Crises of Confidence: the power of behavioral economics

Finsbury’s Graham Buck interviews Dr. Paul J. Zak 

Dr. Paul Zak is a professor of economics, psychology and management at Claremont Graduate University in California. In the wake of the 2014 Ebola outbreak, and the challenges it presented in the communication of public health issues, we asked Dr. Zak what organizations could learn from this crisis and the field of behavioral economics to improve their messages.

What can the government, in the United States and elsewhere, do to help restore calm when public health crises like the Ebola outbreak occur?

Communication is the key, but the government had difficulty getting out a clear message….   While safety guidelines and factual information about Ebola are useful, they are not “sticky.”  My lab’s research on the neurobiology of persuasive narratives shows that the most effective and memorable stories are human ones that have tension and compelling characters.

Why do human stories win out?

The neuroscience experiments done at my lab, and at several others, clearly show that human stories of struggle, pain, and eventual triumph are the most attractive to the human brain.  This is true for constructing narratives to address health crises or business issues. My team found that the neurochemical oxytocin decreases the stress brought on when people confront something that seems new and out of control. Oxytocin is stimulated when we receive trusted information from another person.  We have shown that oxytocin increases trust in government, but only when those around us also trust the government.  Subsequent research discovered that narratives with emotionally engaging characters induce oxytocin release in viewers.

We all have heard that good storytelling can be effective.  You’re saying there are neurological reasons.  Help us make the link.

The first thing an effective story has to do is sustain our attention.  Attention, as any parent knows, is a very scarce resource in the brain. As a result, we flit between things we encounter until one is compelling enough to capture our attention.  Stories with conflict, especially personal conflict, are especially good at capturing our attention because we are highly social creatures.  In addition, for a story to be persuasive, it must produce an emotional resonance with the characters in the story.  This is the increased heart rate we get when James Bond escapes the assassin, or why we cry when the boy finally gets the girl. Our scientific studies show that attention plus emotional resonance is the formula for an effective story – that is, a story that influences one’s attitudes, opinions or behaviors.  Actually, it’s even better than that: our brains crave good stories. This is why Americans consistently spend about 6% of their income on entertainment.

What does your research tell us about the need for corporate, governmental and other organizations to ground their communications work much more firmly in neuroeconomics, behavioral economics and related sciences?

The PowerPoint deck is dead.  Facts and figures are important, but they have greater resonance when wrapped around an effective story.  Stories allow the listener experience a new world, an exciting new opportunity.  Corporate communication, speeches, commercials, and government alerts can all be tested for their neurologic engagement and improved before they are released.  The science has developed so much that we can predict behavioral actions in response to an effective story with very high accuracy (better than 80% accuracy).

If a company faces a situation in which people don’t trust it, what can it do to bring people back?

Trust typically takes time to establish, but can be broken with a single bad experience. Building trust often starts from the inside out.  A customer will not trust a salesperson if the salesperson does not have trust in his or her organization and the people within it.  We have founded a new interdisciplinary field we’re calling “neuromanagement” that uses neuroscience to measure and intervene in organizational cultures.
There are concrete steps that can be used to build, or rebuild, trust. One of the most important is transparency.  Let employees and customers be part of the decision process, open up on what you plan to do, and, importantly, why you want to do it.  This reduces fear and uncertainty that inhibit the brain circuit that processes trust signals.

What are some recent examples of companies overcoming a crisis in confidence and trust? Why were they effective?

My group has worked with companies ranging from start-ups to Fortune 50 clients. We develop long-term relationships in which trust is built step-by-step in a humble way.  That is, by clearly communicating to employees the changes to be made and then doing “management experiments” to see if they improve employee performance.  For example, one component of building a culture of trust is for leaders to offer constant feedback to help those they supervise be successful.  When this is done, the annual review can be jettisoned.  A company in the Midwest going through a painful reorganization got rid of the annual review and assessed people on a project-by-project basis, and trust jumped up immediately. We have even shown that office design affects people’s desire to work together, their mood, and even how fast they shed stress once the workday is over.  Small changes can make a big difference.

Any recommendations you would make for the next crisis in public confidence?  There will inevitably be one.

Clarity of communication.  Repetition.  Human-scale stories illustrating what to do.  Humility by leaders.  Transparency about what is known and not known.