Episode 19: 7 Economics Tricks To Help Keep Resolutions

and spots. Trading involves risk and may not be appropriate for all investors. Hi, and welcome back to Bloomberg Benchmark, a podcast about the global economy. It is Thursday, January seven, and I'm Tory Stillwell and economics reporter with Bloomberg News in d C. And I am joined by my co host Ao Today, our editor for Benchmark in Sanford, Cisco. Happy, Happy, say pretty solid. I was in Atlanta. I got all fancy for a wedding. Did it up real big? What

about you? I went skiing over Christmas, which was really fun. We've been getting almost record snow I think in Tahoe. So yeah, it was amazing. Um when we drove up there, it was right after a big storm, so it was some of the best skiing I've done in a long time. Well with it being New Year's uh, I personally love resolutions. Yes, I think that they're so much fun, even though I don't really keep them all the time. They're nice, a nice way to like center yourself into the new year.

But some people are like really cynical about them and think they're a total waste of time. I'm usually in that camp. Um, what's your what's your new New Year's resolution this year? So? Uh, I like in years past, I would always the first day just like make a list of ten resolutions. But last year I took a different tack that I'm also replicating again this year. And that's where I like give up a bad habit or something that I want to tweak a little bit every

single month. So this month is uh, sober January. I will be giving up alcohol. It has been pretty miserable so far, the one week that we've enjoyed so far of January. Yeah, exactly. At least it's not February, which is giving up Chipotle, which is a pretty sad month. And also like the shortest month, so give myself a little bit of a break there. What about you, what are you doing for? What are your resolutions? Well, um, this makes me sound like a complete lame San Francisco hippie,

but it is to meditate seven times a week. Um. I used to meditate a lot more, but I've recently kind of fallen out of the habit, so I want to redevelop this habit again. It's like one of those things, you know, like running or anything else that's good for you. I know it's good for me in the long run. Um, and I'm really glad I did it once I did it, but it's kind of hard for me to get myself

to do it beforehand. Yeah. Well, Twitter actually put out a list this week of the most tweeted resolutions for and let's see if any of ours made the list. They are to get in shape is number one. Number to eat healthier, three, be a better person, four, be nicer, which seems kind of similar to number three. Number five, learned something new, six, drink more water, seven be happy, Hey, quit smoking, and I drink less alcohol. And to save money. Yeah, so a little bit of overlap there, But as we

both know and have witnessed in our own lives. Resolutions are pretty hard to keep, and when we fail, it can be sometimes be expensive. Let's take that top resolution, for example, to get in shape. So if we walk through it. You want to get in shape, so you get a gym membership, and that's roughly fifty dollars a month more in some cities less than others. Uh. And then you decide you also need to get a fresh pair of kicks, so you spend like a hundred dollars

on a new pair of running shoes. You get new workout clothes another hundred dollars. Maybe you want a fitbit like you have, so that's another hundred dollars. Or do you have an Apple Watch? Now have you upgraded? I have a fit Bit and um, what's called the Basis watch that tracks not just your continuous heart rate, but also how much you're sweating and your surface body temperature sweating. The sweat calculation is an interesting one. Yeah, it would

go up when I'm in dance presence sweat sweat, sweet sweat. Anyways, Okay, so we we've we've we've spent all of our stuff on getting in shape. But then say, we do all that, and after a week or two, we get bored with working out, We hate going to the the gym, a treadmill is awful, and our commitment to the resolution fades and we don't do it for the rest of the year. That's like a thousand dollars over the course of a

year that we've wasted. Once you add all those things together, and when you multiply that by all the thousands, probably millions of people that this happens to, you've got quite a big cost of society there. Yeah. Well, you know, lucky for us, there's now a growing body of research in economics of all things, that helps you stick to

your resolutions. That's right, and beyond keeping us all from needlessly blowing lots of money, Let's walk through what economics has to do with keeping our resolutions and making you meditate every day hockey. Well, you know, economics traditionally thought about people as these rational, disciplined asians constantly per suing their self interest, kind of like robots, and in that universe,

