Fringe Benefits

Who wields influence on social media?

Photo illustrating social media by showing the hands of multiple people tapping on cellphones amid a cloud of emojis and thought bubbles denoting likes, shares, messages, etc.

Want to spread gossip? Seek out a social media celebrity. Want to go viral with a cutting- edge new product or unique idea? You may need to look elsewhere.

A new study by Assistant Professor Douglas Guilbeault found that popular influencers aren’t the most influential people to spread anything more complex than a new flavor of hard seltzer or a meme. Rather, the most innovative or provocative new technologies, social movements, and behaviors spread wider and faster from those on the fringes—what Guilbeault and co-author Damon Centola of the University of Pennsylvania term “complex contagions.”

“For unfamiliar ideas, the people on the edges of a network suddenly have the greatest influence across an entire community.”

Instagram posts of actor Mindy Kaling and Instagram celebrity Ezra J. William wearing face masks and encouraging mask wearing.

“With ideas or behaviors that require a lot of peer reinforcement to catch on—for example, wearing masks—the most influential people in a network are often those who don’t have the most connections and who are not the most central in traditional terms,” says Guilbeault. “For unfamiliar ideas, the people on the edges of a network suddenly have the greatest influence across an entire community.”

That’s because in order for a new idea or behavior to take off, people need to be exposed to it from multiple sources that they trust and can relate to. Eyeballs don’t equal influence: Asking Kim Kardashian or a celebrity on TikTok to persuade people to get COVID vaccines may be more polarizing than persuasive. But when our friends and neighbors all think something is a good idea, we tend to start to think so, too.

Brain Freeze

Why brands should care about our imperfect memory

Small, confused cartoon person standing atop an empty shopping cart.

Quick: List your three favorite fast-food restaurants.

If you’re like many people, McDonald’s, Wendy’s, and Burger King may come to mind—even if you much prefer In-N-Out or Chick-fil-A.

A new Haas study combining decision-making experiments with brain scans found that when it comes to making choices, we frequently and predictably forget about the things we like best and are instead swayed by what we remember—a finding that explains the importance of brands for consumers and has implications for crafting public policy and managing neurodegenerative diseases.

The findings challenge the fundamental tenets of traditional economic models that assume people make rational decisions from all available options. Because most decisions don’t come with multiple-choice answers, we instead conjure options from our imperfect memories.

“Everyone knows that human memory is limited, but scientists know surprisingly little about how this limit impacts our decisions,” says lead author Zhihao Zhang, a Haas postdoctoral scholar, who conducted the research with Assoc. Prof. Ming Hsu and UCSF neurologist Andrew Kayser.

To measure the influence of memory on decisions, the researchers examined people’s choices for different types of branded and nonbranded consumer goods, such as fast food, fruit, and sneakers. In one open-ended study, 30% of people said McDonald’s was their preferred fast food; yet for those given a list of restaurants, only half that many chose the golden arches, while the other half chose restaurants like In-N-Out or Chick-fil-A.

The researchers also scanned the brains of a group of participants using fMRI (functional magnetic resonance imaging). When people were asked to make open-ended choices, the memory retrieval regions of their brains lit up. That didn’t happen when people chose from a list.

All told, the findings show that our memories limit our choices. “What we observed for McDonald’s is true for every product category we investigated and really speaks to the power of brands,” says Hsu.

How imperfect memory causes poor choices

McDonald's and Burger King signs
Photo: Peter Kneffel/picture-alliance/dpa/AP Images

Quick: Pick your three favorite fast-food restaurants.

If you’re like many people, McDonald’s, Wendy’s, and Burger King may come to mind—even if you much prefer In-N-Out or Chick-fil-A.

A new study from UC Berkeley’s Haas School of Business and UC San Francisco’s Department of Neurology found that when it comes to making choices, we surprisingly often forget about the things we like best and are swayed by what we remember. The paper, published this week in the journal Proceedings of the National Academy of Sciences, combines insights from economics and psychology with decision-making experiments and fMRI brain scans to examine how our imperfect memories affect our decision making.

“Life is not a multiple-choice test,” says Berkeley Haas Assoc. Prof. Ming Hsu, director of UC Berkeley’s Neuroeconomics Laboratory, who co-wrote the paper with Dr. Andrew Kayser, associate professor of neurology at UCSF, and lead author Zhihao Zhang, a Haas postdoctoral scholar. “Yet researchers traditionally give people a menu of options and ask them to choose.”

The findings break away from traditional economic models that assume people make rational decisions from all available options. In most situations, rather than choosing from a ready-made list, we conjure choices from our memory.

“While everyone knows that human memory is limited—and there’s a thriving market for reminder apps and Post-it Notes—scientists know surprisingly little about how this limit impacts our decisions,” says Zhang. Answering this question could hold implications for everything from conducting consumer research and crafting public policy to managing neurodegenerative diseases.

Forgetting favorites

To measure the influence of memory on decisions, the researchers examined people’s choices for different types of consumer goods, such as fast food, fruit, sneakers, and salad dressing. For each, they asked one group of participants to name as many favorite brands or items in the category as they could. They asked a second group to choose their preferences from a menu of options. Based on those results, they created a mathematical method to predict which items people would choose in an open-ended situation.

The most surprising takeaway was just how often people seemed to forget to mention items they liked best, choosing less-preferred, but more easily remembered items. “A lot of people name McDonald’s as their favorite, but many of those people don’t actually like McDonald’s as much as other brands,” says Kayser. In an open-ended situation, 30% of people said McDonald’s is their preferred fast food; yet for those given a list of restaurants, only half that many (15%) chose the Golden Arches, with the other half instead choosing restaurants such as In-N-Out or Chick-fil-A.

The researchers found similarly large differences between people’s preferences in open ended versus list-based choices in all the other types of consumer goods tested, both branded and nonbranded, such as fruit. “The magnitude of these changes was very surprising,” says Hsu. “The fact that so many people don’t mention their favorites really argues against the notion that we usually act in our own best interest, as standard economic models might have us believe.”

Surprisingly accurate predictions

To gain a deeper scientific understanding of how memory impacts decisions, the researchers next constructed a new mathematical model that combines economic models of decision-making with psychological models of memory recall. “Very little attention has been paid to connecting these two areas,” says Zhang. “By taking the best features of each, we found that we could make amazingly accurate predictions of how often people fail to choose their more preferred options due to their imperfect memories.”

In fact, the predictions were so accurate that the researchers thought they had made a mistake. “We only came to trust the findings after checking and repeating the experiments multiple times,” he said.

Brain scans show memory systems working

Understanding the role memory plays in decision making has implications for millions of people managing neurodegenerative diseases such as Alzheimer’s disease, says Kayser, who researches behavioral neurology.

“We know that memory declines as Alzheimer’s disease progresses. We also see that decision-making capacity diminishes in areas such as financial management. But we don’t yet have good models of how they might be linked, or even good ways to measure changes in decision-making capacity,” he says. “For neurologists, these are urgent questions.”

To nail down the role of memory retrieval in decision making, the researchers scanned the brains of a group of participants using fMRI (functional magnetic resonance imaging). Past neuroscientific research has shown that decision-making—which involves valuation—and memory are served by different brain systems.

