544. Transforming Environmental Compliance Using Behavioral Economics

Summary

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Episode Overview

Theme:
In episode 544 of The Brainy Business, host Melina Palmer is joined by Karina Montez and Mario Drago from Peru’s environmental enforcement world, discussing how behavioral economics—specifically small, thoughtful “nudges”—dramatically increased environmental compliance in the Peruvian mining sector without changing a single regulation. The duo shares their story of pioneering behavioral interventions in government, the successes and challenges faced, and simple but profound insights for anyone aiming to drive compliance, sustainability, or change in any sector.

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Key Discussion Points & Insights

Background & How the Project Began

• Introduction to Guests and BE OEFA
  • Karina Montez: Economist with Peru’s National Environmental Enforcement Agency (OEFA). Oversaw compliance and data reforms in areas critical to Peru’s economy, like mining and fishing (03:32).
  • Mario Drago: Lawyer and external consultant with public policy expertise, offering a private sector perspective. Known for integrating behavioral design in law and regulation (04:04, 09:08).
• Behavioral Economics: The Missing Solution
  • Initial reforms (2016–2017) included data and incentive-led changes that didn’t lead to higher compliance—“didn’t seem very rational” (05:16). Interest sparked by Richard Thaler’s Nobel Prize win and popular behavioral economics books (05:16–08:27).

Building the Behavioral Science Team (BE OEFA)

• Grassroots Enthusiasm
  • Initial team: Four driven colleagues absorbing books, TED talks, and online resources to self-educate (20:40).
  • Sought Spanish-language behavioral economics expertise, leading them to Mexican trainers, then Mario Drago (08:31–09:04).
  • Opened interest to the agency with a 20-question test; over 100 people participated, narrowing to 30 for the pilot (22:01–23:17).
  • “The people that approved the test are going to have this course with this Mexican institute...it has to be advanced, because we need to apply the methodology to our projects.” – Karina Montez [22:31]

Identifying Irrational Gaps in Compliance (16:54–20:14)

• Five Problem Areas (Projects)
  • Compliance rates for correcting violations were extremely low despite clear economic incentives and regulatory benefits.
  • Internal: Employee participation in training programs was also low, described as “irrational.”
  • External: Other government agencies responded poorly to environmental complaints forwarded to them (often a 30% response rate, 70-day average delay).

Designing the Interventions (Nudges) (24:16–32:17)

• The Power of Outside Perspective
  • Mario acted as “outsider,” representing the view and psychology of companies/clients, crucial for effective experiment design.
• Scientific Rigor
  • Emphasis on segmenting target groups (personas), using control and experimental groups, and understanding the “why” behind each problem rather than jumping straight to solutions (24:16).
• Common Behavioral Obstacles
  • Time Discounting: Companies prefer to postpone paying smaller fines now in favor of risking much larger fines in the future (intertemporal choice).
  • Information Overload/Sludge: Letters or notifications buried crucial instructions in dense, lengthy legalese—e.g., “One thing you’re trying to get them to do is on page 78 of a 250-page [document]” – Melina Palmer [32:17].
  • Status Quo Bias: Even with clear rules, companies and government entities avoid action unless nudged.
• Interventions Used
  • Simple, reframed communications highlighting personal benefit (discounted fines now vs. later, clear actionable steps).
  • Reduced “sludge” by relegating legal text to appendices so the key message is prominent (“we put all the regulation in the back of the letter… it’s going to be on another page, right.” – Karina Montez [32:25]).

Results & Impact (33:19–40:34)

• Stunning Outcomes:
  • From 1.4% to 35% Compliance: In mining, acknowledgment of responsibility (with associated fine discounts) leapt to 35% after introducing a ‘profit-framed,’ one-page letter [35:19].
    • “Everybody knows what the law says... Even knowing that, they preferred to litigate the case for five years. So after knowing that, what could we do to make them understand that this could benefit their companies? So we changed just a document...” – Mario Drago [33:19]
  • Fishing Sector: Compliance rose from <2% to 12%—still a huge improvement in regulatory experimentation.
  • Some interventions produced “60% to 70% difference between the control group and experimental group just by designing a little document of one page” (40:02).
• Cost Efficiency
  • Most changes involved only rewording existing documents or emails—a low-cost, high-impact approach.
• Wider Organizational Benefits
  • Internally, launching BE OEFA drove pride, engagement, and intrinsic motivation among agency staff (“IKEA effect”). Hundreds applied to join, and the experiment continues with more cohorts.