everyone would deliver on their New year's resolutions. Right, But we all know that these resolutions are incredibly hard to keep, even if we want to stick to them, even if we know in our heads that exercising more, or meditating more, or calling our parents more is good for us in the long run. So there's this rising part of economics called behavioral economics that recognizes us for the irrational and

often undisciplined humans that we are. And they are now all these researchers who study how our behavior deviates from what would be the rational thing to do, and by understanding all those quirks, we can come up with ways to save us from ourselves. Exactly. For today's show, we are going to distill the best research into seven different tricks, and we have a great expert to guide us along

the way. Katie Milkman is a professor from the University of Pennsylvania is Wharton Business School, and she is on the frontier of this research on self control failures. Hello, Katie, Hi, thank you so much for joining us. It's my pleasure to be here. Thanks for having me, Katy. I. I always thought New Year's resolutions were kind of this arbitrary thing, but apparently there's actual evidence that the start of the year is a great time to set these goals. Um,

can you tell us about your research into fresh starts. Absolutely. I've spent some time with a couple of wonderful collaborators, hanschen Die at Washington University in St. Louis and Jason Reese's here with me at Wharton, thinking about fresh starts and studying them. And what we found is that there are these moments in our lives that feel like new beginnings, and New Year's is one of them, but there are

lots of others. So the start of a new week, or the beginning of a new month, or following a birthday or holiday, a new baby that's right, having a new baby, um, getting married or getting engaged, starting a new jobs, starting at a new school would be other moments that feel like the beginning of new cycles. And at all of those times, we feel like we have a clean slate and it's a great opportunity for us to make changes in our lives. We have extra motivation.

And we've seen this play out in lots of different settings. But a couple of my favorites are Google searches for the term diet spike at these fresh chart moments, and you can you can imagine why. In some cases it might be that we behave badly before these fresh start moments in some cases, but we see it also with gym attendance and with goal setting. People set more goals and that's in health relevant context and health irrelevant ones

like goals around finance and education at these fresh dart moments. Interesting. Interesting is it that we set these goals at these fresh start moments um more frequently or is it that they're actually effective when we set these goals at these particular times. It's a fantastic question. So our research is focused on showing that people are more motivated, and so we set the goals, but we also go to the gym and so um, so people are executing more and

they're also planning more. So it seems to be a combination. And of course, if you don't have a goal, and if you don't start, you can't be effective. You gotta start somewhere exactly. So that was our first strategy, to use these memorable occasions as time to set new goals. UM. Our second strategy here is what you have called temptation bundling. UM. Can you talk to our listeners about what this is?

Absolutely this is one of my favorite tricks and I devised it to trick myself actually, so I realized I had two problems. Um, at the end of a long day, I found that I really wasn't motivated enough to get myself to the gym. It just sounded like a horrible way to spend time, even though I knew I should do it. And at the end of a long day, I also found myself wanting to waste time binge watching junk TV shows and reading what was your worst guilty pleasure t V show? Oh? No, well, now I have

to insult someone, some producer. Um, let's see when I struggle with. Now is scandal? I had a lot of trouble with loss. Oh I love these shows. Gossip Girls another one I've struggled with. But I should probably be writing my next paper, working on on grading students or helping doctoral students develop, rather than spending time watching these TV shows at a rapid pace. So I have these two problems, and I realized that perhaps I could actually

solve them simultaneously. What if I, for instance, only let myself watch the next episode of my favorite low brow TV show while I was exercising at the gym, I'd stop wasting time at home watching those shows, and I'd start craving trips to the gym to find out what happened next. So I've done some research on this concept. I call it temptation bundling. I've done it actually with audio novels which I personally use. My favorite one ever

is The Hunger Games, which bundles beautifully with exercise. That's great trilogy, lots of um cliffhangers which keep you coming back for more craving the next trip to the gym. And we found that not only is it an effective means of increasing gym attendants to give people access to tempting audio novels that they can only listen to when working out, as opposed to giving them other equally valuable gifts,

but people actually value it. So one amazing thing that we found is that at the end of our study, people are actually willing to pay us for temptation bundling devices. That's what we call them. So people who owned iPods that were loaded with tempting audio novels would actually pay us to take away those iPods their own possessions unlock them at the gym so they could only access the

tempting content while they were exercising. Wow, that's amazing and that's not what traditional economics would predict, right, for people to pay someone else to restrict their future options, that's right. Traditional economic theory would say people shouldn't pay for that kind of restriction, but we found about sixty percent of people would pay for this type of restriction. Let's uh, let's go ahead and talked about our third strategy, which is is related here is putting money on the line.