“When people made open-ended choices in our experiments, we saw increased activity in memory retrieval regions of the brain and enhanced communication with valuation regions,” says Zhang. That didn’t happen when participants simply picked choices from a list: The valuation part lit up, but memory systems showed much less activity.

This provides neural evidence for the direct involvement of memory systems in open-ended decisions, and sheds light on the nature of suboptimal decisions in these situations.

“Based on these findings, it’s possible that Alzheimer’s patients are particularly vulnerable when decisions are open-ended,” says Kayser, “If so, this could motivate development of decision support systems that can alleviate these vulnerabilities.”

The research could also provide a more targeted way of designing “nudges” that help people expand their options without mandating specific choices. For example, “If we want consumers to switch to more sustainable species of fish, it might help to find a way to get people to consider other types of seafood they may have overlooked otherwise,” says Hsu.

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Retrieval-Constrained Valuation: Toward Prediction of Open-Ended Decisions
By Zhihao Zhang, Shichun Wang, Maxwell Good, Siyana Hristova, Andrew Kayser & Ming Hsu
Proceedings of the National Academy of Sciences (PNAS), May 18, 2021

Media contact
Laura Counts
lcounts@haas.berkeley.edu
(510) 643-9977

Berkeley Haas hosts 2021 Clorox Case Competition

Haas MBA students participated in the 2021 Clorox Case Competition. From left to right, top to bottom: Brandon Elhert, Emily Orr, Shaan Arora, Almas Sharif, and Sachi Holla, all MBA 22.

Twelve MBA student teams convened online last week to pitch marketing plans to sell smart Brita water filter products to a specific group of The Clorox Company consumers in the 2021 Clorox Case Competition.

The competition, hosted by the Berkeley Haas Marketing Club, was held virtually April 15-16. Wharton took first place, Berkeley Haas took second, and Cornell placed third.

The Berkeley Haas team included Brandon Ehlert, Emily Orr, Sachi Holla, Almas Sharif, and Shaan Arora, all MBA 22.

The competition grew out of a long-standing relationship between Berkeley Haas and The Clorox Company.

Mathilde De La Calle and Vaibhav Anand, both MBA 22, organized the competition. “We’re giving students the chance to really get to know The Clorox Company, its brand, and get access to information that you don’t get unless you work at the company,” Anand said.

Emily Orr, MBA 22, who’s pursuing brand management at Haas, said the competition pushed her to approach this challenge from both a marketing and consulting perspective. Her team pitched Brita+, water bottles that utilizes smart technology centered around hydration and sustainability.

Of the dozen teams that competed in round one, five teams moved on to the final round Friday for the chance to win $5,000 in prize money and interviews for full-time positions at Clorox. Second and third place winners received $3,000 and $1,000 respectively.

Emily Powell, BCEMBA 08
President & Owner, Powell’s Books

Emily Powell, BCEMBA 08

As the president of world-famous Powell’s Books in Portland, Ore., Emily Powell is well-versed in the nuances of globalization. “We don’t have aims to be in any other city, yet we’re very successful,” she says. “Going deep and knowing your community can allow you to be even more successful than a business with aspirations to go wide.”

Powell’s grandfather started the business as a used bookstore in 1971, and over the years, the store has grown to offer new books, encompass a city block, and, in 1994—pre-Amazon.com—sell books online.

While bookselling is still about connecting readers and books, Powell has had to confront contemporary challenges: the ascent of Amazon, e-books, and, most recently, a pandemic. Through it all, Powell has made serving Oregon’s readers and writers her top priority while also deftly delivering books to readers nationwide and beyond.

The secret sauce, Powell says, lies in used books: intricately tracking their performance—how quickly they sold, at what price, and in what condition—to aid future merchandise choices and shelving them with new books, which many bookstores don’t do. “By far we sell more of both new and used as a result,” she says.

Equally important is maintaining a presence for Powell’s pilgrims. She remembers one Florida woman who burst into tears upon entering the store and realizing a life dream. “Our loyal customers outside of Portland have all had some physical contact with the store,” she says. “They’ve all either been there or had someone tell them about it. It’s the weight of a physical experience that’s allowed us to become who we are.”

Haas team wins regional National Student Advertising Competition

ImagiCal team
imagiCal’s Executive Leadership Team

A plan to help marketers design and place creative, data-driven ads that could deliver a high return on investment (ROI) landed an undergraduate team a first place district win at the National Student Advertising Competition (NSAC). 

The competition, which was supposed to be held at San Jose State University, took place via Zoom on April 24-25. It’s the team’s first major win since 2016.

Team members: The 29-member team, called imagiCal, included UC Berkeley undergraduate students from multiple disciplines, including business, economics, computer science, sociology, and architecture. This year’s team was led by imagiCal’s President, Maya Iyer, BS 21 (economics). Presenters included: Shelley Cai, BA 21 (sociology); Cicily Deng, BS 22; Nikhil George, CS 22 (computer science); and Brendan Shih, BS 23.

Berkeley Haas-sponsored imagiCal team.
A screenshot of imagiCal’s leadership team and NSAC presenters. From left to right: Jago Pang, Tyler Wu, Frances Cheng, Maya Iyer, Vicky Lin, Amber Chen, Michelle Gong, Melody Ding, Kelly Pan, Cicily Deng, Brendan Shih, Shelley Cai, and Jordan Loeffler.

The field: About 2,000 undergraduate students from 200 schools around the country competed in district-level competitions before advancing to the final round. Haas competed against teams from San Jose State University, University of Nevada, University of Nevada-Las Vegas, and University of San Francisco

The challenge: The team was tasked with developing a business and marketing strategy to promote the Adobe Experience Cloud–a digital platform to manage online marketing–among advertising media buyers. 

The plan: The team’s campaign slogan was “Data-backed, Story-driven,” showcasing the ways that marketers could create a curated ad experience using data-informed messaging.

Secret sauce: “Our secret sauce lies in our diversity,” said Tyler Wu, BS 22. “We pride ourselves on having a diverse community of students, which allows us to consider multiple points of view, learn from each others’ strengths and weaknesses, and think creatively.

Wu also credited the team’s success to student designers who were able to see the practicality of certain ad executions and data scientists who crunched the numbers to see the potential impact of these executions. 

The Haas factor: “Our Haas faculty advisor, Judy Hopelain, was very helpful in guiding us through this difficult case,” said Wu.  “With her expertise in business-to-business (B2B) marketing, we were able to gain a stronger understanding of how to market B2B products and approach our campaign strategy.”

Diane Rames, a NSAC advisor, also helped the imagiCal team with their B2B marketing and guided them through the competition.

NSAC is a college advertising competition with 16 districts and over 150 teams nationwide. Each year, students are challenged to create a multi-million dollar advertising campaign for a corporate sponsor.

A simple trick for seeing the world through fresh eyes

Kids looking at an aquarium
Photo: Aleksandar Nakic for iStock by Getty Images

The commute from downtown San Francisco, where Assoc. Prof. Clayton Critcher lives, to his office at Haas is roughly 12 miles. Not ideal, he knows, but when he made the move he tried to look on the bright side. “I figured I’d get to drive across the Bay Bridge every morning, see the scenery, and maybe this would add to my quality of life,” he says. “Unfortunately, I appreciated what I saw for about three days and then started growing blind to it.”