Measuring, Data, and Sustainability

• Why Data Matters
  • Investment in data-gathering was critical. You “have to have information and data…” to demonstrate real results [38:22].
  • Clear, quantitative reporting empowered the team to win Peru’s National Public Innovation Award (2020).
• Replication and Scalability
  • BE OEFA now runs second waves of interventions, and the methodology is spreading to other local agencies.

Memorable Quotes & Moments

• “What if saving the environment didn’t require more laws or stricter enforcement, but simply better emails?” – Melina Palmer [00:37]
• “This blew our mind. There's an irrational part of our brain, an automatic part. Maybe these results that we are getting are because there's this not rational part.” – Karina Montez [07:21]
• “So you can apply these principles and have better regulations that could be understood and could be applied by these customers that are the citizens, the enterprises, the private sector, and also the public sector that has to design it.” – Mario Drago [11:18]
• “[Compliance] isn’t just about rules and it’s about friction. So often we assume that people don’t care, when really they just don’t know where to start or the process feels too complex and overwhelming.” – Melina Palmer [44:03]
• “If you want to be in the [BE] OEFA, you have to train yourself first, read the books.” – Karina Montez [23:17]

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Important Segment Timestamps

• Introduction & Context — 00:00–02:35
• Meet Karina & Mario, Setting the Stage — 03:32–05:16
• Discovery of Behavioral Economics — 05:16–09:04
• Mario’s Lawyer Perspective — 09:08–12:39
• Building the BE OEFA Team — 20:40–23:13
• Project Identification: Finding the ‘Irrational’ — 16:54–20:14
• Experiment Design & Personas — 24:16–28:34
• Behavioral Insights & Redesigning Communications — 29:32–33:18
• Major Results, Impact & Awards — 33:19–42:38
• Closing Thoughts & Broader Applicability — 43:04–44:03

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Key Takeaways for Listeners

• Behavioral tweaks—like reframing a letter or simplifying a process—can drastically improve compliance, even without changing laws.
• Deep understanding of target audiences, clear messaging, and empirical testing are essential for effective nudges.
• Public sector innovation is possible—and can inspire intrinsic motivation in team members and broader government.
• No matter your sector, there’s likely untapped potential for improvement through behavioral economics.
• “It’s not about providing information, it’s about how you sell the information and how people internalize it.” – Mario Drago [36:38]

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Further Resources

• Links to the BE OEFA paper (in English & Spanish) are in the show notes.
• Melina Palmer recommends related past episodes and books for further exploration (see show notes or brainybusiness.com/544).

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Transcript

[Melina Palmer]

Welcome to episode 544 of the Brainy Business Understanding the Psychology of why People Buy. In today's episode, I'm excited to introduce you to Karina Montez and Mario Drago from BE AWEFA in Peru. Ready? Let's get started.

[Mario Drago]

You are listening to the Brainy Business Podcast, where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here's your host, Melina Palmer.

[Melina Palmer]

Hello. Hello, everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. Let me ask you a question. What if saving the environment didn't require more laws or stricter enforcement, but simply better emails? I know it sounds too easy, right? But as you're about to hear, sometimes the smallest behavioral tweaks can lead to massive impact. Today's episode, which originally aired in March of 2022, is a beautiful example of behavioral economics in action. My guests, Karina Montez and Mario Drago are part of a pioneering team in Peru's Environmental Enforcement Agency, where they've been nudging mining companies toward better environmental compliance without rewriting a single regulation. Their work through BE OEFA, increased reporting compliance by over 600% and in just a few years, using simple behavioral science tools like framing, reminders, social norms, and empathy. So what does this mean for you? Now, today, as climate conversations and so many other conversations get louder and resources feel more constrained, this story reminds us that impact doesn't have to be expensive. Sometimes it's just about knowing how to ask. As you listen, I invite you to consider what would it look like to bring this level of thoughtful simplicity to your own work? Whether you're in sustainability, leadership, compliance, or communication, this episode will absolutely spark ideas really quickly. Before we get into the conversation, I want to be sure you know there are links in the show, notes for my top related past episodes and books, ways to get in touch, and more. It's all within the app you're listening to and@the brainybusiness.com 544. Now let's jump right in. Karina, Mario, welcome to the Brainy Business Podcast.

