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From the economics perspective, there
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are many things that we have in our
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lives, whether it be our retirement
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savings, whether it be, you know,
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[music] uh the investments that we want
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to make, whatever it is that come up
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over the course of the year and probably
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align with some of these dates where
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it's probably a good thing to kind
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[music] of do a rethink on some aspect
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of our financial life. [music]
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>> Absolutely. So um there are many
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decisions that we make where it would be
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great if we were more focused on the
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long run. In fact, there's a very
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well-known behavioral bias called
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present bias that leads us to focus
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[music] too much on now. Welcome to the
00:00:36
ripple effect, the podcast that takes
00:00:38
you on a journey through the minds of
00:00:40
Wharton faculty. I'm your host Dan
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Looney and in each episode we'll be
00:00:44
diving deep into the inspiration behind
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the groundbreaking research that [music]
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Wharton professors have conducted and
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exploring how their findings resonate
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with [music] the world today.
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Well, we certainly know that the new
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year is a time for people to think about
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change, what they can do to either
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improve [music] themselves and their
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lives or potentially even improve their
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professional lives. When you think about
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it though, it's a very important time
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for [music] individuals at this time of
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the year, but it could also be an
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important time for companies when
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they're thinking [music] about the
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change that they want to make and
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involve their employees as well. Katie
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Milkman is a professor of operations,
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information, and decisions here at the
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Wharton School. She's also co-founder
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and co-director of the behavior change
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for good initiative and she has studied
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a lot of this for a long period of time
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and a pleasure to have her joining us
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once again. Katie, great to talk to you.
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How are you?
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>> I'm great. Thanks for having me. Glad to
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be here.
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>> It is amazing and the work that you and
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Angela Duckworth and your teams have
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done about looking at behavior change.
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But for those people that haven't
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thought it about a lot, why do you think
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it is? Is it just the calendar? Is it
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the flipping from one year to the next
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that people start to think about making
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change in their lives?
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>> Yeah, it's a great question. Um, a
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little over a decade ago, I studied this
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with a former student uh at Wharton,
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UCLA's Hang Chen Dai. She and I along
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with Jason Reese started digging into
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what it is about certain moments that
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makes them particularly attractive to us
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as times to make a change. Um, what we
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found in our research is that when there
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is what we perceive as a chapter break
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in our life story and and we really
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actually see our lives as if we're
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characters in a novel with these
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chapters. If you think about, you know,
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the college years, the years working at
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company X, the years living in Boston,
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whatever it is, we put these brackets
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around time and we don't experience it
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continuously as a result. And whenever
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there is a chapter break and we enter a
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new era that feels like a new beginning
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to us, we're more motivated to pursue
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our goals. We feel disconnected from our
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past self. We can say that was the old
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me. This is the new me. The new me will
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be different. And those chapter breaks
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arise at predictable moments on the
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calendar as well as at times when we
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make uh meaningful change like a move to
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a new job or becoming a parent. Um New
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Year's is the biggest of the dates that
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signals a fresh start and a new
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beginning, but it actually happens every
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Monday uh at the start of a new month.
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It happens when we celebrate birthdays.
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So these come up a lot and the
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psychology behind them is around this uh
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thing we do it's called mental
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accounting um in the words of Nobel
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laurate Richard Thaylor um where we
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don't perceive time and other resources
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as fungeible across boundaries but
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instead we bracket them and so uh fresh
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starts arise a lot but the new year's is
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a really big one and we should seize it
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uh when when when it arises. So even you
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mentioned even it'll occur on Mondays.
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Just having that weekend break is
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something that can can make people kind
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of do somewhat of a reset.
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>> It's not even the break, which is an
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interesting point because that doesn't
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hurt, right? Having some disruption to
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your routine. Your intuition is right
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that that also can create a sense of a
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fresh start, but it's it's not a
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necessary condition. In fact, there's a
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really clever study that was done
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following our work on the fresh start
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effect by some researchers at UVA
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showing that um if you change the
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calendar someone's looking at and you
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make it look like the week starts on
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Sunday, which it by the way does in some
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religions and some cultures, um if you
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if you randomly assign some people to
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see calendars where the first day of the
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week is a Sunday and others see a
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calendar where the first day of the week
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is marked as a Monday, it shifts when
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people feel it's most appropriate to
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start pursuing a new goal to Sunday. So
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you don't it's not necessarily about the
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break and the refresh so much as it is
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um giving ourselves a sense of when a
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cycle begins. And so from the economics
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perspective, there are many things that
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we have in our lives, whether it be our
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retirement savings, whether it be, you
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know, uh the investments that we want to
00:04:48
make, whatever it is that come up over
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the course of the year and probably
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align with some of these dates where
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it's probably a good thing to kind of do
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a rethink on some aspect of our
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financial life.
