2084: Digital Choice Curation for a Non-Orwellian Economy

In 1907 a young German art historian named Wilhelm Worringer published an essay entitled 'Abstraction and Empathy.' He began by suggesting that historically, there had been only two types of art, 'abstract' and 'realistic.' The most compelling aspect of Worringer's theory was his explanation of why a society might transfer its loyalty from one aesthetic mode to the other. He believed that what societies look for in art is what they do not possess in sufficient supply within themselves. Abstract art, infused as it was with symmetry, order, and geometry, would appeal chiefly to societies yearning for calm and tranquility. But in societies with high standards of order and security, citizens would look for the vibrancy, color, and intensity of feeling of Realistic art; to escape from the suffocating grasp of routine and predictability.

Worringer's theory that society would love in art whatever it did not possess in sufficient supply within itself, may also apply on how societies look to social science, in search of something they miss. Thus, just like Abstract art appeals chiefly to societies yearning for calm, the science of how we perceive reality, judge alternatives, and support decisions; is becoming appealing to the societies of intimidating abundance, endless alternatives, and attentional scarcity. The Choice Paradox societies in which we live now.

The Choice Threat

According to Traditional Economic theory, the quantity of choice is supposedly a good thing. Those who want more choice will benefit from it, and those who don't can ignore additional options. Thus, we may assume that more alternatives lead to more happiness, or at least to more satisfied consumers. This would all make sense in societies where the act of choosing would entail two, three, maybe four alternatives. In a world with hundreds of health care plans, thousands of shoes, and ten thousand music tracks, this becomes a hard to stand assumption.

Imagine you want to buy a pen, and there are twenty different pen options. They are all sold for the same affordable price (say, $2). How many pens should the seller present you, for you to buy one? Avni Shah and George Wolford found that when only two pens were offered, 40 percent of students bought one and that when there were ten pens to consider, the number of students buying pens increased to 90 percent. However, and this is the main finding, when there were sixteen different pens to choose from, only 30 percent of the subjects bought one. This inverted U-curve relationship between the amount of choice and consumer satisfaction doesn't apply only to pens. The same principle applies to Godiva chocolates, fruit jams, and mutual funds.

This inverted U-curve finding becomes particularly relevant in the online world, where the increasing surplus of digital information (90 percent of all the data in the world today has been created in the last two years) puts consumers at the end of the curve, confronted with the lowest levels of consumer satisfaction. Amazon offers consumers 1,047 black roller ball pens and roughly 1,600 fruit jams. Thus, researchers claim, most of the e-commerce established in the online world today is sub-optimal because there is a mismatch between the amount of available choice and our ability to choose.

The Brand Glow Effect

When a girl says to a guy that he reminds her of her cousin, what she is really saying, even if she is not aware of it, is that the guy looks attractive. Psychologists call it the Warm Glow Effect: positive stimuli seem more familiar because of the positive emotions they evoke in us. The familiarity heuristic, which originates this effect, can be applied to various situations that individuals experience in day-to-day life. However, it has both positives and negatives. The familiarity heuristic increases the likelihood that customers will repeatedly buy products of the same brand, a concept called brand familiarity. To narrow down the choice set of alternatives to consider, consumers use brands and logos as familiarity heuristics; mental shortcuts that allow them to offer an adaptive response to a world with too many alternatives and too little time.

But, is using brands and logos as a heuristic a good or a bad thing? Or, if we want to enlarge the scope of the question: is advertising, in general, good or bad? The argument we will develop in the following paragraph is that, if we want consumers to narrow down the vast amount of choice to their best consideration set, we should prevent them from using advertisement as a shortcut. Understanding how people make online decisions can be a unique opportunity for that.

A Non-Orwellian Economy

Groceries are a big business. National grocery store chains now dominate the grocery industry. In 2012, in the US, the top four companies controlled an average of 62.8 percent of the sales of 100 types of groceries. In 30 categories, four or fewer companies controlled at least 75 percent of the sales. In six categories, the top companies sold more than 90 percent of the category sales. This happens with a mostly offline industry, but what about an online industry—music, for example? Because the online space is so saturated with offers; Spotify has more than twenty million tracks, people choose whatever they recognize. And what is the heuristic they use? You guessed well, the “brand glow effect” guides their choices. What is the consequence of this for consumers and the market? Musical superstars, the top 1 percent of artists, account for 77 percent of all the digital revenue from recorded music. Paradoxically, the excess of choices is not only creating a sales monopoly, it is also preventing consumers from considering music they would like, food they would prefer, or clothes they ignore to exist. They feel demotivated from engaging in a deliberative search, due to the existence of too many options, which originate a “choice overload.”

In an economy of infinite choices and information, consumers are forced to rely on mental shortcuts, to reduce complexity to manageable choice sets. The problem is that these choice sets are provided by the supply side of the economy, through advertisement, brands, and logos. Not only this state of things originates monopolies and revenue inequality; it also prevents consumers from satisfying their preferences, or even from getting to build them. In this state of the world, three-quarters of the consumers consume the music produced by 1 percent of the artists, eat the food produced by four or fewer companies, buy the clothes from stores belonging to few multinational companies, and so on. But, what is the alternative to deal with a world of too much choice, and too less attention? Can we build a new economy, where we endow economic agents with capacities do take the best from markets with boundless alternatives?

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The Digital Curation

Traditionally, a curator is a content specialist charged with an institution's collections. In contemporary art, the title curator is given to a person who selects and often interprets works of art. The work of the curator is almost as important as the work of the artist. Its role is crucial to the way art reaches society, and to the way, society interprets and derives utility from artworks. For us to make the most effective choices online, we need to have the best technological infrastructure, the best alternatives available, but we also need a proper “Digital Curation.” We need an effective digital choice architecture that can help us to find the right alternative among large choice sets, but also to expose us to possibilities we never considered before, allowing us to build new preferences, and take advantage of all the variety available online. How can we do that? Behavioral Economist Shlomo Benartzi, suggests in his new book, The Smarter Screen, three research-based choice architecture instruments that can be used to improve digital decision-making: Categorization, Sequential Choice Tournaments, and Choice Closure.

