How Agile Can Learn from Behavioral Economics

by Ben Linders on Feb 17, 2015 |

People usually think that they make rational decisions and act that way; however, this is often not the case, as agile management consultant Pierre Hervouet explains. In his presentation Beware Agile is manipulating you!!! from the XP Days Benelux 2014 conference in Heeze, The Netherlands, Hervouet explored findings from behavioral economics and discussed what we can learn from them from an agile perspective.

Hervouet describes how our brain takes decisions, talks about experiments on using personas and the IKEA effect, and explains what we can learn from these experiments for agile software development.

InfoQ: You talked about why people consider themselves to be rational, but often don’t act this way. Can you explain how this happens?

Hervouet: Behavioral economics has clearly demonstrated that contrary to the neo-classical economic assumptions, humans are not rational economical agents often able to assess the pro & cons, before taking a decision.

Daniel Kahneman is a psychologist who received in 2002 the Nobel Prize of economics. He is one of the main actors of behavioral economics and of psychology of judgment and decision making.

In order to illustrate the way our brain works, he uses the metaphor of System 1 & 2, where System 1 is automatic, fast, emotional, difficult to rewire, learns by experience, and has low energy consumption; whereas System 2 is a deliberate thinking system that is slow, rational, learns new ideas quickly, and requires a lot of energy.

It is as if our brain is split between Homer Simpson (System 1) and Star Trek's Mister Spock (System 2).

System 2 thinks that it controls our thoughts, but most of the time, it is System 1 that is unconsciously controlling them by continuously submitting suggestions to System 2.

When people answer questions that they consider to be obvious and straightforward, they often let System 1 provide the answers, which can be the wrong answer. To answer correctly you have to "pause" your thought, and make an effort…

InfoQ: Can you explain why you recommend using personas in user stories to increase team involvement?

Hervouet: I will answer this question with two experiments from my session that illustrates the benefits of using personas.

The experiments were conducted in two different domains; one was about donating for a humanitarian cause, the other about improving the quality of radiologists’ work.

The first experiment is described by Deborah Small, George Loewenstein, and Paul Slovic in "Sympathy and Callousness: the impact of deliberative thought on donation to identifiable and statistical victims".

Participants in the experiment received 5$ for completing a questionnaire. After receiving their money they were asked to donate for the food shortage crisis in Africa.

The first group received information very factually: "the food shortage in Malawi is affecting more than 3 million children etc.".

In the second group: people were shown the picture of one girl named Rokia, with personal information, and with very personal description: "Her life will be changed for better, as a result of your financial gift …".

The donations of the second group turned out to be twice as high as the first group. This is what the psychologists call the identifiable victim effect; people are more engaged when they have to support one person, than thousands of persons. When engaged emotionally, people are pushed to go over their rational behavior.

The second experiment explored ways to improve the quality of radiologists’ work, which is mainly to diagnose the patients’ illness, based on X-ray pictures displayed on the screen, with no direct contact with the patient benefiting from this service.

A Radiologist named Yehanatan Turner published results from the study Patient Photos Spur Radiologist Empathy and Eye for Detail on ScienceDaily. He took photos of 300 patients who came for a CT scan, and he submitted the X-ray of these patients with their photo to a group of 15 radiologists, who filled in a questionnaire after doing their evaluation.

The first finding was that all the radiologists said that they felt more empathy for their patients and it turned out that they were more meticulous in their examination, as it increased the number of incident findings.

Incident findings are detected anomalies without any links with the reasons for which the patient was consulting: you come for a fracture of your arm and the radiologist detects a cyst to your elbow.

Turner selected 81 cases with incident findings from the X-rays with the patient picture, and submitted them to the same group of radiologists without a photo of the patient, three months later. The result was that 80% of the incident findings were no longer detected when the file did not have the patient’s photo.

These two experiments reveal that having persona is a way to increase team involvement for supporting customers, and it can have positive results on the quality of work. By using personas we are sending a message to System 1 which believes in stories.

InfoQ: You mentioned the IKEA effect, a cognitive bias that occurs when customers value products higher if they partially created them. How does this effect occur with Agile software development? Is it a good or bad thing?

Hervouet: The IKEA effect refers to the fact that people overvalue their own creations. I showed an experiment where people had to do an origami and price it. The value that they gave to their own poor quality work was equivalent to the price given to an expert work. The amateurs evaluated their own work at an average of 23 cents.

Whereas persons not involved in the fabrication process were bidding for the two types of origami as following: 27 cents for the professional origami and 5 cents for the amateurs’ origami.

People over estimated their own work by a factor of 5! And this is done… sincerely.

I think that this cognitive bias is problematic, because it can be an obstacle for process improvement, at least at the beginning, or with non-mature teams.

Ironically the same "Ikea effect" can exist on the customer side when he/she is deeply involved in the product production process, which would lead him/her to overestimate the value of the outcome.

InfoQ: What can we learn from these experiments with personas and the IKEA effect when we are doing agile software development?

Hervouet: Activating our empathy Persona is an effective way to commit teams to produce higher quality work, as the radiologists’ experiment demonstrated it. A picture & a small bio will help them improve their work.

As I mentioned, the IKEA effect can prevent teams from self-questioning since they are overestimating their work and would be less inclined to accept any idea of improvement. The nice thing about the empiricism in agile is that frequent feed-backs from different sources (team, different stakeholders) and constant built-in transparency in the practice, smoothes cognitive bias.

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Reminds me of Extreme Programming vs Interaction Design circa 2002 by Jason Yip

Re: Reminds me of Extreme Programming vs Interaction Design circa 2002 by pierre hervouet

Hi Jason,
I like that this article resonates to you about Extreme programming and interaction design. Thinking about the persona (good techniques for both) or about the Ikea effect (I overestimate my creation) or something else?

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