Psychologists refer to this phenomenon as habituation. Novelty wears off; what is fresh grows stale; beauty no longer captivates. As he personally experienced this universal human tendency many days of the week, Critcher began to wonder if there might be a way to slow the process down. How can we stir up our waning sense of wonder? With Minah Jung and Fausto Gonzalez from New York University, Critcher found that a relatively small intervention can, in fact, go a long way toward this end. (Their results were published this month in the Journal of Personality and Social Psychology.)

Their finding is rooted in a mechanism that Critcher and his colleagues call the “vicarious construal effect.” In short, by imagining an experience through somebody else’s eyes, people are themselves able to capture an appreciation that they had either lost or never possessed in the first place.

By imagining an experience through somebody else’s eyes, people are themselves able to capture an appreciation that they had either lost or never possessed in the first place.

Experimental interventions

The researchers ran more than a dozen experiments in which participants were asked to watch the same short video clip three times in a row. (These clips varied in the responses they evoked, from laughter to disgust.) Predictably, when participants were asked to rate how funny or sad or uplifting they found a particular clip on a scale from 1 to 100, ratings dropped with each successive viewing. However, by asking one group of participants to consider what somebody seeing the clip for the first time might see—by pushing people to step outside of their own experience—the researchers were able to significantly reduce the rate at which people grew habituated to the clip. That is, their ratings of their own experience dropped 60% to 70% less between the second and third viewings.

The vicarious construal effect also proved influential outside of this strict framework. In one study, for instance, participants watched short clips of Japanese anime. A subset of those who had no particular interest in the form was told to look for what an anime fan might enjoy about the clip. Through this lens, the participants themselves expressed a greater personal appreciation for what they saw. This result held even in an experiment that had people who could not speak Spanish watch a Spanish-dubbed clip of Friends. Those who were prompted to consider what a Spanish-speaking fan might enjoy in the clip liked it more themselves.

“This was a case where it seemed like the intervention would in no way be useful: These people couldn’t even speak Spanish,” Critcher says. “And yet, without understanding the dialog, they still enjoyed it more.”

This finding about a Spanish-dubbed Friends raises a key question that Critcher is now exploring: How far can vicarious construal effects reach? The degree to which somebody likes anime, or Jerry Seinfeld, or polar bears—three examples of video clips that participants watched — is a politically and morally neutral issue. Opinions on these topics aren’t classified as “wrong” or “bad.” This changes when it comes to politically charged subjects: Might a political progressive overcome some of their own biases against a conservative viewpoint if asked to consider it from the perspective of a supporter? This question becomes all the more important given the recent proliferation of fake news, in which liberals and conservatives alike are often duped into believing fictitious news stories that spread falsehoods sympathetic to their own side. Might encouraging people to consider the media through their political opponents’ eyes—the vicarious construal effect—help to eliminate political partisans’ biased tendencies?

Rediscovering joy

Whether or not this turns out to be the case, Critcher offered one important consideration in the application of the results. In all of the cases he studied, researchers told participants to adopt somebody else’s perspective, but the participants didn’t know why they were being asked to do this. It is possible that this ignorance is essential to the result. Critcher may not be able to rediscover the joy of his commute by simply asking himself what a tourist driving over the Bay Bridge would appreciate. His awareness of the deception could blunt its power.

Simply trying to think about what someone else might see actually changes the way we see and interpret what we’re doing, changes the emotions we feel.

These larger questions aside, though, Critcher reiterated the scientific legitimacy this work lends to the old adage encouraging us to walk a mile in somebody else’s shoes. “Simply trying to think about what someone else might see actually changes the way we see and interpret what we’re doing, changes the emotions we feel,” he says. “It can help people to rediscover what they once saw in experiences they’ve had many times, or even help people to enjoy an experience that they weren’t initially predisposed to like.”

Free “Leading Through Crisis” video series features top Berkeley Haas experts

Leading Through Crisis banner

BERKELEY, Calif.—Berkeley Executive Education has released a free weekly video series featuring top faculty offering insights on leading through crisis.

The short videos feature Berkeley Haas faculty responding to the uncertainty and volatility created by the coronavirus pandemic with expertise across a wide range of fields—from psychology, sociology, and organizational behavior to economics and neuroscience.

Produced while sheltering-in-place, the “Leading Through Crisis” series brings the unique Berkeley and Bay Area perspective on culture, leadership, and innovation to our current challenges.

Videos will be released weekly throughout the spring:

  • Leading Culture Through Crisis with Jennifer A. Chatman, the Paul J. Cortese Distinguished Professor of Management at Berkeley Haas and co-founder and director of the Berkeley Haas Culture Initiative. Chatman is a leading researcher in the area of organizational culture and leadership.
  • Leading in a Time of Crisis with Homa Bahrami, a professional faculty member and international educator, advisor, and author. Bahrami specializes in organizational flexibility, team alignment, and dynamic leadership in global, knowledge-based industries.
  • Organizational Adaptation in a Time of Crisis with Sameer Srivastava, the Harold Furst Chair in Management Philosophy and Values. Srivastava’s research unpacks the complex interrelationships that people forge within and across groups. His work uses computational methods to examine how culture, cognition, and networks relate to career outcomes.
  • The Neuroscience of Work-From-Home Productivity with Sahar Yousef, a professional faculty member who specializes in applying and leveraging cutting-edge neuroscience research to improve productivity, innovation, and wellness.
  • Becoming a Changemaker in a Time of Uncertainty with Alex Budak, a professional faculty member and social entrepreneur who created the highly rated “Becoming a Changemaker” course.
  • Keeping your Head in a Crisis with Don Moore, the Lorraine Tyson Mitchell Chair in Leadership and Communication at Berkeley Haas. Moore’s research focuses on overconfidence—including the consequences of people thinking they are better than they actually are or being too sure they know the truth. Moore is the author of Perfectly Confident: How to Calibrate Your Decisions Wisely.
  • How Do I Show up as a Leader? with Maura O’Neill, a professional faculty member and distinguished teaching fellow. O’Neill was appointed by President Obama to be the first Chief Innovation Officer of the U.S. Agency for International Development, where she had responsibility for inspiring and leading breakthrough innovations in foreign assistance and development worldwide. O’Neill is best known for adapting venture capital and drug discovery methods to development by co-creating the Development Innovation Venture Fund.
  • The Economics of a Cultural Shift with Steve Tadelis, the Sarin Chair in Strategy and Leadership and professor in the Haas Business and Public Policy Group. His current research areas are e-commerce, industrial organization, procurement contracting, and market design.

Additional programs are in production with professors Toby Stuart, Catherine Wolfram, Rich Lyons, Cameron Anderson, Zsolt Katona and Tom Lee; professional faculty members Robert Strand, Susan Houlihan and Bill Pearce; and other renowned faculty members across a range of topics.

Sign up here to receive “Leading Through Crisis” videos weekly.

