Preston Smith's Corner

Book Reviews: How We Decide & Nudge: Improving Decisions about Health, Wealth, and Happiness

How We Decide

Jonah Lehrer. Boston: Houghton Mifflin, 2009. 302 + xvii pages. US$25.00 (hardback).

Nudge: Improving Decisions about Health, Wealth, and Happiness

Richard H. Thaler and Cass R. Sunstein. New York: Penguin, 2009. 312 + viii pages. US$16.00 (paperback).

These books address decision-making. If you dissect the product development process down to its core, you will find that the core is decisions, thousands of them, made daily by all members of the development team: shall I route these wires to the left or to the right of this capacitor, shall I make this bracket from plastic or aluminum, shall we buy this troublesome component from a local supplier we trust or from an offshore one for less? These countless small decisions, cumulatively, establish the character of the product and determine development process quality. Thus, decision-making is central to effective product development.

Most literature on decision-making, clear back to Plato, treats the subject as a rational, considered process. However, recent research shows that intuitive decisions, made subconsciously, play a large role. Both these books address intuitive decisions, which Jonah Lehrer calls emotional decisions and Richard Thaler and Cass Sunstein call the automatic system (as opposed to the reflective system). Frequently, these intuitive decisions trump rational ones, as Gigerenzer (2007) explains: “Often what looks like a reasoning error from a purely logical perspective turns out to be a highly intelligent social judgment in the real world.” (p. 103)

An example of Lehrer’s suggests the importance of intuitive decisions. In professional baseball, the pitcher throws a ball, which is in the air for only one-third of a second before the batter must decide whether to swing at it or not. This is far too little time for a considered decision; it must be intuitive. Baseball players train for years to gain such intuition.

Delving into some fascinating recent research on how the brain works, Lehrer describes the parts of the brain where we make intuitive and considered decisions and how these brain areas interact to form a decision. Consequently, he addresses the types of decisions best made intuitively versus the ones best made rationally, some severe limitations of the brain for each of these modes, and how we can combine the two effectively. In contrast, Thaler and Sunstein concentrate on intuitive decisions and provide results from countless psychological experiments—in contrast to Lehrer’s neurological studies—to illustrate how a person can be persuaded subconsciously to make a certain decision.

Thus, the title Nudge arises because often people can be “nudged” subconsciously into a certain intuitive decision. For instance, in a store, people primarily notice items shelved at eye level. So the store manager—what these authors call the choice architect—can nudge buyers toward certain choices according to where they are placed. This book is about such nudging.

Accordingly, these books approach intuitive decisions quite differently. For the product developer, Lehrer will be useful for improving project decision making. Nudge is more restricted in its product-development applications. It will be useful in marketing communications for nudging customers toward the desired product without over-nudging—a topic that Nudge handles excellently. It also will be of some interest to designers of human interfaces, as it provides a rationale for Norman’s (1990) work. For instance, Norman describes the design of a common stovetop, where four burners are arranged in a rectangular pattern but their controls lie in a line. With this layout, it is unclear which control operates the front burner. By using the simple “nudge” of shifting the burners a little or the controls a little, this confusion can be eliminated.

How We Decide is engagingly written, well researched, and nicely organized. Chapter 1 features intuitive decisions by using exciting examples from professional sports and soap opera production. An example from neurology illustrates that without the intuitive parts of the brain, a person cannot even reach decisions. Chapter 2 digs into the brain’s workings to show how dopamine acts as a neurotransmitter for building intuition. Brain neurons learn intuition from positive feedback, for example, from training, but they learn even more from negative feedback (mistakes). Athletes, performers, and chess players become expert by retrospectively analyzing their mistakes, which builds intuition. In one riveting military example where hundreds of lives were at stake, an intuitive decision reached in less than a minute later took over two years to verify using rational methods.