[Karina Montez]

Thanks for the invitation, Melina. Thank you. I appreciate it. I'm very glad to be here with you. Thank you.

[Mario Drago]

Yeah. Thank you for having us.

[Melina Palmer]

Yes. So excited. I know we had talked about this in advance, but this is, I believe, our first set of guests from South America that are here on the show, which I'm very excited knowing, of course, like we were talking about Dr. Marco Palma has been on the show, of course, and he is originally from South America, but as part of, you know, works, of course, at Texas A and M University at the Human Behavior Lab there. So, so excited to be able to talk about some of the amazing behavioral economics work that you all are doing in Peru. Before we jump into, you know, the project and things we're going to be talking about, would love to let the audience know a little bit about each of you and where. What your background is and where you came from. So whomever wants to start, I think the story. Yeah, I think the story starts with Karina, so go ahead and let us know.

[Karina Montez]

Okay, thank you. Thank you. I'm really excited also to be here. Thanks for the platform. I'm Karina Montes. I'm an economist and I work for the Environmental Enforcement Agency. Its name is oefa. OFA is the acronym in Spanish for. For the National Environmental Enforcement Agency here in Peru. OFA is in charge of inspection and promote compliance in very important activities in my country as mining industry, fishing, et cetera.

[Mario Drago]

Mario, I'm a brugal lawyer and I have a master's degree in regulatory matters and specialization in public policy. I don't work in Noeva. I'm an external consultant, but I've been part of this beof a project for a couple of years. So I'm excited to be here explaining what we've done in the first set of experiments.

[Melina Palmer]

Yeah, absolutely. And I know that when we did our pre call conversation, we talked a little bit about how you both got involved and how kind of bringing some of this behavioral economics into the space in Peru and knowing that there are so many people listening from around the world who are struggling with a similar problem of saying, you know, we're the first. I'm the only one, you know, there's nobody else here who is doing anything with behavioral economics. You know, I'm excited, but what do I do? Can you share a little bit about your story of how this even came together and if you do have tips for anyone who's looking to do something similar in whatever country they are in.

[Mario Drago]

Of course.

[Karina Montez]

Melina, I'm going to tell you about the story and how things happened. This is about in the year 2016. Everything started in 2016. We started with a group of reforms in this agency in Oeifa. I was leading the data process and analysis reform that involved collected and processing a huge amount of data in order to set a group of indicators to measure our results. We didn't have a lot of data at that time, and meanwhile, a group of lawyers were designing new regulation, new incentives to promote compliance, to avoid sanctioning because of can put sanctions, even if there's no environmental damage, because there's a lot of obligations, formal obligations, and if OEFA finds any violation, even in a formal way, we have to put a sanction, thus the law. So these lawyers were designing new regulations, new incentive benefits to promote compliance. And in about 2017, we were ready to measure our results, to measure our indicators. We realized that, for example, we had strange results for us that didn't seem very rational. For example, these benefits were not working, our rates were very low, or there were processes that demand a lot of time and we couldn't understand what was happening. This didn't seem rational. I'm an economist and in that year Richard Taylor won the Nobel Prize recently. And my colleagues were talking about this book. So the book was very popular at that time. So we started to think, well, maybe, maybe this is the solution because the book is also about not just in public policy. So me and a group of three colleagues, another economist and two lawyers where started to read in the books and watching some Ted talks and YouTube videos and said come on, what's happening here? Really this blow our mind. There's an irrational part of our brain, an automatic part. Maybe these results that we are getting are because there's this not rational part. We said maybe the problems could be caused or could be explained by behavioral science. So we started to look for a trainer. At that time the literature was mostly in English. And you know, in my country we are Spanish speakers. So we needed a Spanish speaker trainer and we couldn't find anyone in Peru at that time. We found this Mexican institute and we thought we needed to conform a group different professionals in Oeifa in order to involve more professionals with this topic and also to make the most of the time of the trainers. So these professionals, these trainers, Mexican trainers came to Peru. We had this training course with them and we were chatting with them. We were very, we were very excited about all these, all these new concepts. And when we were chatting, they said, we told them we couldn't find anyone in Peru. And they said but there's someone and they introduce us. Mario so that's the first part of the story.

[Melina Palmer]

Wonderful. And then, and then what happened? Mario?