About Berkeley Haas

As the second-oldest business school in the United States, Berkeley Haas has been questioning the status quo since its founding in 1898. It is one of the world’s leading producers of new ideas and knowledge in all areas of business, inspiring new thinking for the new economy. Two of its exceptional faculty have been honored with the Nobel Prize in Economic Sciences. Two of its female faculty, Laura D’Andrea Tyson and Janet Yellen, chaired the President’s Council of Economic Advisers. Janet Yellen also recently stepped down as the chair of the Board of Governors of the Federal Reserve.

Berkeley Haas offers outstanding management education to about 2,500 undergraduate and graduate students who come from around the world to study in one of its six degree-granting programs and to join the school’s network of 41,000 alumni worldwide. Its distinctive culture is defined by four Defining Leadership Principles: Question the Status Quo, Confidence Without Attitude, Students Always and Beyond Yourself.

About Berkeley Executive Education

UC Berkeley Executive Education serves leaders and organizations who aspire to redefine the future of business.  Our immersive learning experiences, led by renowned UC Berkeley faculty, equip global executives and their organizations with the vision, culture, and capabilities to thrive in an ever-changing world. Leveraging the best resources of the world’s No. 1 public university (Forbes) and the surrounding Silicon Valley business ecosystem, Berkeley Executive Education embraces the Haas School of Business mission to develop leaders who Question the Status Quo, exhibit Confidence Without Attitude, are Students Always, and think Beyond Themselves.

Berkeley Executive Education delivers over 150 programs annually, to a global audience, including Open Enrollment programs in leadership, strategy, finance and entrepreneurship; Comprehensive programs (15 days or longer) in leadership, digital transformation and other emerging topics; Custom programs designed and tailored specifically for a specific company, government or university partner’s objectives and organizational culture; and Online programs, in various languages, which offer a flexible schedule with direct application of practical learning exercises. Read more on the Berkeley Executive Education website.

Contact:
Laura Counts | Berkeley Haas Media Relations
lcounts@haas.berkeley.edu | (510) 643-9977

Asst. Prof. Ellen Evers wins top mentoring award

Asst. Prof. Ellen Evers of the Haas Marketing Group has been recognized with UC Berkeley’s premier award for graduate mentorship. 

Asst. Prof. Ellen EversThe Carol D. Soc Distinguished Graduate Student Mentoring Award recognizes faculty for their vital role in mentoring graduate students and training future faculty. Evers received the 2020 award for early career faculty.

Evers has acted as an exceptional mentor, supporting students in their academic and personal lives and bringing the department together, wrote marketing PhD student Stephen Baum in his nomination. 

“Our weekly meetings are a treat. They are fast paced, firing-on-all-cylinders affairs, where I am pushed and challenged to grow as an independent thinker,” he wrote. “As part of this, Professor Evers meaningfully engages with me throughout every aspect of the research process, from hypothesis creation to data analysis.”

Baum said Evers has an “an extremely uncommon ability” to guide him in uncovering and identifying the promising components of his ideas. “The prospect of proposing and completing a dissertation is much less daunting with the knowledge that I will have Professor Evers guiding me.”

She has also provided warm personal support, he noted, from offering to bring medicine when he was sick to organizing card games, hikes, and other outings for the department. “She regularly goes above-and-beyond in supporting me as a student, as a collaborator, and as a human being,” Baum wrote.

Evers, who has taught at Haas since 2015, studies judgment and decision making and moral psychology. 

How information is like snacks, money, and drugs—to your brain

Group of young people using smartphone mobile phone_Ming Hsu research

Can’t stop checking your phone, even when you’re not expecting any important messages? Blame your brain.

A new study by researchers at UC Berkeley’s Haas School of Business has found that information acts on the brain’s dopamine-producing reward system in the same way as money or food.

“To the brain, information is its own reward, above and beyond whether it’s useful,” says Assoc. Prof. Ming Hsu, a neuroeconomist whose research employs functional magnetic imaging (fMRI), psychological theory, economic modeling, and machine learning. “And just as our brains like empty calories from junk food, they can overvalue information that makes us feel good but may not be useful—what some may call idle curiosity.”

Assoc. Prof. Ming Hsu of the Haas Marketing Group
Assoc. Prof. Ming Hsu of the Haas Marketing Group

The paper, “Common neural code for reward and information value,” was published this month by the Proceedings of the National Academy of Sciences. Authored by Hsu and graduate student Kenji Kobayashi, now a post-doctoral researcher at the University of Pennsylvania, it demonstrates that the brain converts information into the same common scale as it does for money. It also lays the groundwork for unraveling the neuroscience behind how we consume information—and perhaps even digital addiction.

“We were able to demonstrate for the first time the existence of a common neural code for information and money, which opens the door to a number of exciting questions about how people consume, and sometimes over-consume, information,” Hsu says.

Rooted in the study of curiosity

The paper is rooted in the study of curiosity and what it looks like inside the brain. While economists have tended to view curiosity as a means to an end, valuable when it can help us get information to gain an edge in making decisions, psychologists have long seen curiosity as an innate motivation that can spur actions by itself. For example, sports fans might check the odds on a game even if they have no intention of ever betting.

Sometimes, we want to know something, just to know.

“Our study tried to answer two questions. First, can we reconcile the economic and psychological views of curiosity, or why do people seek information? Second, what does curiosity look like inside the brain?” Hsu says.

The neuroscience of curiosity

To understand more about the neuroscience of curiosity, the researchers scanned the brains of people while they played a gambling game. Each participant was presented with a series of lotteries and needed to decide how much they were willing to pay to find out more about the odds of winning. In some lotteries, the information was valuable—for example, when what seemed like a longshot was revealed to be a sure thing. In other cases, the information wasn’t worth much, such as when little was at stake.

For the most part, the study subjects made rational choices based on the economic value of the information (how much money it could help them win). But that didn’t explain all their choices: People tended to over-value information in general, and particularly in higher-valued lotteries. It appeared that the higher stakes increased people’s curiosity in the information, even when the information had no effect on their decisions whether to play.

The researchers determined that this behavior could only be explained by a model that captured both economic and psychological motives for seeking information. People acquired information based not only on its actual benefit, but also on the anticipation of its benefit, whether or not it had use.

Hsu says that’s akin to wanting to know whether we received a great job offer, even if we have no intention of taking it. “Anticipation serves to amplify how good or bad something seems, and the anticipation of a more pleasurable reward makes the information appear even more valuable,” he says.

Common neural code for information and money

How does the brain respond to information? Analyzing the fMRI scans, the researchers found that the information about the games’ odds activated the regions of the brain specifically known to be involved in valuation (the striatum and ventromedial prefrontal cortex or VMPFC), which are the same dopamine-producing reward areas activated by food, money, and many drugs. This was the case whether the information was useful, and changed the person’s original decision, or not.

Next, the researchers were able to determine that the brain uses the same neural code for information about the lottery odds as it does for money by using a machine learning technique (called support vector regression). That allowed them to look at the neural code for how the brain responds to varying amounts of money, and then ask if the same code can be used to predict how much a person will pay for information. It can.

In other words, just as we can convert such disparate things as a painting, a steak dinner, and a vacation into a dollar value, the brain converts curiosity about information into the same common code it uses for concrete rewards like money, Hsu says.

“We can look into the brain and tell how much someone wants a piece of information, and then translate that brain activity into monetary amounts,” he says.

