Scroll back to California in the noughties, and you’ll find Mark Martinez from Southern California Edison dealing with spikes in demand in the same way many electricity generators do – through complex technological forecasting and running costly ‘quick start’ gas fired power stations. He tried a new approach, which involved firing off peak demand price alerts to his customers via email, automatic phone calls, and text messages. It was well meaning. It was sensible. It was hopeless.

Invisible energy
He wasn’t sure what to do. He had seen some ‘Ambient Orbs‘ – a glass globe which glowed different colours based on input – hacked by users to show stock prices, ovulation dates (yes, really), and energy use at home. So – on a hunch – he bought a hundred or so, programmed them to listen to Southern California Edison electricity generation numbers and handed them out to the same customers he’d been emailing, phoning, and texting. The Orb glowed turquoise during inexpensive off-peak hours and red when the price of electricity was high. Among those gifted, peak-hour energy use dropped by 40% according to Clive Thompson in Wired Magazine. (Check out these real-world stats from Ambient Devices)

Attentive
Martinez describes the Orb as being relatively benign until it glows red, which is a perfect description ” . . . we are engaging finally with that ‘in there’ proximal concept of psychology rather than the ‘out there’ distal concepts such as . . . technology.”of pre-attentive processing taking the place of his cognitively demanding emails and phone calls. We all have some brain processing available on a low tick-over, which notifies us of things like the red glow, or our name called-out in a crowded room. You’ll see pre-attentive processing incorporated in the design of aircraft cockpits, too. It is a much better solution to his problem. The psychology wins. And Martinez isn’t the only energy generator to realize this.

Stout savings
Tim Stout, when he was the vice-president of energy efficiency at National Grid in Massachusetts, said in a 2009 article by Grist.org that technological solutions are the default solution to energy production efficiency, but

‘changing consumer behavior is the next wave of savings that needs to be tapped.’

In his opinion, the psychology is required. And it comes in many forms.

Opaque no more
In Norway ‘informative billing’ approaches have seen non-painful reductions in energy consumption of up to 15%. Disaggregated billing (such as pie chart breakdowns) shows use at the appliance level and prompts useful investment by homeowners, which is very logical response. The greater clarity in amount and cost afforded by other ‘informative’ methods such as metering, trailing averages, seasonal comparison, and daily weather-based suggestions, to name a few, bring clarity and immediacy to a traditionally opaque and distant purchase.

Indeed, in 1994 Kempton and Layne said of traditional energy billing ‘consider groceries in a hypothetical store totally without price markings, billed via a monthly statement . . . How could grocery shoppers economise under such a billing regime?’

We’re lost without the psychology. The benefits of aligning reality with our psychology are not the province solely of energy-use.

Favourable government
The UK government coalition’s Behavioural Insights Team was established in July 2010 to use cognitive-behavioural theories to help refine decision making in ” . . . companies that have innovative business models and are based off behavioral economics have proven to be extraordinarily successful . . . “favour of constituents. One strand of work investigated increasing tax compliance (helpful, in that any system without leaks is as fair as intended for constituents), for which they trialed a letter which told recipients that ‘9 out of 10 people in Britain pay their tax on time’. Additionally, some were informed (the truth) that most people in the local area had already paid their tax. This ‘provincial norm’ is a very powerful message structure, and in this case returned a 15% increase in tax, or an extrapolated £160 million to the Exchequer over the six-week trial period.

Halfway around the world, in a similar – and earlier – test the psychologist Michael Wenzel worked on

Australian tax compliance using a similar normative approach where the most successful message was in the injunctive mode stating that although many thought that other people weren’t honest – ‘in reality normal social practice was honesty in tax returns’. This saw the value of the return on the ‘deductions’ part of the tax form where food, travel, and other expenses are documented, drop from $286 to $151. A crude projection of this $135 reduction onto the approximately 5 million Australians who make claims on the ‘deductions’ section would see an extra $675,000,000 of gross income declared. The psychology is certainly valuable.

And as much as you can stop burning cash, you can start burning carbs.

Brain and brawn
Two Harvard undergrads were inspired by their Harvard Behavioural Economics course to start up a not-for-profit gym called Gym-pact, which is designed specifically to combat temporal discounting (a dimension of construal useful to economists) by charging customers when they don’t go, rather than when they do. Why? For all but ” . . . tech hubs are not behaviouralists’ ground zero”the hardiest gym goers, the fight between the instinctive, compulsive, System 1 brain and the rational, planning, System 2 brain means that in-the-moment staying on the sofa watching the TV seems much more attractive than going to the gym, even though we’d promised ourselves (yesterday!) that we’d go. Putting a financial penalty right in the middle of the in-the-moment consideration aligns the financial penalty with the health penalty of not going. This never happens with the ‘sunk cost’ of already having paid gym fees for the month. The psychology helps you stick to your plans.

So where is the epicenter of all these thrusting business-forward approaches?

Hello? Where are you?
Sherry Coutu writes excitedly in Wired UK about growing tech start-up hubs in New York, London, Berlin, and of course, Silicon Valley. But tech hubs are not behaviouralists’ ground zero. (And if you read Alex Madrigal in The Atlantic, even the tech hubs are not the tech startups’ ground zero: “@alexismadrigal we need a new paradigm for tech #startups. Mobile-local-social happened. Now what?”.) Bill Aulet, MD of the MIT Entrepreneurship Center speaking to Susan Johnston in the Boston Globe, recognizes the verve of Silicon Valley in behavioural businesses such as Gym-pack, and yet laments the fact that they can’t grow in that environment

“There [Silicon Valley], they think you solve problems with technology. But these companies that have innovative business models and are based off behavioral economics have proven to be extraordinarily successful.”

He’s right, behavioural-informed businesses are successful – extraordinarily successful. Perhaps because the Howard Stevenson definition of entrepreneurship as “ . . . the pursuit of opportunity without regard to resources currently controlled” is turned on its head simply because behaviourists have the resources ‘currently controlled’ in the form of peer-reviewed psychology and empirical testing. A behavioural business can deliver on its promise from a standing start. Are they a type of ‘entrepreneur+’?

Whether that characterization helps or hinders, it’s thanks to the work on the ‘business of behaviour’ by Gym-pact, Wetzel, the Behavioural Insights Team, Martinez, Stout, Kempton and Layne, and many, many others that we are engaging finally with that ‘in there’ proximal concept of psychology rather than the ‘out there’ distal concepts such as geography and technology. Claude Lévi-Strauss would be pleased.

All we need now is our Silicon Valley.