Years ago, as a still fresh-faced PhD student at UNC’s psychology department (I said many years ago), I was thrown into the world of teaching for the very first time. I was about to teach a course on sensation and perception–a favorite subject of mine–and wanted to get the best, most interested students. So, in my infinite irrationality, I scheduled my class for 8 AM. No student, I thought, would sign up for a course starting so early unless they were just as excited about visual illusions, auditory tricks, and mind-bending phenomena as I was. The course wasn’t designed to be a convenient fit for their schedule; but a mind-altering experience that came at a cost: waking up early.
I couldn't have been more wrong.
On the first day of class, I walked into the lecture hall, expecting to meet a group of enthusiastic, bright-eyed students. But what I got was a class of sleepyheads that stumbled in late, usually still in their pajamas, and yawned every five minutes. What had gone wrong?
These were not the students that I’d intended to attract. So I asked, “What made you take this class?” A few drowsy but honest students admitted they’d only signed up for my course because they couldn’t wake up on time to register for the courses they originally wanted. My class, scheduled for the least desirable time slot, became the default option for those who missed out on other courses because they slept it. Instead of attracting the motivated early birds, I got the night owls who couldn’t wake up in time for registration.
Whoops.
This is a classic case of adverse selection.
In economics, adverse selection refers to a situation where there is unequal information between two parties, usually buyers and sellers, which allows one party to take advantage and maximize its outcomes at the expense of the other. Health insurance is a classic example of adverse selection. The healthiest people are the least likely to opt in, which increases the pool’s riskiness, making health care less appealing for insurance companies and policies more expensive for the people who want them.
But to go back to my mishap. While I viewed the 8 AM time slot as a proxy for dedication, none of the students did. I thought I was designing a system to reward interest, but in reality, I’d set up a perfect trap for the disinterested. That’s why, instead of attracting a group of psychology enthusiasts, I ended up with a cohort of students who self-selected for their inability to wake up early enough to avoid this time slot entirely.
Well-intentioned assumptions, as it turns out, often lead to unintended consequences.
Our expectations of how people will behave don’t usually take into account the complexity of human behavior. With my story in mind, the next time you attempt to design an incentive-driven system, consider your plan’s potential pitfalls. Think like your target audience and ask yourself, “Is this system really going to work out in the way I want it to? To my benefit?” Then account for the system’s vulnerabilities and make the necessary amends.
The way that my “8 AM plan” backfired taught me to slow down and be very explicit about my assumptions and the exact behaviors that I expect from my system. We all plan different systems from time to time, some larger some smaller, and we can all benefit from a deeper understanding of human behavior, and integrating our irrational nature deeply into our design.
Irrationally yours,
Dan Ariely