When I was growing in the sprawling township of Chatsworth, during the 1970’s the folk around me comprised mostly factory workers from the farming, clothing and leather sector. The exceptions, my gods, were the teachers, lawyers and doctors. White-collar jobs for non-whites were rare, back then.  So when my eldest brother Shalin’s best friend Louis Peters got a humble clerical job at the then insurance giant IGI, I became his devotee. I remembered IGIs logo “We don’t hassle, we pay” and proudly related it to Peters without having a clue what it meant.

Now, Peters was a cool person who took delight in my interest. So, he related a story which I am now certain was folklore – I tell it anyway. On his first day at work, a senior manager took him across the Esplanade road in Durban to view the IGI’s sprawling skyscraper and made him read the emblazoned logo “We don’t hassle, we pay.”  He kept reading and according to his manager kept reading it wrong. Finally, the manager “read” the logo for Louis “We hassle, we don’t pay!” Louis related, this and laughed saying that he implicitly understood his job to vet claims very carefully.

Try computing the cost that insurance and medical aid has on our lives. Too much will be our collective responses. We, with some justification, refer to these as grudge payments. Juxtapose your payment history with your paltry claim record and it becomes crystal clear. Yet, you still feel guilty, almost criminal when making a claim! It remains a very painful business relationship.

Enter Richard Thaler, the 72-year old economist who won the 2017 Nobel economics prize for his trail blazing nudge theory which began the shift of the process from grudge to nudge. I use the notion of milestones evolving to smilestones as we are rewarded for good habits. Thaler says that small design changes can markedly affect (read Nudge) individual behaviour. These techniques rely on insights from behavioural science, which used ethically, may be very helpful. We do need to be sure that they aren’t employed to sway people into bad decisions that they will later regret.

Assurance and Insurance actuaries, and policymakers around the world are embracing a behavioural science approach to problems using iterative, data-driven. Therefore, Data science is important. Nudge theory posits that small incentives persuade people into making certain decisions.

Think, Discovery car insurance and a reduced petrol cost as a reward for good driving. Think, minimum balance to get a free account. Think, rewards for gym attendance.

Policymakers around the world should and indeed are adopting Thaler’s ideas, to establish purposeful governmental nudge units and programs intended to guide people toward choices that are in their best interests. Nudging has become fashionable. Nudge theory is particularly useful when inventive civil servants craft methods to influence and shape societies in the face of budget deficits. Thaler, for example, found that writing to Britons to inform them that most people in their town had already paid their taxes had the effect of persuading the remaining payments.

He shed light on how people succumb to short-term temptations, which is why many people fail to plan and save for old age. Thaler’s body of work includes insights on the ways in which limited rationality, social preferences and a lack of self-control affect decisions that shape market outcomes. He has studied how American football teams make poor choices when drafting players and how quiz show contestants take risks.

Dr Irvin Khosa, as a devout Buccaneer, I am coming to you, Sir. The university of life you attended to earn your richly deserved doctorate is awe-inspiring. The country has benefitted through football. The brick and mortar university version has some benefits as well. Scholars like Thaler may yet prove useful as Nudge Theory will inform that we keep our successful coaches and nudge them to greater success and titles not other teams!

Thaler’s research on “fairness,” showed how consumer concerns may stop firms from raising prices in periods of high demand, but not in times of rising costs. I am a shopkeeper’s son. My dad, in his tiny shop, taught us this years ago that in times of high demand retain even reduce prices and make up on the numbers because it was free advertisement. Uber obviously did not study this research!   Nudge theory is probably at odds with ubernomics which also is the economics of abundance as it allows companies which defy traditional economic principles of scarcity. Surprisingly Ubernomics defense of surge pricing, which will ruin many customers New Year, is counterintuitive and almost reprehensible. Surge pricing, after all, is price gorging.

Noble prize winner Thaler, is a man after my heart, especially as he famously declared on winning the USD 1.1m bonanza which accompanied the Nobel prize that “I will try to spend the money as irrationally as possible.” My advice until you win such a prize, is to not fudge. I nudge you to make the grudge payments. As business strategist Schourie forewarns “Don’t grudge the grudge payments; they’re often the fire extinguisher in the blaze.”

It’s the New Year, lets reimagine how we can creatively leverage Nudge Theory, to improve service delivery, to mitigate the carnage on our roads, and to get our kids and even their teachers to read. Happy New Year!


Dr Colin Thakur is a digital activist who is committed to the dream of “one person, one connected device.” He is the KZN e-Skills CoLab Director, located at the Durban University of Technology. His areas of research include e-democracy, Social media, and unstructured big data

 

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