Raising questions about digital addiction

While the research does not directly address overconsumption of digital information, the fact that information engages the brain’s reward system is a necessary condition for the addiction cycle, he says. And it explains why we find those alerts saying we’ve been tagged in a photo so irresistible.

“The way our brains respond to the anticipation of a pleasurable reward is an important reason why people are susceptible to clickbait,” he says. “Just like junk food, this might be a situation where previously adaptive mechanisms get exploited now that we have unprecedented access to novel curiosities.”

 

Regret is a gambler’s curse, scientists say

What goes through a gambler’s mind after she’s placed her bet?

It’s not just the anticipation of a big payoff, or doubts about the wisdom of her bet. It’s also regret about previous bets, both won and lost, according to UC Berkeley neuroscientists.

“Right after making a choice and right before finding out about the outcome, the brain is replaying and revisiting nearly every feature of what happened during the previous decision,” said senior author Ming Hsu, an associate professor in the Haas School of Business and Helen Wills Neuroscience Institute at UC Berkeley. “Instead of ‘I just gambled but maybe I shouldn’t have,’ it is, ‘Last round I gambled and that was a really good choice.’ Or, ‘I played it safe last time but should have gone for it.’”

Activity in the orbitofrontal cortex during a gambling experiment, as recorded by electrode meshes placed directly on the surface of the brain.
Activity in the orbitofrontal cortex during a gambling experiment, as recorded by electrode meshes placed directly on the surface of the brain. On the left, the dots indicate the positions of the electrodes in each of the 10 subjects, distinguished by color. During normal activity (middle), the electrodes (black dots) show little activity (red) in the OFC region that deals with regret. During the betting game, however (right), after learning the outcome of the bet, many electrodes record activity in the area where we feel regret (red).

The UC Berkeley study is one of a small but growing number of studies that record fast human brain activity – a thousand measurements per second – to reveal the complex array of operations underlying every decision we make, even those that may seem trivial.

Ming Hsu and Ignacio Saez at UC Berkeley.
Ming Hsu and Ignacio Saez at UC Berkeley. (Jim Block photo)

The researchers focused on the brain’s orbitofrontal cortex, long-known to be involved in reward processing and social interactions. Indeed, it was one of the main sites of damage in the well-known case involving 19th century railroad worker Phineas Gage, whose left frontal cortex was destroyed after an explosion drove an iron bar through his head. The damage altered his personality, making him impulsive and uninhibited – seemingly a man who didn’t regret any act, no matter how disastrous the outcome.

In recent decades, the orbitofrontal cortex has been shown to be involved in how people value their choice options, how much regret they felt, how much risk they were taking and how valuable their choice was, all of which guide future choices or help someone appraise how good or bad the outcome was.

As shown in this study, however, the orbitofrontal cortex spends much of the time replaying aspects of past decisions. In particular, when people play a gambling game, the main driver of activity in the orbitofrontal cortex is the regret they feel from losing or the regret, after winning, of not having bet more.

“It turns out that the most prevalent information encoded in the orbitofrontal cortex was the regret subjects experienced from their previous decision,” said first author Ignacio Saez, a former UC Berkeley postdoctoral fellow who is now an assistant professor at UC Davis.

With the ability to recognize the pattern of activity associated with regret, the findings could open the door to assessing how well the regret circuits in the brain operate in people with brain injuries or those with behaviors that suggest the absence of regret, including some politicians.

Read the full story by Robert Sanders—and try the gambling game—on Berkeley News.

Can racism, sexism, and other biases be quantified?

Berkeley Haas Assoc. Prof. Ming Hsu built a model to quantify stereotypesWhen a Starbucks employee recently called the police on two black men who asked for a bathroom key but hadn’t yet ordered anything, it seemed a clear-cut case of racism leading directly to unfair treatment. Many outraged white customers publicly contrasted it with their years of hassle-free Starbucks pit stops.

But from a scientific perspective, making a direct connection between people’s biases and the degree to which they treat others differently is tricky. There are thousands of ways people stereotype different social groups—whether it’s assuming an Asian student is good at math or thinking an Irish colleague would make a good drinking buddy—and with so many variables, it’s incredibly challenging to trace how someone is treated to any one particular characteristic.

“There is a tendency for people to think of stereotypes, biases, and their effects as inherently subjective. Depending on where one is standing, the responses can range from ‘this is obvious’ to ‘don’t be a snowflake,’” said Berkeley Haas Assoc. Prof. Ming Hsu. “What we found is that these subjective beliefs can be quantified and studied in ways that we take for granted in other scientific disciplines.”

How do stereotypes influence behavior?

Berkeley Haas Assoc Prof Ming Hsu
Ming Hsu

A new paper published today in the Proceedings of the National Academy of Sciences cuts to the heart of messy social interactions with a computational model to quantify and predict unequal treatment based on perceptions of warmth and competence. Hsu and post-doctoral researcher Adrianna C. Jenkins—now an assistant professor at the University of Pennsylvania—drew on social psychology and behavioral economics in a series of lab experiments and analyses of field work. (The paper was co-written by Berkeley researcher Pierre Karashchuk and Lusha Zhu of Peking University.)

“There’s been lots of work showing that people have stereotypes and that they treat members of different social groups differently,” said Jenkins, the paper’s lead author. “But there’s quite a bit we still don’t know about how stereotypes influence people’s behavior.”

It’s more than an academic issue: University admission officers, for example, have long struggled with how to fairly consider an applicant’s race, ethnicity, or other qualities that may have presented obstacles to success. How much weight should be given, for example, to the obstacles faced by African Americans compared with those faced by Central American immigrants or women?

Eye-opening findings

While these are much larger questions, Hsu said the paper’s contribution is to improve how to quantify and compare different types of discrimination across different social groups—a common challenge facing applied researchers.

“What was so eye-opening is that we found that variations in how people are perceived translated quantitatively into differences in how they are treated,” said Hsu, who holds a dual appointment with UC Berkeley’s Helen Wills Neuroscience Institute and the Neuroeconomics Lab. “This was as true in laboratory studies where subjects decided how to divide a few dollars as it was in the real-world where employers decided whom to interview for a job.”

The model offers a way to establish a direct connection between widely held stereotypes and entrenched societal inequities. Kellie McElhaney, founding executive director of the Center for Equity, Gender and Leadership (EGAL), said this is the kind of fundamental research that informs the mission of the center, which aims to “develop equity fluent leaders who ignite and accelerate change.”

“This research continues to advance critical knowledge and solutions around the significant and negative impact of biases, and in particular, the consequences in the business world,” she said.

Rather than analyzing whether the stereotypes were justified, the researchers took stereotypes as a starting point and looked at how they translated into behavior with over 1,200 participants across five studies. In the first study involving the classic “Dictator Game,” where a player is given $10 and asked to decide how much of it to give to a counterpart, the researchers found that people gave widely disparate amounts based on just one piece of information about the recipient (i.e., occupation, ethnicity, nationality). For example, people on average gave $5.10 to recipients described as “homeless,” while those described as “lawyer” got a measly $1.70—even less than an “addict,” who got $1.90

To look at how stereotypes about the groups drove people’s choices to pay out differing amounts, the researchers drew on an established social psychology framework that categorizes all stereotypes along two dimensions: those that relate to a person’s warmth (or how nice they are seen to be), and those that relate to a person’s competence (or how intelligent they are seen to be). These ratings, they found, could be used to accurately predict how much money people distributed to different groups. For example, “Irish” people were perceived as warmer but slightly less competent than “British,” and received slightly more money on average.

