human psychology and the internet age - swiss re

Human Psychology and the Internet Age

George LoewensteinSwiss Re Institute Symposium

11/29/2017

Understanding the perils and pitfalls of the age of information requires a deeper understanding of how humans deal with information.

Once there was hope that exposure to more information would make us…• smarter, • more productive, and• bring about a new era of democracy.

Now, we have fears that…• computers are taking over jobs• privacy is a luxury of the past• relationships are distorted by social

media• democracy has been poisoned

rather than enriched

• Standard economics – People value information (only) to the extent that it improves decision making

– People are Bayesians; they are unbiased, and rationally update beliefs based on new information

• Behavioral economics – People are motivated to hold certain beliefs because they feel good or fit into the sense they have made of the world Process evidence in a biased fashion: motivated cognition

– When they want to believe something: “Can I believe it?”– When they don’t want to believe something: “Must I believe it?”

People get attached to their beliefs, and defend them like they would possessions

Behavioral Economics and Information

Science intelligence and belief that climate change is caused by humans..

Kahan (2015). Climate Science Communication and the Measurement Problem. Advances in Political Psychology.

Desire to Desire not toObtain

informationCuriosity Information avoidance

Shareinformation

Desire to reveal Privacy

• This talk: Four information‐related phenomena that..‐ don’t fit with standard economic models‐ are key to recent developments in, e.g., social networking, e‐

commerce, etc.

Loewenstein (1994). The psychology of curiosity: A review and reinterpretation. Psychological Bulletin, 116, 75‐98.

Golman, R. & Loewenstein, G. (forthcoming). Information Gaps: A Theory of Preferences Regarding the Presence and Absence of Information. Decision.

• Account of curiosity based on concept of an information gap• Enumeration of some of curiosity’s most salient features..

‒ Intensity‒ Stimulus‐dependence/transience‒ Disappointment when satisfied

Curiosity

Kruger & Evans (2009). “The paradox of Alypius and the pursuit of unwanted information.”

Hsee & Ruan(2015). “Curiosity Kills the Cat.”



Shareinformation


Privacy is arguably the social science issue of the internet age

• New technologies allow unprecedented collection of data – e.g., cell phone locations, credit card use, highway tolls, click‐streams

• New businesses integrate this information and sell it to those who can exploit it

• Data can be used for purposes other than intended

• Once on the internet, information cannot be effectively erased – "digital skeletons‐in‐the‐ closet"

• Information is easily forwarded and shared – e.g., 'digital shaming'

Lots of suggestive evidence that people have difficulty navigating these complexities

• Voluntary posting of personal and even self‐incriminating information

• Fewer than 3% of consumers read privacy policies

• 75% of consumers think that the existence of a privacy policy implies privacy protection

• 54% of privacy policies are beyond the grasp of 57% of the Internet population (requiring the equivalent of more than fourteen years of education)

• The aggregate opportunity cost of US consumers actually reading privacy policies would be $652 billion/year

(neo)classical model of privacyShould I mention

my sexual preferences on Facebook?

(neo)classical model of privacyMaybe I’ll find a lover... But what about my future job prospects? And what if my parents happen to log on...

(neo)classical model of privacy)(cos)(

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itdiitdi tsuqbenefitsup tt

Privacy preferences should be coherent, consistent, and based on underlying fundamental values…

Behavioral Economics challenges these assumptions…

• Preference uncertainty:– Preferences are often ill‐defined, particularly so

for privacy! • Constructed preferences:

– When people don't know what they want, they will search for 'cues' in their environment to resolve the uncertainty

wide range of effects

Acquisti, John & Loewenstein. 2012. "The Impact of Relative Standards on the Propensity to Disclose," JMR.

Showing that people take their cues about what to reveal from others and from their past experiences

Brandimarte, Acquisti & Loewenstein. 2013. Misplaced confidences: Privacy and the control paradox. SPPS.

Showing that giving people more control over privacy may be giving them more rope to hang themselves with

Acquisti, John & Loewenstein. 2013. What is Privacy Worth? Journal of Legal Studies.

Showing that people exhibit default effects and loss aversion with respect to privacy

Acquisti, Brandimarte & Loewenstein (2015). Privacy and human behavior in the age of information. Science.