[Mario Drago]

Well, before I tell you the, the full story about that, maybe I can tell you my, my background. Because of course, maybe, maybe someone, someone that is listening to this, to this podcast is, is wondering why is there a lawyer invited Here, how does a lawyer know about behavioral economics? And my relationship with behavioral economics and with behavioral design in general, it was kind of an accident. I was pretty much into law and economics, and there is the application of economic principles to regulation and to law to have better results that could be measured and so on. And I was doing an investigation in 2008 after a big earthquake in Peru that happened in southern Lima in a city called Pisco. If you go to Pisco and you go to the beach, there is a district called Pisco Playa Pisco beach in English. And almost 95% of that district was destroyed by the earthquake because of the ground. That was not a good place to live in an earthquake country like Peru. It was a reason, if you want to define it. And we were trying to investigate why the public policies that were applied to the reconstruction of this place were not working. And we found out that all these rational measures, all these incentives, economic incentives that were brought, were not working. And all this economic theory, this economic classical theory about how people think and how people decide, it's not working. It's not real, it's not getting applied. So we went, we were trying to investigate how, how we can fix that. And I found this first article wrote by Gus Sanstein. I think it was like some kind of regulatory advisor for Obama. And he was talking about how this psychological and social science principles should be introduced to public policy. So after that, I've been applying behavioral economics not only to public policy, but also to law, to litigation, to tax, and to every aspect of life in which law and public policy is involved. So maybe it's something that it's pretty easy to understand for someone that is into marketing or someone that is into business. But it's not usually understood in a world of lawyers and a world of public policy. So after 10 years doing that, I'm very glad that people is beginning to understand that the public policies, the regulations, are also products and there is a customer that is the citizen. So you can apply these principles and have better regulations that could be understood and could be applied by these customers that are the citizens, the enterprises, the private sector, and also the public sector that has to design it.

[Melina Palmer]

Yeah. And for one, you are not the first lawyer on the show. So we're Kwame Christian, Good, good friend of the brainy business. He has been here twice and we talked about how he uses psychology and behavioral economic principles in anchoring when he's sending out letters and. Yeah, all sorts of stuff. So definitely, you know, I'm glad I'm not alone. No, no. It's. It's a great, great space to be. So with all of that, that's some of your background. And now we have. Karina has this perfect moment where they say, you know, there is somebody in Peru.

[Karina Montez]

There is somebody. Yeah. You know, that we just have found. Conform. The group formally confirmed the group and we needed a coach because we have set this group of five projects. We felt that we need somebody to come with us and to coach and come with us with all the process. So we find Mario and we apply the methodology. We started to setting the problem. To find each group has to work with a problem with one problem, one indicator, find the problem with data, of course, analyze the behavior of interest groups, setting objectives, design the nudges. And that's what we hired Mario as a coach.

[Mario Drago]

Yeah. So we met each other at 2018. They were searching for someone that would give them an outsider opinion, if I can define it like that. And actually I am into behavioral economics, but I am particularly litigator and I have a lot of cases against OFA or in OFA for private companies. So I can provide the point of view of the companies and the private sector that was going to be the subject of the experiments. So it's been a very interesting experience.

[Melina Palmer]

Yeah. And being able to bring the differing perspective that they may. When we get into our own spaces so much, especially with the regulatory agency, you get bogged down in your terminology and the way that things should work and you just, you know, everybody's going to do this because they should and it's. It's good for the planet, right?

[Karina Montez]

Yeah. Because it's written in the law. Everyone should know the law and read like thousands and millions of law and a lot of. Yeah, that's a funny way about this because in my country then the law, if it's published, you should know the law. So if I find any violation, I have to put a penalty on that. And sometimes it's not fair if you are, for example, a company that is not big. So sometimes you have to think in another way to promote compliance, to promote low compliance. I think these kind of tools are very, very useful for that.

[Melina Palmer]

Yeah, absolutely. So you mentioned that you had these five projects that you were working on, which I believe ended up being published in a paper which is how we all got put together. So as a shout out, a thank you to our mutual friend Carlos Hollywood Pollos for introducing us together. I know Carlos from LinkedIn and you know, he listens to the show. Thank you, Carlos. And it Said, hey, have you, if you're ever looking for something, have you talked to these amazing people? And I said, no, not yet. And so here we are, right? Yeah.

[Karina Montez]

Thank you to Carlos.

[Melina Palmer]

So can you tell a little bit then about the project that or projects that you were working on, you know, what were you trying to figure out and what happened?

[Mario Drago]

Maybe Karina, you can give more details about the problems you found, since you were the one that identified them.