And you mentioned commitment devices. Act. I feel like you told me about your experience with something along these lines not too long ago, when you were here visiting me in d C. Yeah, that's right. So about two years ago, I was using this app that used a GPS tracker to let you check into a gym or track your

runs outside. And so you you set this goal of exercising let's say three times a week, and every week you made your goal, you earned this small amount of money, and every week you didn't make your goal, they automatically deducted ten dollars from your bank account. So the fear of losing this money really kept me going for a while. It's a fantastic example of a commitment device, and there's a lot of research showing that these are highly effective.

So any any situation where you're able to put money on the line that you'll forfeit if you fail to achieve your goal is called the commitment device. And this is another situation where traditional economics would say, who would ever do that? Why would you ever put money on

the line, Why would you want to punish yourself? But self flagellation turns out to be really motivating, and so there's some studies that have shown it is effective for helping people lose weight if they can put money on the line that they'll forfeit if they fail to lose weight. In fact, one of my co authors and colleagues here at Wharton, Kevin Volpe, has led one particularly impactful study on that. There's also work showing it helps with smoking cessation.

So if you give people the opportunity to create an account where they can put money that they'll forfeit if they haven't successfully quit smoking in six months, that significantly increases smoking cessation rates. So those are a couple of

important settings where it's been studied. And there's a great website that I like to promote because I think it's so fun and so effective called um stick dot com S t I c K K two ks dot com and you can go there and actually set up commitment contract acts around any kind of goal that you hope to achieve. You can put money on the line and choose a referee who will report back to the site about whether or not you've actually stuck to your guns and achieved the goal, and you can do fun things

with the money. For instance, they have anti charities, so they have charities that are on either side of contentious issues, like, for instance, um the National Rifle Association versus a gun control charitable organization. You can pick your poison which of those would make you angrier to donate to, and then so you'd allocate your money to whichever of those painful

and punishing. Well, let's take a short break for now for a word from our sponsor, and when we get back we'll go through smart strategies for how to keep your New Year's resolutions. What do traders want to limit risk? Access every opportunity and trade on a level playing field. Nate x binary options let you set your maximum profit and loss before the trade, so your risk is always limited.

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appropriate for all investors. So, Katie, our fourth strategy is actually planned out the specifics of how you're going to implement your plan. Can you tell us about this? Yeah? Absolutely. There's some really fantastic research out there on the importance of having concrete if then plans to help you follow throwing your goals. And really the leader in this work as as someone named Peter Goldwitzer at n y U. He's done dozens of studies showing how important it is

to have those if then plans. UM. But I've done some follow up work my self on this, and so I'll tell you about one of my own studies because it's near and dear to me and also close to top of mind UM right now. And that is a study we did where We show that simply encouraging people to write down the date and time when they intended to engage in a healthy behavior. We looked at this in the context of getting a flu shot was incredibly

effective at increasing follow through rates. And the idea here is that when you have that kind of an if then plan, you've thought through exactly the date and time when you intend to follow through. First, you've made a commitment to yourself, and and that is something that it's uncomfortable to break. Lots of research has shown it's uncomfortable. Not to follow through when we make commitments makes us feel like flip floppers. Um. Second, you've thought more deeply

about it, so it's embedded more deeply in memory. And you you've also associated a queue with follow through. So if you've chosen a date and time, for instance, when you'll get a flu shot, now, if you look at your calendar and look at your watch and realize it's that date and time, you're more likely to remember this is what I said, I'd i'd follow through and get my flu shot, for instance. It can also help us

anticipate obstacles along the way. So, for instance, if I realized I want to get a flu shot on Friday at noon, I might think, well, I better line up childcare and come up with a transportation strategy and so those things won't trip me up when Friday comes around and I want to get that flu shot. I feel like I'm really seeing the benefits of this one specifically. So I'm running the Paris Marathon in April, and this