John, L., Acquisti, A., & Loewenstein, G. (2011). "Strangers on a Plane: Context‐Dependent Willingness to Divulge Sensitive Information." Journal of Consumer Research, 37(5), 858‐873.

Shows that willingness to share information depends on arbitrary cues that often bear little connection – or a negative connection – to objective net benefits

A representative study..

Professional

Manipulation

Baseline

Unprofessional

Pretest: perceived security• Do people perceive the unprofessional site to be less secure?

• 2x2 condition mixed design:– Within‐Ss:

• Shown professional vs. unprofessional interface– Between‐Ss:

• Order of presentation• Dependent measure:

– 5‐item scale (1‐7 response scale) cf. Salisbury et al., 2001

• “I would have concerns about giving sensitive information on this web site”

• “Overall, this website is a safe place to transmit sensitive information”

21

Results: Perceived Security

22

1

2

3

4

5

6

7

Unprofessional shown FIRST Unprofessional shown SECOND

Perceived Security (1‐7)

Professional

Unprofessional

Main effect of interface: F(1,28)=116.3, p<.0005

ITEM4. Have you ever smoked marijuana? (i.e. pot, weed) 26% 27% 35%5. Have you ever “cheated” while in a relationship? 19% 22% 31%6. Have you ever driven when you were pretty sure you were over the legal blood alcohol level? 17% 17% 30%9. Have you ever tried to peek at someone else’s email without them knowing? 29% 27% 45%

Actual Study:Affirmative admission rates

23

Affirmative Admission Rates(1 on y axis = overall admission rate across all conditions)

24F(2, 200) = 8.00, p = .005

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

Rel

ativ

e Ad

mis

sion

Rat

e

Professional Baseline Unprofessional

***

F(2,196)=6.8, p=.001

1

1.5

2

2.5

3

Interface"Yes" to beh

aviors in

which I ha

ve

NOT en

gaged (1‐5)


Effect caused by lack of concern for revealing negative things, or desire to brag?

– To what extent were you tempted to say…• ‘Yes’ to behaviors in which you have actually never engaged

25F(2,196)=.35, NS

– To what extent were you tempted to say…• ‘No’ to behaviors in which you have actually engaged

26

1

1.5

2

2.5

3

Interface"No"

to beh

aviors in

which I ha

ve

engaged (1‐5)


F(1,196)=3.4,p<.05

Main conclusions from privacy research: • Concern about privacy is extremely context‐

dependent• People’s willingness to share information varies in

response to cues that have little connection to the true costs and benefits of sharing and withholding

• New technologies...– greatly magnify the risks – e.g., internet posting cannot be undone

– eliminate danger cues ‐‐ e.g., email flaming– introduce new cues (e.g., indications of community) that actually mute privacy concern – e.g., Facebook

need for new regulations and legal protections



Shareinformation


• Privacy research suggests that people don’t care much about privacy (except when one ‘rings alarm bells’)

Desire to reveal information is a far more powerful motive than the desire to conceal it

Desire to reveal

Qualitative Study of “dying” to share (with Erin Carbone (GSPIA); n=244 CMU alums)

• In a series of open‐ended questions, each subject asked:– To describe a time when they were “dying” to tell someone

something– What motives drove this desire– If sharing could be damaging– If they shared (and why or why not) – Who they told (and why)

• Also asked what happened when they shared:– How the other person reacted– How sharing made them feel– If sharing was ultimately damaging

83% of those surveyed were able to report something they were dying to tell someone

What people were dying to share (and whether they shared it)

Do we share positive stuff or negative stuff?

It depends!

Do people feel they under‐share or over‐share?

Don’t share thoughts and feelings when I should

Share thoughts and feelings an appropriate amount

Share thoughts and feelings when I probably should not

Motivations for Sharing

3.6

3.8

6.0

6.2

6.3

6.3

7.0

7.2

7.3

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

To make important events feel more real through sharing.

Just to keep the conversation going and avoid silence.

To get advice from other people.

To tell people something they didn't already know.

To make experiences feel more special through sharing.

To feel closer to people.