“We found that people don’t just see certain groups as warmer or nicer, but if you’re warmer by X unit, you get Y dollars more,” Hsu said.

Specifically, the researchers found that disparate treatment results not just from how people perceive others, but how they see others relative to themselves. In allocating money to a partner viewed as very warm, people were reluctant to offer them less than half of the pot. Yet with a partner viewed as more competent, they were less willing to end up with a smaller share of the money than the other person. For example, people were ok with having less than an “elderly” counterpart, but not less than a “lawyer.”

Predicting job callbacks

It’s one thing to predict how people behave in carefully controlled laboratory experiments, but what about in the messy real world? To test whether their findings could be generalized to the field, Hsu and colleagues tested whether their model could predict treatment disparities in the context of two high-profile studies of discrimination. The first was a Canadian labor market study that found a huge variation in job callbacks based on the perceived race, gender, and ethnicity of the names on resumes. Hsu and colleagues found that the perceived warmth and competence of the applicants—the stereotype based solely on their names—could predict the likelihood that an applicant had gotten callbacks.

They tried it again with data from a U.S. study on how professors responded to mentorship requests from students with different ethnic names and found the same results.

“The way the human mind structures social information has specific, systemic, and powerful effects on how people value what happens to others,” the researchers wrote. “Social stereotypes are so powerful that it’s possible to predict treatment disparities based on just these two dimensions (warmth and competence).”

Future applications

Hsu says the model’s predictive power could be useful in a wide range of applications, such as identifying patterns of discrimination across large populations or building an algorithm that can detect and rate racism or sexism across the internet—something these authors are deep at work on now.

“Our hope is that this scientific approach can provide a more rational, factual basis for discussions and policies on some of the most emotionally-fraught topics in today’s society,” Hsu said.

Meet the faculty: Haas welcomes three rising academic stars

Three new assistant professors have joined the Berkeley Haas faculty, with research interests that range from how financial news influences markets to the unintended consequences of mortgage market regulations to developing more accurate ways to predict consumer behavior.  

Anastassia Fedyk and Matteo Benetton will join the Finance Group, while Giovanni Compiani will be part of the Marketing Group.

“We’re thrilled to have these three rising stars join us this year,” said Prof. Candace Yano, associate dean for academic affairs and chair of the faculty.

The three new faculty members have already won awards for their research and have published in top journals. As is customary, they will spend the fall semester working on their research and plan to begin teaching in the spring semester.

Assistant Professor Anastassia Fedyk, Finance

Berkeley Haas Asst. Prof. Anastassia Fedyk
Asst. Prof. Anastassia Fedyk

For Anastassia Fedyk, coming to Haas is a homecoming of sorts. Though she was born in Ukraine and moved to the United States at age 10, she spent her high school years in Berkeley while her mother earned her PhD in accounting at Haas.

“I really loved living here back in high school, so it was always a dream to move back,” says Fedyk. “And the fact that there are so many people here working in behavioral economics makes it a perfect fit with my work.”

Knowing early on that she wanted to become a research economist, Fedyk majored in math at Princeton and did a two-year stint doing research at Goldman Sachs before heading to Harvard University to earn her PhD in business economics.

Her work spans finance and behavioral economics, and she has pursued three main research threads so far. The first focuses on financial news and how it translates into prices and trading volume in the markets. She’s looked at trading around news events and how the news is presented. “For example, if the news is printed on the front page that will prompt a much faster price response than if it’s less prominent,” she said. Or, when two old news stories are reprinted together, they are perceived as a new piece of information.

Her second line of research centers on present bias and procrastination. She’s found that although people fail to recognize these tendencies in themselves—and really do believe they’ll follow through on their plans for a new gym routine or diet—they easily recognize them in others.

Fedyk’s third line of inquiry looks at how employees’ skills relate to companies’ performance, working with a large dataset of resumes from a startup that collects public profiles. She has found that companies with an unusually high focus on sales-oriented skills tend to outperform, while companies that are heavy on administrative and bureaucratic personnel tend to do worse.

She will be teaching core finance in the evening & weekend MBA program.

Assistant Professor Matteo Benetton, Finance

Berkeley Haas Asst. Prof. Matteo Benetton
Asst. Prof. Matteo Benetton

Matteo Benetton also feels a kinship with Berkeley, although he had only spent three days here interviewing before moving 5,500 miles this month from the U.K, where he completed his PhD at the London School of Economics.

“The vast majority of Italian economists study at Bocconi, which is a private university, but I went to the University of Pisa’s Sant’Anna School of Advanced Studies, which is public,” said Benetton, who originally hails from Treviso near Venice. “I love the idea of a high-quality public university, and the research mindset that goes with that. That’s something I value a lot. Plus, after six years in London I’m looking forward to some sunshine.”

Benetton, whose work centers on the intersection between competition in the lending market, mortgage product design, and regulation, says he was excited to find so many faculty at Haas who share his interests, both in the Finance and Real Estate groups.

Benetton’s research has shown that some banking regulations put in place after the global financial crisis have had unintended consequences, giving more advantages to big banks over smaller banks. “The regulation can actually distort competition, and increase market concentration,” he said. In one paper, Benetton recommended that regulations apply evenly to big banks and smaller lenders, to prevent established banks from gaining additional advantages.

He has also researched how innovative mortgage product design can benefit consumers and prevent the buildup of risk in the housing market. He’s looked at shared-equity mortgages, in which a government or bank lender provides a homebuyer with part of the down payment but takes some of the equity. These profit-sharing contracts can reduce risk, but homebuyers who expect prices to go up tend to avoid the since they don’t want to share the gains.

While much of his work has been focused on Europe, with his new proximity to Silicon Valley Benetton says he’s interested in exploring how fintech is changing banking and payment systems, as well as branching out into household finance.

Benetton will be finishing up a research project this fall and will begin teaching finance in the undergraduate program in January.

Assistant Professor Giovanni Compiani, Marketing

Berkeley Haas Asst. Prof. Giovanni Compiani
Asst. Prof. Giovanni Compiani

Giovanni Compiani is also a native of Italy, who comes to Haas via Yale University, where he earned a PhD in economics. He’s looking forward to opportunities for working across disciplines at Berkeley, and also to the proximity to Silicon Valley and its trove of consumer data.

“Being at a business school and at Berkeley in particular, there’s a more question-oriented approach—rather than a focus on methods it’s about ‘What real-world question do we want to address?’”, Compiani said. “At Yale, I acquired a rich set of econometrics and structural methods tools which I now look forward to applying. There are so many relevant topics in the digital economy, and at Berkeley an economist can work with a computer scientist and say something very meaningful and interesting.”

Compiani grew up in Bologna before studying economics at Italy’s prestigious Bocconi University in Milan. He completed part of his master’s at Yale and returned for his doctorate.