is my second marathon. I want to do better than the first one, and I had a training plan for the first one, but I didn't adhere to it very well and only ended up running like thirteen miles before the marathon. So that was kind of a tragedy. But did you make it? I did somehow. That's impressive. But this time I obviously want to do a lot better. So um, I am using the Nike Running app and it has planned out every single day what I should

be doing up until the day of the marathon. And it's been really nice because I get like a check mark every single time it tracks a run. And I know, like when I was thinking about what I was going to do when I went home for Christmas and New Years, for example, I knew it's going to be much harder because I was going to be on a loser schedule, but it was great to have those specific distances on the specific days that I could just plan my whole

day around, even a week or two in advance. Yeah, that's fantastic, And that sounds like that app is not only taking advantages of advantage of the benefits of planning, but also how powerful it can be to set goals and have concrete, achievable but challenging goals that you set up for yourself, and and having plans about how to achieve those as them of critical importance as well. Well. I think our fifth strategy here is related to what not to do, which is to set up a backup plan.

Why can't we have a plan? B Katie. That's a great question, and I wouldn't always say you shouldn't. Sometimes you actually do want to plan. It's important to have those in some contexts. But I've done some research with a wonderful collaborator named g Haitian at the University of Wisconsin who thought a lot about this when she was uh finishing her doctoral program and she was thinking about what she would do if she didn't get an academic job and realized that if she made a backup plan

for herself. For instance, if she told herself, you know it's gonna be okay, I'll just go work in industry and I'll start looking for jobs at companies that might be exciting, that might actually diminish her motivation to really tackle all the things she needed to do to succeed on the academic job market. So having a backup plan or a fallback strategy in case your plan A fails or go south. While it may reduce uncertainty and make you feel better, it also may reduce your motivation to

achieve your primary goals. And we've shown that in a bunch of our research together. That's right, So just thinking about failure increases your chances of failure. It's not just thinking about failure, it's just thinking about an alternative strategy you would deploy in case of failure and doing that, giving yourself that backup plan, giving yourself that cushion makes you less motivated to tackle your primary goal. Amazing um.

Our sixth strategy here is to post your nears resolution on Twitter like we talked about earlier Tory, or on Facebook. Katie tell us why this is effective, Absolutely well, it's it's simply a shaming strategy, right, So that turns out making your goals public makes you feel a lot worse about not following through. And there's some great work by um Holland Beck and collaborators actually from the showing how important it is to make your goals public and how

that motivates us to work harder. So if you put it on Twitter, if you put it on Facebook, if you tell your boss, someone who you really care about thinking highly of you, and then know that they're going to check up on you, you're much more likely to follow through. That really increases motivation. And Katie, if all these tricks still don't keep you on track and we end up veering off, let's say around maybe mid March

is all hope lost? All hope is not lost. This work we've done on the fresh start effects, as you can find a new fresh start opportunity and start again. And in fact, you might even think about reminding yourself or your loved ones of dates that I feel like fresh arts that they might have forgotten about. So we've shown that reminding people, for instance, that March is the first day of spring inspires renewed motivation and and encourages people to start tackling their roles anew on that date.

So is that our seventh strategy. Seventh strategy is to go back to the first strategy when in doubt, start again, right, start all over. Wonder I love it well, I'm setting my calendar reminders now, Kitty, do you have any last words of advice for listeners who are about to go and implement all these tricks. One one piece of advice is not to be disheartened for sure if you if

you fail. I think that almost all of us el to achieve our goals, whether they're resolutions, made it New Year's or some other time of year when we set ambitious schools. But that's just part of the journey. And you have to pick yourself up and try again, recognize that there are new opportunities at every corner, and and just don't let yourself, don't let yourself get down, keep trying and keep trying these strategies and you'll get there. And Katie, we would be totally remiss if we didn't

ask you what your resolutions were for the year. I knew that was coming. And my husband, if he's listening, will be very happy to hear that. Um My, my big resolution is to stop checking email after nine pm and just relax. Great one. Oh I like that one a lot. We'll see how I do well. Thank you so much for joining us, Kat, This has been great and put all my strategies to work. A sap. Oh my pleasure. Thanks again for having me. It's been It's been a lot of fun and thanks to you all

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