So that other people have a positive opinion of me.

To discover shared values or beliefs with another person.

So someone else understands who I am or what I’m feeling.

Motivations(Scale: 0 to 10, level of agreement with each statement)

Quotes from study participants:

“I think there are moments in life when you know something that no one else knows (or a handful of people). That moment feels special and amazing. Some truth about the universe, or about your life or the lives of people close to you. You can feel special in that moment, that it's only you. But, then you want to share it because you want others to know. Maybe you don't want it (or yourself) to be forgotten. Perhaps, the joy (or sorrow) you feel can be spread (or tempered) if you share. Or, it brings you closer to your friends. Or by discussing it, you can make sense of it.”

“When I felt a great urgency to share… It was often about someone with whom I was close to another person who knew these relationships and understood where the event fit into my life.”

“Just little things. Like just walking home tonight, and the streets were so quiet and dark, and the park was so beautiful. I wanted to share the experience. I didn't want it to just be mine.”

“Information is currency, the coin of the realm. You negotiate position with "juicy" information or honoring someone by sharing something exclusive. It's like a newspaper "scoop" in that way.”



Shareinformation


Information Avoidance

Golman, Hagmann & Loewenstein (2016). Information Avoidance. Journal of Economic Literature.

• Definition of information avoidance:‒ Individual must know that information exists‒ Must be costless to acquire (or costly to avoid)

• Methods of information avoidance‒ Physical avoidance‒ Inattention‒ Biased interpretation of information‒ Forgetting

A study of the ‘ostrich effect’..• Panel of 1.1 million defined contribution accounts over 2007‐2008 at

Vanguard• Logins and trading observed daily over 2 years. N = 853 million

day/investor obs. • Focus on 100k subsample of “paperless” accounts

Sicherman, Loewenstein, Seppi & Utkus (2016). “Financial Attention.” Review of Financial Studies

How many ostriches?

What about bond holders?

Ostrich? Frequency Percent

No (β>0) 2,900 20.9

Yes (β<0) 10,962 79.1

Ostrich Classification of Investors(significant coefficients only)

Ostrich? Frequency Percent

No (β>0) 1,148 67.3

Yes (β<0) 559 32.7

Other findings..• People were less likely to log in when the market was down on the previous day, week, or month (and these tendencies were highly correlated)

• People who were ostriches in one year (2007) were also likely to be ostriches in the other year (2008) – ‘ostricity’ seems to be a stable trait

• People logged in multiple times on weekends much more when the market was up, even though there was nothing new to be learned

• Men log in much more than women, but they are also much more likely to be ostriches

• Ostricity is positively correlated with the size of one’s portfolio; people with big holdings are more likely to be ostriches

An amusing exhibit from a company we work with…

Information avoidance matters

“The bottom line is that we do not accept climate change because we wish to avoid the anxiety it generates and the deep changes it requires. In this regard, it is not unlike any other major threat. However, because it carries none of the clear markers that would normally lead our brains to overrule our short‐term interests, we actively conspire with each other, and mobilize our own biases to keep it perpetually in the background” (page 228).

Sicherman, N. Loewenstein, G., Tvassoli, T. & Buxbaum, J. (forthcoming). Grandma Knows Best: Family Structure and Age of Diagnosis of Children with Autism Spectrum Disorder. Autism.

• 48% of friends and family respondents report they suspected child had a serious condition before, they believe, either parent was concerned. Among these..₋ 51% claim to have expressed their concern to

parents. ₋ 27% “hinted concern” ₋ 22% report did not express their concerns

• Frequent interaction with a grandmother reduces the age of diagnosis by 5.18 months (p=0.026).

• Survey with 477 parents of children diagnosed with ASD.• Additional short survey with 196 “friends and family” referred by parents. 58% saw

child at least once a week around time of diagnosis • Collected information about family structure, interactions with family and friends, and

age of diagnosis, etc.Results:• 25% of parents reported that other people indicated concern that the child “might have

a serious condition” before they started suspecting

In sum, to make sense of recent of recent developments in the information age, we need a deeper understanding of how people interact with informationWe need behavioral economics!

http://www.bedrpolicy.org

human psychology and the internet age - swiss re

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