He has focused much of his research so far on consumer behavior, building a model that gives more flexibility than established models allow for in predicting consumer reactions to price changes. “Let’s say a tax is levied on a supermarket. The market could lower the price of products to keep  the final price to consumers unchanged, or they could pass on the full increase to consumers. The best strategy depends on knowing how consumers react,” he said. “This model relaxes certain strict assumptions typically made for ease of programming, and thus delivers more robust results.”

Compiani is also investigating patterns of how consumers search across different product characteristics, such as price. “Understanding these patterns has implications both for policy and for firm strategy,” he said.

With the possibility of increased access to data sources from Silicon Valley companies, Compiani is interested in exploring new lines of research on how concerns about data privacy influence consumer behavior.

He will begin teaching marketing analytics in the undergraduate program in the spring.

How the “I approve” tagline boosts nasty political ads

I Approve This MessageWith primary season just around the corner, voters will soon start hearing a familiar refrain: “I’m Candidate X, and I approve this message.” Since 2002, federal law has required the tagline on all ads paid for by candidates for federal office.

The aim was to discourage negative campaigning. But newly published Berkeley Haas research shows that it’s actually made attack ads more powerful.

“People tend to be suspicious of political rhetoric—especially negative political rhetoric,” says Assoc. Prof. Clayton Critcher of the Haas Marketing Group. “But we found that the mandatory tagline has an unintended effect: It makes ads attacking an opponent’s policy positions seem more credible.”

Ironic effect

Assoc. Prof. Clayton Critcher

In a series of experiments, Critcher and co-researcher Minah Jung of New York University’s Stern School of Business found that adding the tagline to policy-based attack ads not only makes them more believable, but gives people a more positive view of the candidate who gives the tagline endorsement. Their paper, “How Encouraging Niceness Can Incentivize Nastiness: An Unintended Consequence of Advertising Reform,” was published this month in the Journal of Marketing Research.

“Although we think political consultants are not currently aware of this ironic effect, we clearly know regulators did not mean to help to legitimize negative and often misleading ads,” Critcher said.

As a psychologist who studies judgment and decision making, Critcher had long been curious about whether the ubiquitous taglines had any effect on voters. The “I approve this message” tagline originated with the “Stand by Your Ad” (SBYA) provision of the Bipartisan Campaign Reform Act of 2002, better known as McCain-Feingold.

“John McCain had this great speech from the Senate floor in which he said that candidates wouldn’t approve the trash their campaigns were putting out if they had to put their face on screen and stand behind it,” Critcher said. “We now know that despite the law, there has been no slowdown, and in fact an escalation, in negative political advertising.”

The percentage of negative ads swelled from 29 percent in 2000 to 64 percent in 2012, according to research cited in the paper. A CNN analysis found that in the week before the 2016 presidential election, a full 92 percent of ads were negative. While the rise of SuperPACs explains a lot of the growth in negativity, the candidates own messaging has grown more negative as well.

How do voters respond to “I approve”?

But rather than look at whether the mandatory tagline has encouraged politicians to change their messages, Critcher and Jung wanted to know whether it changes how voters respond to those messages—and if so, why.

Past research has found that negative ads can be more effective than positive ones, but campaigners who go negative face the added hurdle of overcoming voter skepticism. This hurdle is higher with character-based hit pieces, which voters may not see as relevant. Does someone’s affair or tax evasion penalty mean they will be a poor leader? In contrast, attacks on an opponent’s policy positions are clearly relevant to the job, but what undermines them are suspicions of their truthfulness. The researchers suspected the tagline might influence that.

The researchers experimented with real and fictional ads in video, audio, and print formats, conducting four experiments on about 2,000 people recruited from universities and Amazon’s Mechanical Turk. They used ads from Congressional races from 2006 to 2010, as well as fictional ads they created by editing together snippets from real advertisements.

They began by asking about 400 people to watch eight TV ads aired by Democratic and Republican candidates in recent Congressional races. In this set were positive and negative ads from each party focused on candidates’ character and policy record. Crucially, the researchers edited out the tagline on half of the ads each viewer saw.

What they found is that although the tagline did not consistently change people’s reaction to positive ads or ad hominem attacks, the tagline did give a clear boost to the policy-based attack ads. In addition, people had a more favorable view of candidates running negative ads when the tagline was included. The researchers found the same pattern in a second experiment using ads they wrote themselves, which allowed them to more precisely control for the ads’ content.

The effect was substantial: Across all their experiments, the researchers found that the tagline had an even stronger effect than did partisanship. “It may seem intuitive that Democrats and Republicans believe that Democrats and Republicans, respectively, run truer ads. It is remarkable that mandatory
endorsements can have effects that are at least as large,” they wrote in their paper.

Critcher cautioned, however, that the effect may sound exaggerated, because participants were not generally familiar with the candidates in the ads, and most ads, designed for broad appeal, don’t state candidates’ party affiliation. Still, given the closeness by which many races are decided, campaigns invest heavily in turnout operations that have much smaller effects, he noted.

Why the boost?

The researchers were also surprised when they began parsing out why the tagline works. Do voters not realize the tagline is simply required of all ads? Does it confuse them into thinking regulators have vetted the ads’ content?

They ran two more experiments with large sample sizes (639 people and 565 people) and found that even when participants were told the tagline was required by law, and that no regulators had vetted the content’s veracity, they still said the ads that included a tagline were more believable. Participants also were largely unaware of the tagline’s effect: Even those who said that it didn’t influence their evaluation of the ad were indeed influenced by it.

The researchers were able to invent brand new taglines (which they had voice actors deliver), attach them to ads, and tell participants that the law required candidates to deliver the tagline. They observed the same boost to ad credibility.

“We initially thought the boost came from what sounded like an implicit promise of the ads’ truthfulness—with the candidate putting themselves and their credibility on the line by affirming that they ‘approved’ the message,” Critcher said. “That was a factor, but the bigger effect was the fact that the ad had been touched by regulation. That gave a legitimating halo to the message as a whole.”

Critcher and Jung close their paper by considering whether the tagline should be ditched altogether. Although they didn’t find a perfect solution, they did find that a more neutral tagline—one that can’t be confused for an implicit promise of message truth value (e.g., “My name is X, and I am running for Y”) significantly decreased the unintended consequences.

“We hope that by bringing this to light, policymakers might realize this provision is not serving the public good and find a better way,” he said.

 

More research by Clayton Critcher:

Judging moral character: A matter of principle, not good deeds

 

 

 

Truth or consequences? The negative results of concealing who you really are on the job.

 

 

Prof. Aaker’s new book shows the power of story

In Creating Signature Stories, emeritus marketing professor David Aaker explains why storytelling is essential for brand marketing.

Back in 1984, Zhang Ruimin was promoted to lead a struggling Chinese refrigerator company that would later become Haier. When a customer brought in a defective fridge, he went through an inventory of 400 units to find a replacement; unfortunately, he found that 20 percent of them were also faulty. Zhang promptly ordered all of the defective units to be brought to the factory floor and gave the employees sledgehammers, inviting them to destroy them.

Prof. Emeritus David Aaker's new book explores the power of Signature Stories.
Prof. Emeritus David Aaker

“That dramatic story led to a change in the firm’s quality culture that is a foundation of Haier today,” says David Aaker, emeritus professor of marketing strategy. “Asserting that the firm was going to have a quality-first culture would not be noticed or believed. But the story penetrates.”