Conversely, Chapter 3 covers known, often serious flaws in the intuitive brain. “The human brain is like a computer operating system that was rushed to market.” (p. 24) For instance, dopamine neurons are fooled easily by randomness, which causes us to put undue credence in things like “winning streaks.” Also, we hate losing more than we love winning, and we value the present more than the future (which is why many of us have trouble with credit cards). Chapter 4 goes further: in decisions where we have little experience to guide us, intuition can mislead us and emotions can stymie us. Then the rational brain—the prefrontal cortex—needs to take over to either address a situation logically or, in its executive role, rein in the emotions.

Chapter 5 addresses known weaknesses of the prefrontal cortex: “the flaws and foibles of the rational brain—the fact that it’s an imperfect piece of machinery—are constantly affecting our behavior, leading us to make decisions that seem, in retrospect, quite silly.” (p. 152) Professional musicians and athletes, who have honed their intuitive skills, regularly “choke” if they actually start thinking about what they are doing. And the prefrontal cortex has quite limited processing power, so it can easily overload. “It’s amazing how perfectly intelligent people will make foolish decisions if you give them lots of irrelevant stuff to consider.” (p. 165)

Chapter 7, citing recent brain studies, shows that, although decisions often seem quite clear and effortless, in reality, different parts of the brain are in a heated struggle. It is up to the rational brain, in its executive role, to referee this conflict. As Alfred P. Sloan, the famous chairman of General Motors, said during a board meeting, “Gentlemen, I take it we are in complete agreement on the decision here . . . Then I propose we postpone further discussion of this matter until our next board meeting to give ourselves time to develop some disagreement and perhaps gain some understanding of what the decision is all about.” (p. 218)

Finally, Chapter 8 beautifully combines intuitive and rational decision-making using an example of a professional poker player in a tournament worth millions of dollars. He starts off deciding rationally by calculating the odds at each step (using his exceptional talent for numbers) and folding strictly when they are not strongly in his favor, while others are following their emotions. Then, as these competitors drop out, bluffing dominates the more sophisticated later stages, so he shifts to an intuitive approach by sensing facial expressions, nervous gestures, body language, and skin tone, stemming from his careful building of intuition by detailed analysis of many past games. A surprising conclusion is that simple decisions are best handled by the rational mind, while complex ones are best trusted to intuition.

Nudge considers many examples such as the store shelf-location one mentioned previously. In such cases, the choice architect has many options. Assuming the shelf items are food, they could be arranged for maximum profit, to encourage good health (carrots at eye level and candy at floor level, for example), or randomly, among many other alternatives. The good-health layout is an example of what the authors call libertarian paternalism, a concept they develop in great depth. This uncommon word pair suggests that the choice architect tries to make the easiest choice the one that is the best for the decider (paternalism) while providing others (libertarian) if the decider is so inclined.

Although Lehrer provides great insight into decision-making, he provides little specific advice on making decisions. Another weakness for product developers is that many development decisions are made as a team, but Lehrer treats decisions only at the individual level.

Nudge has two shortcomings for JPIM readers. One is that it emphasizes personal and public policy decisions, so that only the first third of the book, which covers the principles involved, is relevant to the business decisions of product developers. The other weakness is that it focuses so narrowly on the United States that readers from abroad may have difficulty understanding it. For example, the authors state, “Most Americans have an Automatic System reaction to a temperature given in Fahrenheit but have to use their Reflective System to process a temperature given in Celsius” (p. 20), not appreciating that for residents of 34 of 35 countries in North and South America, this is exactly backwards. Nevertheless, Nudge can help product developers to nudge their customers in the developers’ desired direction.

Gigerenzer, Gerd (2007). Gut Feelings. New York: Penguin.

Norman, Donald (1990). The Design of Everyday Things. Sydney: Concurrency.

(c) Copyright 2013 Preston G. Smith. All Rights Reserved.

This review was published in Journal of Product Innovation ManagementJournal of Product Innovation Management, March 2010, pp. 292-294

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