducted a study that revealed just how much your environment impacts your behavior — often without you even realizing it.

This graph shows the percentage of people, across different European countries, who are willing to donate their organs after they pass away:

In a continent where countries are very much alike, what could cause such a difference? Initially, the researchers thought the difference in donations would be caused by the “big” reasons, such as religion and culture. But that wasn’t the case.

For example, Austria and Germany are located right next to one another, sharing geographic, cultural, and social similarities. It would make sense that their donation rates would be roughly the same. And yet, only 12% of the population in Germany has chosen to become an organ donor while almost all of the Austrians (99.98%!) have chosen to donate.

Could the researchers explain that massive gap between similar countries with a single factor?

Do Defaults Save Lives?

They focused on measuring the change in organ donations by focusing on a single factor: the no-action default for agreement.

In organ donation, countries use one of two possible policies:

Countries who employ a default opt-in (presumed consent) scheme see average rates of 97.56% compared to countries who employ a default opt-out (explicit consent), where the average rate is 22.73%.

As Richard Thaler and Cass Sunstein have reported in Nudge: Improving Decisions About Health, Wealth, and Happiness:

“In Germany, which uses an opt-in system, only 12 percent of the citizens gave their consent, whereas in Austria, nearly everyone (99 percent) did.”

While large majorities of Americans approved of organ donations, only about a quarter consented to donate their own.

On the other hand, nearly all Austrians, French and Portuguese consent to donate theirs. The default explains the difference. In the United States, people must choose to become an organ donor. In much of Europe, people must choose not to donate.

And countries with presumed consent policies don’t just have more people who sign up to be donors. They also have consistently higher numbers of transplants.

Defaults are so powerful they save lives.

Your “Golden Years” on Autopilot

Most Americans are bad at saving money for the future, especially for retirement. And the current defaults don’t make it any easier. Many companies’ retirement plans — such as 401(k)’s — are opt-in. You need to head to HR to get enrolled, and you might need to understand a bit about investing.

But an alternative strategy has seen massive success: automatic enrollment. This means that employees are enrolled by default, forcing them to decide to opt-out in order to not contribute to retirement automatically. Now employees make smarter decisions by default.

Under these circumstances, participation in 401(k)’s skyrockets. This chart shows that, for one company, participation among new hires rose from less than 20 percent to over 90 percent:

However, this system retirement savings stuck at the low default contribution rate, often 3%. That’s not much to be contributing year after year. So many employers now implement automatic escalation, which means you agree on up front to raise your contribution by 1 or 2% every year.

Economist Richard Thaler — the author of “Nudge” — devised one variation of automatic escalation called “Save More Tomorrow”. It ties the increased contribution to your next pay raise, so you don’t “miss” the money so much. Thaler estimates that automatic escalation programs have boosted annual savings by $7.4 billion.

Little defaults can add up to a lot of cash.

Positive and Negative Defaults

When you’re faced with a challenge and need to make a decision, your brain starts to look for the path of least resistance. Frequently, you go with the default option.

Let’s suppose you commit to run for 30 minutes every day after work. But when you get home tired after a long day at the office, all you want to do is binge-watch Netflix. And so that’s what you do instead. Because it’s the default, and it’s easier.

But what if you were to remove your ability to watch television?

You unplug the TV and cancel your subscription. Now your previous default is not accessible anymore. This is called “default to zero” and it can be a powerful hack to change behavior through negative reinforcement and force you to make smarter decisions.

Will you go running? You might. But if not, at least you won’t be watching television instead. And even if you try to cheat — by plugging the TV and getting Netflix again — it’s going to take you a few minutes. Because your ability to do it has been reduced, you’ll be more resistant to do it.

Now, let’s couple that with positive reinforcement. To increase your ability to go running, place your running shoes by the front door (or next to the bed if you want to run after waking up). The hardest part of any run is starting, and making your shoes more accessible make it easier to make the smart decision.