Aaker uses that example in his new book, Creating Signature Stories: Strategic Messaging that Energizes, Persuades and Inspires, to show how effective stories can be in creating an organizational culture or managing a brand’s image. “It is so difficult today to cut through the clutter and engage a disinterested and skeptical audience,” Aaker says. “Stories are enormously powerful, and can be much more impactful than facts.”

“Father of modern branding”

Author of 100 articles and 15 books who has been called the “father of modern branding,” Aaker is currently vice chairman of the brand consultancy Prophet. He was inspired to write the book by conversations with his daughter, Jennifer Aaker, a behavioral psychologist at Stanford Graduate School of Business. Stories work, studies have found, because they engage the emotions, allow listeners to deduce the logic for themselves, and are much more difficult to argue against than facts. “There are hundreds of studies that demonstrate the power stories have,” says Aaker.

For businesses, stories can be helpful in engaging both employees and customers. “There is a whole cadre of young employees who will not work for companies they are not proud of,” says Aaker. “If you want to compete for the best people, you need to have a higher purpose, and the way to communicate that is with a story.” At the same time, a small but meaningful subset of customers are looking for authentic engagement with a brand. “Even if this percentage of the market is small, it can still be the difference between making money and losing money.”

Creating a signature story

Creating Signature Stories by David Aaker book coverFor companies looking to find or create a “signature story,” Aaker first recommends they hone the strategic message they are trying to communicate. Then, he suggests that they focus on a protagonist who can exemplify that messages—whether it’s a customer, an employee, a leader, or a product. L.L. Bean company founder Leon L. Bean, for example, had a stitching problem with the first 100 boots he sold that made them less than watertight. He refunded every customer’s money, though it nearly put him out of business. Nordstrom often repeats the story of an employee in Alaska, who—when a customer brought in a pair of tires to return—gave him a full refund even though the store didn’t sell tires.

If a company doesn’t have a ready-made story of their own, they can borrow a story from elsewhere. In the 1990s, incoming Columbia CEO Peter Guber faced a dysfunctional workplace of competing departments. He united them with the story of Lawrence of Arabia, who famously united warring Arab tribes to capture the strategic city of Aqaba. He presented executives with pictures of actor Peter O’Toole playing Lawrence in the eponymous Columbia film, and made “Aqaba” a rallying cry in the company.

Authenticity is key

While there is “no checklist of elements a signature story has to have,” Aaker says it helps if it is intriguing, authentic, and engaging. Generating and testing such stories can take serious investment by companies, some of which have hired editors, videographers, and social media experts, and even chief story officers to make up a storytelling team. After creating a signature story, it can become an art in itself to disseminate it and keep it alive over time. To this day, Haier has a sledgehammer on display at its corporate offices in China.

One of the most effective signature stories that Aaker describes in his book is Lifebuoy soap, which has worked to educate children in developing countries on the importance of handwashing to prevent disease. The company has created a series of videos of parents and children in India as part of its “Help a Child Reach 5” campaign—in one of them, for example, a mother is dancing joyously by a tree. It turns out that the custom in the village is to mark a child’s birthday on the tree, and she was celebrating the fact that her child turned five, in a place where many don’t reach that milestone. “Compare that with any effort to explain why Lifebuoy bar soap was better than others, or even to factually describe the hand-washing program,” Aaker says.

Making the story effective required a real commitment on the part of Lifebuoy, which has set a goal of changing handwashing for 1 billion people by 2020. But that commitment has paid off: to date, the videos have had more than 44 million views. By learning how to tell those kind of authentic and emotionally engaging signature stories, companies can assure that their employees and companies associate them with a higher purpose, creating loyalty to the brand for years to come.

David Aaker will talk more about Signature Stories at his Dean’s Speaker Series at 12:30 pm Tuesday, Feb. 13, in Chou Hall’s Spieker Forum. The paperback goes on sale March 8 (Kindle version now available). 

New California Management Review explores neuromarketing & the ed tech revolution

Like DNA tests gathered by investigators to solve a crime, human brain scans can provide key evidence for marketers trying to better understand consumer behavior.

At the same time, just like DNA tests, there are clear limits to what a peek into the brain can tell marketers, says Ming Hsu, an associate professor in the Berkeley-Haas Marketing Group and the Helen Wills Neuroscience Institute at UC Berkeley.

In “Neuromarketing: Inside the mind of the consumer,” an article published in the new California Management Review, Hsu aims to set realistic goals and expectations about what the application of neuroscience to marketing can and can’t do. Hsu’s case is among seven new articles included in the current issue, including an article by Berkeley-Haas Dean Rich Lyons on “Strategies for Higher Education in the Digital Age.”

CMR cover summer 2017

In his article, Lyons explores how new technology, including artificial intelligence, machine learning, and mobile, are changing how education is delivered and structured. The article outlines eight examples of ways in which technology will be used to rethink everything from how students learn to how to train faculty to use their classroom time more efficiently.

“Ed tech is already changing the education product,” Lyons writes. “Therein lies its disruptive potential.”

One example is MATLAB, a coding course at UC Berkeley that used to be taught solely in a traditional classroom, but is now also taught online. The online format gives students access to a quick feedback loop that relies on a grading engine: students submit code and get instant feedback and help with problem areas. Students so loved the iterative part of the course that the engine is now used to teach the traditional campus versions of the same course. “This is a different product, not the same product distributed through a new channel,” Lyons writes.

Meantime, Hsu’s case discusses how neuroscience promises products that directly measure customers’ underlying thoughts, feelings, and intentions by testing a multitude of responses coming from the brain. The key differentiator of brain-based techniques is that they separate what people say they think from what they actually think, Hsu says.

Common tools used include EEG, or electroencephalogram, a test that detects electrical activity using small, flat electrodes attached to the scalp; PET, or positron emission tomography imaging; and functional MRI (magnetic resonance imaging), which measures brain activity by detecting changes associated with blood flow. Indeed, these techniques are more expensive than traditional methods such as focus groups, and that expense tends to inflate expectations.

“Managers sometimes have a vision that brain recordings are effortlessly translated into customer insights and delivered with a bow,” Hsu said. “But that’s like asking DNA evidence to completely replace tools likes suspects’ interview, crime scene observation, or general critical thinking. The inability to reconstruct the suspects’ profiles from DNA evidence alone has not made the impact of genetic testing on forensics any less profound.”

Hsu suggests using tools to complement traditional approaches, not replace them; taking insights from focus groups or surveys and testing them using brain-based methods. This is particularly important when it comes to decisions in marketing and brand strategy, which often address questions regarding how customers think, feel, and respond to a company’s offerings.

Getting the wrong answers can mean costly mistakes that take years, even decades, to become apparent, let alone correct, Hsu said.  “A growing problem today is the inundation of data from customer focus groups, surveys, and social media, some of which can be mutually inconsistent and contradictory,” he said. “Brain based methods allow marketers to validate, prioritize, and select among putative insights generated from this mountain of data.”

About California Management Review: Published quarterly, California Management Review is a top-ranked management journal that serves as bridge of communication between those who study management and those who practice it.

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