Here is a talk I gave on behavioral economics and psychology for the Thiel 20 Under 20 Fellowship retreat.

1. Behavioral Economics
& Psychology
20 Under 20 Retreat

2. Study of decision making in the
real world

3. Conclusion: People aren’t
rational

4. People are dumb and easily
manipulated
Doesn’t work with smart people
Interesting, but doesn’t apply to
me

5. Inverse: Calculating rational
robots aren’t ideal either

7. Reframed Conclusion: People
make decisions very efficiently
(not without errors)

8. Examples & Studies
(Academic + Business)

9. Example (social proof)

10. Social Proof
15%

11. Social Proof
48%

13. Game: $20
Rules:
Bids are made in $1 increments
Winner wins $20 but 2nd place
must honor bid to charity

14. Commitment

15. Commitment
Before: 1%
Now: 17%

16. Value Attribution
Sobe Study
Control: Test no drink
Group 1: Test drink full price (2.89)
Group 2: Test discount price ($.79)

17. Value Attribution
Nathan
Handwerker
5 cents per hotdog vs. 10 cents
Initially viewed as cheap and not good quality
Paid doctors to stand around and eat hot
dogs

18. Default Option (environmental
effects)

19. Default Option (environmental
effects)

20. Reciprocity
Survey
research
Mailing a $5 bill gift with a survey is 2x as
effective than giving $50 for completed survey

21. Reciprocity

22. Reciprocity

23. Framing
Ataturk wanted adoption of two sources of
food, tried to make it compulsory, then
switched to marketing approach

24. Framing
AOL
Moved from pay per hour to fixed $19.95 a
month. Went from 140K customers to 236K
customers in 24 hours.

25. Authority
Milgram
Experiment
Learner and teacher, 15 volt increments, up to
deadly shocks, thought 1% would go all the
way, reality was 65%

26. Authority
Yelp
Exclusive club for top commentors, estimated
to be in the 4,000 range, a huge force to be
reckoned with

27. Authority

28. Pygmalion effect (take on
perceived traits)
51 Women
Randomly paired up with guys to chat
via phone.
Men received profiles of women
(pictures faked)
Some women were beautiful some
weren’t in pictures
Independent group attributed same
ratings the guys did.

29. Conclusions
(Why this stuff is important)

30. In any product that deals with people:
behavioral economics, psychology, and
design, become very important.

31. Small inputs can have
inordinate results

32. Psychological inputs tend to be
non-numerical

33. Easiest to figure out these large effects
through experiments not reason

35. Questions?
chris@startupdigest.com
@mccannatron