[Karina Montez]

Of course. We identified five projects, five indicators that we thought that there were a problem that could be solved with behavioral science, two with companies, because we were designing a lot of benefits for correcting non compliances. And the rates of correction were very, very low. And we were assuming, come on, what's going on? You're gonna have benefits, economic benefits, no penalty, no sanction, and you're gonna be good with also with environment because everything is gonna be better for you, for me, for, for the people. Why are you not understanding that? Were two projects very, very similar in different sectors and different economic activities. Also we have this problem with the people in OEFA because we used to design a lot of a group of training courses for the people. And the rate of participating in these courses were also very, very low. So the boss of this area was saying, why nobody wants to be in my training courses. This isn't rational. The other two projects were for also government entities because for example.

[Melina Palmer]

We in.

[Karina Montez]

OFA receive environmental complaints and the rates of answer the complaints were very, very low. And we said, come on, there's a citizen here, there's a complaint, something maybe is wrong in their city because OFA has not all the functions, for example, about the garbage in the city, we cannot solve the problem, the municipality has to solve it. So we have to send them a letter and say, come on, there's some individual that is complaining because there's garbage in the corner and we can solve it. We have to just send the communication to another public agency. And the rate of response of that complaints were very, very low. We're like 30%. And we said, come on, there's complaints. What's happening? And the answer was around 70 days. So why is delaying so much if you only have to answer if there's garbage in the corner or not, and if you can solve the problem. So that's, that's our project there seem like for us, very irrational because we thought that the way to solve that problem was easy for the group of interest. For example, for people that. Why, why don't you want to participate in my training courses? For the companies, why don't you want to correct your offenses if you're going to be. You're. You're going to have a benefit? And for the government, why don't you want to answer the complaints of the individuals if that's your responsibility and that's a thing you have to do as a. As a government? So that's our group of projects, and we thought that were irrational for us and very easy to comply.

[Melina Palmer]

Yeah. And so then B. OEFA was created to be this kind of experimental nudge unit for you to work on, seeing if you could solve these five problems. Can you share a little bit then, about what that process was like of finding your team and bringing them together and designing the projects?

[Karina Montez]

You know that for us it was a special process because we were just four people. Me, my boss, Stacey, my colleague Marcos, that is an economist, and Joanna, that is another colleague that is also a lawyer. And we started to watch these TED talks and YouTube videos to buy the books and start to borrow each other the books to read. Come on, read this part. Read. And then we started to think this was very important for us, the knowledge that. That we have learned by ourselves. So we need to share this. No, we need to share these TED Talks with all the institutions in order to know if there's most people interested in. So we send this email to everyone and said, are you interested in this? If you are interested, we're going to take a test. And we prepared a test of 20 questions. We did it all by ourselves. We prepared a test of 20 questions. So the day of the test, you can imagine, because that moment was 2018, and we were not in this pandemic thing. So, no, the test was in person. So we had groups of, I think more than 100 people take the test.

[Melina Palmer]

Wow.

[Karina Montez]

Yeah. And there's like 500 or 600 and a lot of people take the test. And we had the group for the training course, and we also mentioned the award, of course, because we were learning about incentives. So we said, and the people that approved the test are going to have this course with this Mexican institute, but it's going to be an advanced course because we thought that we already were not basic in behavioral economics anymore because we have read a lot of. So we said to these Mexican colleagues, please, we need a training course that is not going to be basic, has to be advanced, because we need to apply the methodology to our projects. And the test was very good. A lot of People was like 100% in answers. Yeah. And we confirmed the Group with the people that were more motivated and had already know about this topic. So that was our first group of behavior of the oesta. They are very motivated. They are very motivated also right now.

[Melina Palmer]

Yeah. And you narrowed them down to 30 people.

[Karina Montez]

Yeah, 30 people. That confirmed the first group. Now we are in the second group of projects that we named the second portfolio project. Now people are not going through that anymore because people change, you know, change, they change work. And we need some people that are new. But we also said in ofa, if you want to be in the ofa, you have to train yourself first, read the books. And for example, for this second portfolio that start 2021, we take again the test, but was online.

[Melina Palmer]

Yeah.

[Karina Montez]

And the second group and members of the OFA have also passed the test.

[Melina Palmer]

Awesome. And so then Mario, you came in and got to help design the experiments for that. Can you share a little bit about that, the process you went through?

