In Behavior Science

Q: What is impact investment in your perspective?

A: From my perspective, impact investing has two components. The first one is the more straightforward element: these are investments where we care about the well- being of the people who are going to benefit from new product or service that we are working on. That the problem we are working on is a meaningful tangible problem with the potential to make their lives better in a meaningful way. The second component, which is less clear, is to think about impact investing as investing in changing the deep structure of how we live. The interesting thing about such deep changes is that the implications for such changes involve all kinds of feedback loops, and these are hard to anticipate and predict. For example, imagine that we manage to change the way that poor people interact with medicine. Such a change might have lots of important implications that are hard to anticipate – which means that when we delve into such directions the potential for the next change and the next change and the next change are increasingly important, broad, and potentially impactful.

Q: How can Tech. make an impact?

A: Impact is about scale, and tech is about taking interventions from small to large scale with high efficiency. Anther interesting aspect of tech is that is that it can be used to create new ecosystems where new knowledge and flow of information becomes possible. For example, if you think about proliferation of cell phones, they are allowing not only for communication but also for electronic payments.

Q: How can Behavioral Economics assist Tech. generating impact?

A: Much of impact investing is about changing behavior; which means that if you don’t understand what behavior you want to change and how to change these behaviors your efforts are unlikely to yield the desired results. Behavioral economics is the science of the systematic odd influences on our behavior and motivation, and it is an important ingredient for any attempt to change behavior for the better.

Q: How can Tech Impact startup leverage social science research?

A: There’s lots of very useful science research out there. For example lets think about what we might change to get people to save more. In one study in rural India, there were migrant workers working in a remote part of the country with the intention to send the money to their families. But of course every place where migrant workers appear, temptation appears as well. As a result they ended up spending too much money on temptation and not sending a lot of money home. The research team changed how they got their weekly pay. Some people got the pay in the traditional approach – one large sealed envelope. Other people got the same amount divided into four sealed envelopes. What happened? They opened the first envelope, they spend it but then they stopped before transitioning to another envelope. In a final condition, the research team wrote the name of their kids on the envelopes, and now people send the most money home. Now, this is not a technology based intervention, but you can clearly see how you can take the principle and build a technology to build on it.

Q: How can irrational innovation assist entrepreneurs?

A: Irrational innovation is aimed to be a hub with expertise on the ground and in social science, plus financial and strategic help. Whenever we try to come up with a useful create a solution, we need to understand exactly the details of the situation that people are struggling with. What are the exact limitations on the ground, what are the challenges, and once we understand the constraints better it is easier to see what might be a useful solution. That’s the knowledge on the ground. And then we need to take the next step and think about behavioral change, which is where social science enters the picture. And of course financial and strategic help are always useful. Irrational innovation is trying to capture all of those elements together and to help the right entrepreneurs.

Q: How do you see Irrational Innovation tackling the worlds’ greatest challenges?

A: There are lots of challenges; the UN used to have a small list of these, now they have a list of almost two hundred of them. Sadly, there are many grand challenges to pick from. And I think the choice of which ones to start with will be a combination of our own interest and the interest of the entrepreneurs that will join us. Whatever those are, I think we’ll tackle them by first trying to understand the facts on the ground to our best ability, then trying to envision potential solutions to these problems using what we know already from social science. Next we will be designing tests so that we can learn what really works, iterate, and repeat until we are satisfied that we found something that can be truly transformational.

Dan Ariely
Professor of Psychology and Behavioral Economics