You just designed your life as a choice architect.

On one hand, you encourage smarter decisions you want to do by making them more accessible. And you add friction to habits you want to quit, making them less accessible, or remove the option to perform them altogether.

Defaults to Make Smarter Decisions

We are defined by the choices we make. And, as we now know, most of the choices we make are automatic. If you plan your defaults, you make smarter decisions every time with little effort.

Default decisions are everywhere. They are the settings that come out of the box, the selections you make on your computer by hitting enter, the assumptions that people make unless you object, the options easily available to you because you haven’t changed them.

They might not seem like much, but defaults (and their designers) hold immense power — they make decisions for us that we’re not even aware of making. Consider the fact that most people never change the factory settings on their computer, the default ringtone on their phones, or the default temperature in their refrigerator. Someone, somewhere, decided what those defaults should be — and it probably wasn’t you.

Defaults are powerful nudges as they require you to actively object for it not to work. But people have a strong tendency to go along with the status quo or default option.

We are nudged all day, towards good and bad decisions. The good news is you can design your defaults in many areas in life to help you make smarter decisions. Turn your automatic decisions into good ones and you will naturally make the right choice.

“First, never underestimate the power of inertia. Second, that power can be harnessed.” — Richard Thaler in Nudge

Here are a couple of defaults you can adopt in your life to make smarter decisions. To make it easier to read, I’ve divided them into Health, Wealth, Work, and Life.

Make Smarter Decisions in Health

Eat healthier

Drink More Water

Sleep Better

Exercise More

Make Smarter Decisions in Wealth

Spend Less

Save More

Make Smarter Decisions at Work

Deep Work

Productivity

Email

Meetings

Make Smarter Decisions in Life

Watch Less TV

Less Phone Time

Reduce Mindless Internet Browsing

Read More Books

There are a lot more nudges and defaults strategies that you can use to shape the environment around you. In the words of Winston Churchill:

“We shape our buildings; thereafter, our buildings shape us.”

Optimizing Other Defaults to Make Smarter Decisions

To make smarter decisions, your goal is to create “good by default” options. By doing so, you must consciously decide to make the choice to do bad.

To understand “good by default”, consider the towel washing service at hotels.

One has a sign saying: “Washing towels every day is bad for the environment. If you don’t want us to wash them, place them in your bed”. In other words, you must choose to do good. Most people either won’t bother or will forget.

Another hotel uses a different sign with an opposing message: Washing towels every day is bad for the environment. If you want us to wash them, place them in your bed”. Suddenly, not only is the default option the right thing to do for the planet, but you must actually choose to do bad.

In the first example, you had to actively choose to do good. But the game changes when both the path of least resistance is the right thing and you have to make a conscious choice to do something you know is unsustainable.

The same idea can be applied when designing your own defaults. If you haven’t got any bars of chocolate at home, you can’t eat them unless you consciously decide to go out and buy them. 9 out of 10 you won’t make that call.

Another key strategy is to simplify. More options aren’t better, it’s worse. It depletes your willpower and leads to decision fatigue. Keep your defaults as simple as possible: eat the same meals over and over again, read one blog post at a time instead of opening 10, own fewer things and love everything that you own.

As a rule of thumb: when in doubt, eliminate options.

Ultimately, designing for default is based on a simple premise: change your environment so that it’s easier to make smarter decisions and harder to perform bad behaviors.

Make Smarter Decisions Designed By You, Not For You

It’s very powerful to realize that most of your life was designed for you, but not by you. Social media end goal is to capture your time and attention. This is contrary to your end goal, which is to remove distractions in order to perform Deep Work.

That’s why you need to rethink all the defaults in your life and decide for yourself what the optimal choice is. Most of the times you can re-design defaults to work for you, instead of against youQuestion everything. Change your environment so it fits your goals and the way you want to live your life.

So what are you waiting for? Go on and change some defaults.


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