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>> Absolutely. So um there are many
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decisions that we make where it would be
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great if we were more focused on the
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long run. In fact, there's a very
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well-known behavioral bias called
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present bias that leads us to focus too
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much on now and not enough on a
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long-term outcomes and it leads to all
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sorts of problems for us like
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undersaving for retirement. It it
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contributes to that. I should say policy
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decisions contribute too, but uh it
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contributes to undersaving for
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retirement. Uh and and PS also not
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having enough money contributes to
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undersaving for retirement. But but
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present bias as part of it contributes
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to, you know, bad decisions we make
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about exercise, eating, smoking, you
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name it. Um if we're too focused on the
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here and now and how good things feel
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right in this moment, we won't make
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those long-term oriented decisions. The
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fresh start effect though gives us at
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least temporarily a little extra
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motivation to focus on the future and
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our future goals. And what we want to do
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with that extra motivation is ideally um
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put in front of people and put in front
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of ourselves opportunities to make small
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changes in the moment that will have big
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long-term effects. And one of those
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would be, for instance, saving um for
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retirement, starting to set up um
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automatic deductions to a 401k, for
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instance, if you work for an employer
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that offers one of these tax advantaged
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savings plans. And we did some research
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a number of years ago looking at whether
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or not inviting people to start saving
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for retirement by contributing to a 401k
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plan at their employer um on a moment
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when it felt like a fresh start would
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increase savings in the long run. And
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what we found is that relative to
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inviting people to save at some other
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future date that felt more arbitrary.
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You know, you could put it off and
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procrastinate two months, three months,
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whatever you prefer, uh it was better to
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tag that opportunity to a fresh start
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like the start of spring or someone's
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birthday. Um, and so that's one item
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that people might have on their mind. Is
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there something where you can make a
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one-time change when you have that
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momentary because it is temporary.
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That's a big problem with fresh starts,
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right? By by Wednesday, it's not a fresh
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start anymore. So, you want to seize
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that feeling that you have at the
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beginning of a new year that this is a
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good time to make a change and try to
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think of what's something consequential
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I can change once that will have big
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benefits. Savings decisions are often
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such a a a choice. You could think about
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um you know signing up for life
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insurance if that would really be a good
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decision for your family. You could
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think about you know if there's an
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important screening test that could have
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a big impact on the in the long run
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whether it's you know a colonoscopy. I
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know that's a weird thing to talk about
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at New Year's but yeah they're important
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or a mamogram you've been putting off.
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Yeah. Some of these like big one time
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you don't have to do it that frequently
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but if you use that motivation to make a
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big one-time change that can be
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particularly helpful. How frequently
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then as people do make some of these
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changes, whatever they might be, is it
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important for them to review the change
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and potentially make an adjustment on
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the change that maybe they made a year
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ago?
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>> Yeah, that's a great question. I mean,
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you know, in an optimal decision-making
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model, you'd kind of be constantly
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reviewing, oh, you know, I got a I got a
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raise or, you know, I lost my job or I I
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got married. Like, all of these things
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are constant. There's flows, inflows,
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outflows. In an optimal world, you'd be
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constantly re-evaluating and making sure
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all of the choices you've made remain
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perfect at this moment. But
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realistically, we don't have the
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cognitive capacity to do that. So,
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thinking about, you know, what is the
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right, you know, this could be one of
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your New Year's resolutions. Thinking
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about making a plan for the right
00:08:25
frequency at which you do want to
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re-evaluate all the big decisions you've
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made in your life. Maybe it's monthly in
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the beginning of each month could be
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that uh little kick in the pants you
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need to say, "Okay, this is the moment."
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But maybe you don't feel like you need
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to do it even that frequently. Maybe
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it's quarterly or maybe it's even once a
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year at the new year that that's when
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you're going to sit down and
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re-evaluate. You know, do I have all my
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beneficiaries defined for all of my
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accounts and am I happy with them? You
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know, is my um is my will set up the way
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I want it to be? Have I gotten all my
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doctor's appointments and checkups in?
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So, whatever. Um I you know I don't
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think there's a one right answer but we
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should acknowledge that we don't do this
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continuously and these fresh starts can
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be a good opportunity to set up a plan
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and um for the valuation frequency that
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that feels right in our life.
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>> So when you think about fresh starts
00:09:10
then from a business perspective and how
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companies may have to mix that in.
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>> Yeah. Is it easier for a company,
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especially one that might be publicly
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traded to do this because they kind of
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already have part of this schedule built
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into their year-by-year process?
