Making Easy Choices vs. Making Choices Easy

Technology Outlook

June / July 2004 By: Esther Dyson Volume 2 Number 3

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How do people really behave, online and off? You certainly can't get a complete answer to that question from a traditional economist—€”human beings are far too complicated for that.

I got an interesting perspective on the issue recently when I spoke to Eric Johnson, a Columbia Business School professor with a background in psychology as well as economics, who has made a career making sense of why people don't make sense.

"Most people think they make up their own minds," Johnson says. "They'll say, 'I watch TV, but I'm not influenced by the ads.' Yet if you do something as subtle as change the wallpaper of a web site, you can change what they look at while they're shopping online."

One tremendously powerful way to influence consumer behavior is to offer extra products or services by default. For example, a travel company automatically charges its customers for trip insurance, or a restaurant adds a soft drink to a patron's lunch order, unless he says no. But is that responsible? Would it be more ethical to leave the customer to actively choose the extra item?

I personally don't see what's so immoral about offering extra goods and services by default: A consumer still has the option of refusing. However, that default choice must be made clearly visible, not buried in small print or tacked on later as a hidden charge -- otherwise the practice is outright sleaze, or arguably consumer fraud.

Those who assume that active consumer choice is the only ethical option should consider this: There's no way for a vendor to avoid influencing the outcome of the transaction. If the insurance or soft drink isn't automatically offered, that itself becomes the default. Either way, Johnson says, "You give the user the choice, but you influence the decisions made to a measurable degree."

As it happens, Johnson brings a unique perspective to the intertwined issues that surround decision-making, pricing and influence. After he entered remission following a bout with Hodgkin's disease, the default was to refrain from collecting "clean" stem cells to use in further treatment if necessary. It was an easy default, because the collection is an expensive, painful process.

"Moreover, statistically the chances of a recurrence are low," Johnson says. "But my doctor was cautious and suggested collecting stem cells, just in case. Three months later, I had a relapse, and was able to have treatment, a stem-cell transplant, much more quickly." Three years later, he is still disease-free.

Right now consumer privacy is at the center of the debate over defaults, but the issue is, of course, as much about economics as it is about ethics. According to Johnson, a typical vendor can get 90 percent permission to send follow-up mailings by leaving the opt-in box checked (which, confusingly, is really opt-out, because the customer has to take action to avoid getting follow-up mail). If the customer has to check the box in order to get additional mail, the "opt-in" rate can drop to 44 percent.

"Obviously, those results differ depending on a variety of factors, but they mean something," Johnson says. "There was more interest in this research at the FTC until the administration changed."

The current furor over do-not-call lists points to how touchy consumers get about the issue: Given the chance, 57 million have taken the trouble to opt out.

But defaults aren't only about reaping profits for vendors. Defaults can also have a big impact on security. Microsoft's recent decision to change the default security settings for consumer PCs could make a big difference in overall computer security. It would be much tougher for hackers, virus writers and others to attack innocent users' machines.

But the industry says it values consumer convenience, and firewalls can make legitimate communications more difficult. Also, companies who sell security software may not want to see it become a default pre-installed on consumers' machines -- but in fact, pre-installed software could be a marketing opportunity to sell update subscriptions.

And finally, defaults can even benefit consumers. "Personalization is really about setting defaults," Johnson says. "Defaults can be set in a way that suits each individual user. It should be done in a way that does not restrict the user's choices if we guess wrong, but that makes things as convenient as possible when we do guess right."

Take, for example, certain travel sites, such as Expedia, that default to your home city. Most of the time that can come in handy, but it can be annoying when you're trying to book a trip that starts in another city; when you edit your search, the site keeps deleting the city you typed in and returning you to home base.

Defaults encompass many other subtleties. For example, Amazon's resistance to competition surprises many, but not Johnson: "What matters to people is not always the lowest price, no matter what they say. What does matter is getting in and out quickly, just like at a corner store. Amazon's famous 'one-click checkout' is really a default, to use your stored payment and shipping information."

The challenge for all of us is to make the defaults visible—€”and to keep them as options, not restrictions.

Esther Dyson is chairman of EDventure Holdings and publisher of Release 1.0.