Consumers reported significantly higher levels of satisfaction when they were asked to choose from fifty different coffee flavors divided into ten discrete categories (spicy, sweet, mild), than when they were asked to choose from the same fifty different coffee flavors, without categories (Mogilner et al., 2008). The introduction of categories works because it increases perceptions of variety. It gives back to the consumer a feeling of self-determination, and it allows to alleviate choice overload from consumers, without reducing the number of options. However, categorization by itself is not enough. We need to help consumers find what are called “Smart Categories,” to ensure that their limited attention is focused on the options they are most interested in. This can be done if we personalize categories according to consumers past purchase and search history. Smarts categories should be able to help consumers discover new alternatives, and possibilities they never considered before, such as a new band from their favorite music category, a new author related with the books they like, or a new coffee belonging to their favorite beans. Instead of simply using a brand/logo heuristic to be able to strive through endless alternatives, Categorization can help us to take advantage of all the variety on the display. But what if after categorization, we still end up with thirty coffee bean alternatives?

Wimbledon tennis tournament uses a sequential elimination method, in which each round eliminates half of the competitors: each player wins or goes home, to find a single winner. This same tournament model can be used to deal with an excessive post-categorization consideration set. Imagine you have a final consideration set of sixteen health plans, where one is objectively ideal for you. How can the website of your health insurance help you to find it? We could design a tournament of four rounds, where each round would be constituted by four health plans, from which you would have to choose one. After the four rounds, you would be confronted with the last round, where you would need to choose from the four options you selected during the previous four rounds. When choices were presented like this (Besedes et al., 2012), people were able to choose the optimal alternative 48 percent of the time, in comparison with 23 percent, when they were confronted with all the sixteen alternatives at the same time. Interestingly, the study also showed, although the sequential tournament method generates the best performance, this choice architecture was the least preferred by subjects. Thus, there was evidence that subjects prefer choice architectures that lead them to suboptimal choices.

After making a decision, we can also employ online choice architecture to help consumers deal with other consequence of choice overload: post choice regret. Did it ever happen to you, that after choosing a truffle bonbon, you just can't stop thinking about the cappuccino one? How can we help consumers minimize thoughts about forgone alternatives and regret, after making a choice from a large choice set? Physical acts that activate metaphorically associated cognitions and feelings, can, in turn, affect judgments and decisions. Researchers (Gu et al., 2013) showed that the simple act of putting the transparent lid on the tray, before tasting a chocolate, can give us a sense of choice closure, prevent a sense of regret, and increase our choice satisfaction. This effect was only significant when subjects had to choose from a large choice set (24 different options), instead of a small one (6 options) and makes the finding particularly relevant for online decision-making, which normally involves the existence of large choice sets. Thus, having a website that requires buyers to click and cancel the many options that were not selected, might help them increase satisfaction with the chosen option, reducing contra-factual thinking and regret.

2084: Dataism vs. Cognitive Prosthesis

1984 is a dystopian novel by English author George Orwell. The novel is in a world of omnipresent government surveillance and public manipulation, dictated by a political system controlled by a privileged elite controlled by Big Brother, the Party leader who enjoys an intense cult of personality but who may not even exist. Still, today, Orwell's book continues to influence popular and political culture, and the term Orwellian—descriptive of totalitarian or authoritarian social practices—has entered the language together with many of his neologisms, including cold war, Big Brother, and thought police.

Ever since Adam Smith, the central teaching of economics has been the narrative that free markets provide us with material well-being, as if by an invisible hand. As Nobel Prize–winning economists George Akerlof and Robert Shiller argue, in their latest book, Phishing for Phools: markets harm as well as help us. As long as there is profit to be made, sellers will systematically exploit our psychological weaknesses and our ignorance through manipulation and deception. We will spend our money up to the limit, and worry about how to pay the next month's bills. The financial system soars, then crashes. We are attracted, more than we know, by advertising. Our political system is distorted by money.

But, this narrative is being substituted by a new one, subtly and without warning. “Just as free-market capitalists believe in the invisible hand of the market, so Dataists believe in the invisible hand of the dataflow,” Historian Yuval Noah Harari recently wrote. The new science called Dataism, perceives the entire universe as a flow of data, and sees organisms as little more than biochemical algorithms. This new system will assume that it understands humans much better than we understand ourselves. This assumption is wrong. As we saw previously, our digital footprint might not always reflect our personal preferences and idiosyncrasies. Explaining our consciousness is impossible in terms of data processes. What is more important for us: receiving “our” choice, or being able to express it?

But even if Dataism is flawed in terms of understanding life (as were Communism, Capitalism, and the Bible), it can still conquer the world. Once Big Data systems assume that they know us better than we know ourselves, authority will shift from humans to algorithms: they will decide which books to read, which soap to buy, which medical treatment to undergo. Big Data could then empower the famous Big Brother Orson Wells so eloquently envisioned in the first decades of the XX century: we are already becoming tiny (chips) inside a giant (chip) no one really understands.

What this short text wants to show, is that if we understand the differences between offline versus online thinking, and learn how to improve our digital behavior, we can build a different narrative. In this new narrative, the online world becomes an opportunity for autonomous self-expression, instead of an authoritarian external system. It opens the possibility of escaping Dataism, through the creation of digital choice architectures that can act as a “cognitive prosthesis,” helping citizens and consumers to improve decision-making in a way they would never be able to do by themselves.