Capture Higher Ed data scientists Thom Golden and Brad Weiner began their Weightlist Podcast just over a year ago — the first two episodes recorded in an Airbnb with a “loud HVAC unit that would come on like it was a jet engine swooping in,” Thom recalled.
“What people don’t know is that, based on the profitability of this entire enterprise, we now have a $3 million studio that we record in,” joked Brad at the outset of Episode 18 of Weightlist Podcast, which features him and Thom discussing — often with excellent guests from higher education — data, enrollment management, machine learning and, of course, good beer.
“We’re so unbelievably appreciative of you hanging with us,” Thom says. “And all the people who follow us on Twitter who are putting out such great questions and really building up a community around this. We’re super humbled by it.”
After cracking open their episode beers on the Weightlist Podcast — Thom chose an Osiris Pale Ale from Sun King Brewing Company in Indianapolis; Brad broke tradition and went with a home brew he and his wife made with hops grown in their garden — the two embarked on a conversation about behavioral economics, specifically the work of 2017 Nobel Prize-winner Richard Thaler and how it has been applied to public policy as well as marketing.
“It really could have a lot of impact in the admissions space,” Thom says. “In fact, it already has.”
One thing that was significant about Thaler receiving the 2017 Nobel Prize for Economic Science, according to Brad, is that his research so applicable.
“A lot of Nobel Prize work, especially in economics, tends to go to these super arcane theories that might or might not influence public policy in a meaningful way,” he said. “So it’s pretty cool that Richard Thaler won because his work has influenced a lot of public-policy makers all over the world.”
How? For a long time, the world of economics and, in several ways, the world of public policy was influenced greatly by what’s known as “rational choice theory,” which suggests that humans can calculate internally the costs and benefits of a particular decision and make a rational choice based on what that calculation presumes.
“It’s a little bit scary to think about how influential this is because all of the nuclear game theory — all of the theories about who would launch nuclear weapons and how that first-strike, second-strike capability would play out during the Cold War — was thought-through based on rational choice theory.”
What Thaler basically did was list all of the things that humans do that are irrational — that don’t make sense according to classical microeconomic theory. Over time, he began to formulate the idea that our psychology really is not as complicated as we think, and that we’re really not as good at figuring out probabilities as we think we are.
Here is a classic Thaler story: While working on his Ph.D. at the University of Rochester, Thaler and a friend were given free tickets to a basketball game that was an hour away. But there was a snowstorm, so the two students decided not to make the drive and use the free tickets.
“They both totally acknowledge that, had they paid for the tickets, they would have gone,” Brad said. “They would have driven through the snowstorm.”
This is the problem of sunk costs — money you’ve already paid that you can’t get back. It’s about “making a completely different decision based on who paid for the tickets,” Brad said. “That’s irrational. That doesn’t make classic economic sense.”
It’s like sticking with a book that you are not enjoying because you purchased it with your own money; or enduring a bad movie because you paid for the ticket.
How does this apply to policy?
“This is why so many projects have cost overruns,” Brad said. “People will continue to throw good money after bad because of the idea that they cannot behave rationally given sunk costs. Even though everyone is totally aware that the costs are sunk.”
Mental Fund Accounting
Thaler might be most known for the idea of mental fund accounting. A good example of this is finding a hundred dollars on the street, and then deciding that you are going to spend it on something fun.
“Classical economics would tell you that any dollar is fungible,” Brad said. “It doesn’t matter what you spend the money on, but in your mind you’ve psychologically allocated different buckets of money for different purposes even though it totally doesn’t matter.”
In the end, along with other scholars, Thaler undid the idea that people are rational economic beings that can calculate costs and benefits and act and make decisions based on those calculations.
How might Thalers’s research and theories be applied to your recruitment efforts? Listen to the Weightlist Podcast, Episode 18, Giving Your Enrollment a Nudge.
By Kevin Hyde, Senior Content Writer, Capture Higher Ed