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>> Absolutely. So, companies tend not to be
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the target of the research on the fresh
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start effect in so much as uh companies
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have a lot of procedures and planning in
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place both for legal reasons and
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reporting reasons. So, so I don't think
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of a company as the place where uh you
00:09:40
know there might be major mistakes made
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so much as I think within the individual
00:09:45
working in a company who makes choices
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both for themselves, the people they
00:09:48
manage and their own advancement. Um
00:09:52
that's where I think about fresh arts as
00:09:54
being particularly useful. And actually
00:09:55
this research initi it it came from uh
00:09:58
making a visit to Google's headquarters
00:10:01
out in Mountain View, California about
00:10:03
15 years ago for a big retreat that um
00:10:06
where I was invited to present some
00:10:08
research on how we could help employees
00:10:10
make changes that would be beneficial
00:10:12
for themselves and for their employer.
00:10:14
So HR professionals at at Google are
00:10:16
called um people analysts and the people
00:10:19
analytics team was trying to figure out,
00:10:21
you know, how do we get more employees
00:10:23
to opt in to benefits we've offered that
00:10:25
are beneficial for them and for us.
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Things like taking advantage of
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educational programs that they offer,
00:10:31
taking advantage of their 401k match,
00:10:33
taking advantage of their wellness
00:10:34
programming. And I got this great
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question. The question was um from a
00:10:38
senior leader there uh named Prasad um
00:10:41
Si. He said, you know, when should we be
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putting these opportunities in front of
00:10:46
people? I get that we should be sort of
00:10:47
nudging them to adopt these things and
00:10:49
using behavioral science insights when
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we present them, but are there opportune
00:10:53
moments? And that's where the work
00:10:55
really actually came from was the idea
00:10:56
that for managers who are trying to
00:10:58
figure out how, you know, when are the
00:10:59
right moments to set up a goal setting
00:11:01
meeting with an employee who's
00:11:02
underperforming, when can I best nudge
00:11:06
someone on my team to take advantage of
00:11:08
an educational program we're offering so
00:11:10
they could level up their software
00:11:11
development skills? You know, when are
00:11:13
those times? And that's what this
00:11:15
research tried to answer. There are
00:11:17
actually moments when your employees are
00:11:19
going to be more open to making a
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change. And by the way, I should say
00:11:22
it's not just at these calendar moments,
00:11:24
but also at these um cycle ends within a
00:11:27
company. And so they use it at Google
00:11:29
now. They have a moments engine that
00:11:31
triggers uh nudges and encouragement for
00:11:33
people to take advantage of these kinds
00:11:36
of programs at moments that they know
00:11:37
are fresh starts. A
00:11:38
>> and isn't it to a degree how that nudge
00:11:40
is kind of delivered as well? I I mean
00:11:42
you for the from the company's
00:11:44
perspective, you probably don't want it
00:11:45
to seem a little bit like bullying. You
00:11:47
want it to be viewed as, hey, we're
00:11:49
trying to help you out. We're trying to,
00:11:51
you know, see if your life, your
00:11:53
professional life, your personal life
00:11:54
can be better. The the the messaging is
00:11:57
very important here as well.
00:11:58
>> 100%. That's true. Whether we're talking
00:12:00
about a fresh start moment or any other
00:12:02
moment to be um persuasive and to change
00:12:05
behavior requires understanding that uh
00:12:08
you know, people will react against
00:12:09
anything that feels coercive and
00:12:11
designed to extract value from them
00:12:13
without creating value for them. And so
00:12:16
in general we uh especially when it
00:12:18
really is aligned and and that's what we
00:12:20
study at the behavior change for good
00:12:21
initiative. I don't work on projects
00:12:23
where there isn't actually an alignment
00:12:25
between the employee and the company or
00:12:27
the customer and the company's best
00:12:29
interest. When when that's the case, um
00:12:31
we absolutely want to make sure that the
00:12:34
communication is con conveying that that
00:12:36
these are benefits everyone is better
00:12:37
off, right? The employee is better off
00:12:39
if they build their human capital by
00:12:41
taking advantage of the educational
00:12:43
programming that the employer is better
00:12:44
off because they now have a better
00:12:46
trained employee. Same is true for
00:12:47
wellness programming. You're lengthening
00:12:49
your life. Um but the employer is also
00:12:51
getting more benefit from you because
00:12:53
when you're healthier, you actually
00:12:54
perform better at work. And so the idea
00:12:56
is that um you want to make it clear
00:12:59
you're not coercing.
00:13:00
>> I know one of the things you have talked
00:13:01
with me in the past about as well is not
00:13:04
only making the promise, especially if
00:13:06
it's a person making the promise to
00:13:07
themselves. I'm going to do this. I'm
00:13:09
going to improve this with my life is
00:13:11
following through on it and and not
00:13:13
breaking the promise and and the cost
00:13:15
that can actually, you know, can be
00:13:17
incurred by somebody when they don't
00:13:20
follow through on a promise.
00:13:21
>> Yeah. No, that's a great question. Um,
00:13:24
we often fail to follow through. Follow-
00:13:26
through failure is a major challenge. In
00:13:28
fact, if you look at data on the
00:13:30
fraction of people who follow through on
00:13:32
an important health goal that they say
00:13:34
they're going to execute on, or even
00:13:36
something like, you know, turning out at
00:13:38
the polls in an election, it ranges, but
00:13:40
it's never, you know, in in in the data,
00:13:43
it's somewhere like 50 to 80%. It's
00:13:45
almost never higher than than 80% of
00:13:47
people following through on a commitment
00:13:49
to their future selves. um unless right
00:13:51
we do a bunch of intervention work to
00:13:53
try to really make it easy and really um
00:13:56
support planning. So a lot of the work
00:13:58
we do at the behavior change for good
00:14:00
initiative is to identify what are the
00:14:02
tools that we can give people and
00:14:04
companies to help increase follow-th
00:14:06
through on everyone's best intentions.
00:14:09
Um some of the most powerful tools are
00:14:12
just making it insanely easy, right?
00:14:14
like how do I set you up for success by
00:14:16
making it so that for instance if you do
00:14:18
literally nothing you don't lift a
00:14:20
finger the best outcome ensues right so
00:14:21
there's this um wonderful research on
00:14:23
defaults um which means you know the
00:14:26
option that happens even if you take no
00:14:28
action if you are defaulted into having
00:14:31
a day on your calendar blocked for uh
00:14:34
educational training or you're defaulted
00:14:36
into automatically having a portion of
00:14:37
every paycheck set aside and sent to a
00:14:40
401k um these are the kinds of things
00:14:43
that lead to really particularly big
00:14:45
benefits. But if you can't eliminate
00:14:47
friction, just removing friction so it's
00:14:50
as easy as possible for people to do the
00:14:52
things that are in their best interest
00:14:53
is really important. And short of that,
00:14:55
you know, we can help people make clear
00:14:57
plans about when they're going to do it,
00:14:58
where they're going to do it, how
00:14:59
they're going to follow through, and
00:15:00
that also really increases success.
00:15:02
>> Let me finish up with this because I I'm
00:15:04
always interested, especially with the
00:15:06
work that you've done, kind of what's
00:15:07
next. And we always look at
00:15:11
whether it be generationally or
00:15:13
professionally, whatever it is, kind of
00:15:15
the changes that occur as we move
00:15:17
forward. What are some of the areas that
00:15:18
you're most interested in kind of
00:15:21
looking at right now in and around
00:15:24
behavior change and and how we either
00:15:26
accept it or push it to the side?
00:15:28
>> I mean, that's a great question. So, I I
00:15:31
would be remiss if I didn't mention the
00:15:32
the buzzword that's in every hallway at
00:15:34
the Wharton School, which is AI, right?
00:15:36
So, we're thinking a lot about how LLMs
00:15:39
can be supportive in this journey. How
00:15:42
can they best be harnessed to help
00:15:43
people achieve their goals? Like, what
00:15:45
are the what are the ways, you know,
00:15:46
that we can design LLMs that help people
00:15:50
set up plans that help people um follow
00:15:53
through on all the best behavioral
00:15:54
science advice that that we know can
00:15:56
create greater success rates when it
00:15:59
comes to goal pursuit. So, that's
00:16:01
absolutely one of the areas that's
00:16:03
actively being pursued by our team. Um
00:16:05
but you know we're interested in so many
00:16:07
questions about habits um you know and
00:16:09
can machine learning be used in other
00:16:11
ways not just as a tool to help support
00:16:13
people but also as an analysis tool to
00:16:15
understand what are the strategies that
00:16:17
people are using successfully um you
00:16:20
know over the course of their lives that
00:16:22
that we could then study and and help
00:16:24
others adopt. So, uh, we have a lot of
00:16:27
work underway using a wide range of
00:16:29
different tools, but with the new, um,
00:16:32
availability of of LLMs, there's a lot
00:16:35
of potential there. [music]
00:16:36
>> Katie, always great to talk with you.
00:16:38
Look forward to chatting again
00:16:39
throughout the course of the year. All
00:16:40
the best.
00:16:40
>> All the best to you, too. Thanks so much
00:16:42
for having me.
00:16:42
>> Thank you. Katie Milkman, who's
00:16:44
professor of operations, information,
00:16:46
and decisions here at the Wharton School
00:16:47
[music] and co-founder and co-director
00:16:48
of the Behavior Change for Good
00:16:50
initiative. Thank you for listening to
00:16:52
the Ripple Effect. We hope you found
00:16:54
this episode informative and engaging.
00:16:56
Don't forget to subscribe and leave us a
00:16:58
review so that we can continue to bring
00:17:00
you the best [music] insight from the
00:17:02
Wharton School.