[Mario Drago]

Yeah. After they had this discourse with Emiliano and the people of the Economic microeconomics Mexican team, I came to help these five groups to design the projects. And the first things I noticed was that as everyone that is beginning with this, with behavioral economics or behavioral science and want to apply something in the real world, they wanted to have a result, a very quick result and go from, from the theory to the practice in, in three days. And I told them, okay, wait a minute, we have to go back a little. And before we even start to do something, we have to do what every social scientist would do in this, in this situation. That is knowing who is the one that's going to be the subject of your experiment and why did you decide to apply this nudge or this incentive for this and how to control, to have a control group and experimental group. So the first thing we have to discuss was who was this Persona? No, we told the, I think in marketing, they told Persona and UX to the person that's going to be the one that's going to be nadjit, if that term exists. And we had to be which incentive are we going to apply in each one of the projects? So we designed several experimental groups, tests for different groups, and began to compare. And after identifying the real problem, the causes of the problem, we were able to begin the experiments that I think last between three months and a year to start seeing some results. So for example, I don't know if I'm saying something that has to be discussed later, but for example, you have a very first problem, that is you have benefits if you acknowledge your responsibility and an administrative procedure, for example, you contaminate someplace and if you acknowledge your responsibility and you address that contamination and you repair it, you can be even exonerated from the fine. And people even knowing that they may have a discount after the administrative procedure has begun, they prefer to litigate until the end for five years to be, to have a fine of up to $10 million instead of paying just a little amount, like we're talking about mines and oil and gas companies, not regular people. Instead of paying $10 million, you can pay $100,000 if you pay now. So we can all avoid the time, the effort of having this procedure for five years. So the OFA benefits with the fine, the people benefits with your, with your addressing of the, of the problem. And you benefit from the benefit of the discount on the fine. And people knowing that because the lawyers of these companies know that's a benefit they can apply to, they prefer to keep the problem to the future. So we found, for example, that there was an intertemporal choice situation there, and we had to address that with some special nudges signed to this kind of situation. So we found something similar in every case and we understood first the problem and investigated about what kind of nudge could be applied to every one of these problems.

[Melina Palmer]

I made some notes for everybody listening here of some concepts that were coming up and what you're talking about there. We've got our time discounting problem. And part of that where people are like, I'll do that tomorrow, I'll do that next week. I'll deal with that in five years when I have to. But by reframing the problem and making it, you know, more relevant today, saying, you know, yeah, you could pay $10 million then, or you can pay us 100,000 now, you go like, that's obviously better. I want to do this thing. You know, it now becomes a little bit more urgent. We have the loss aversion coming into play where like, I don't want to lose 10 million tomorrow when I can do this hundred thousand today. So your incentive is shifted to do something now when you naturally would maybe rely more on the status quo, you know, or whatever that is.

[Mario Drago]

Well, it seems pretty obvious, and from that rational point of view, it's pretty obvious. But that's why we understand why people don't, don't prefer to pay the defined with the discount now and expect us to pay the, the full amount five years from now. So after knowing why or how these people think it's that we can, we could be able to apply the nudges and have spectacular outcomes.

[Melina Palmer]

Yeah. Such an important point. The best nudges are incredibly simple. And when you look at them in hindsight, you say, well, obviously, of course that works, right? But when you, so you're, you know, listening to this show, or you're reading the books that have been talked about, you know, here, nudge or predictably irrational. I'm going to talk about sludge here in a minute. But you read it and go, of course, easy. I could do, I could do that. And then you get your team right, and you sit down, you say, okay, we're going to, we're going to implement this stuff. Huh? Like, now what. When you look at your problem of saying, you know, say, you know, we have a 36% response rate and it's taking people 71 days to get these easy requests processed, then we have a shift when we're working on our own problem, where you go, well, but that's just the way it is. Or what could we possibly do? Or, you know, what's the effort? They should know how to handle this, but we need to just educate them better or whatever, right? We, we, we read the book. We know it should be something easy to bring in, but if it doesn't come to mind, easy, it feels like there's this disconnect. So like you said, Mario, there's so much time that has to be spent on developing and thinking about who you're talking to. I'm absolutely going to be linking to my episode. On understanding the problem that you're solving, you need to know who it's for, what they're doing, what mindset are they in, like you said, bringing in outside perspectives, even having, you know, Mario, being part of the team, being able to say, you know, they're not looking at these documents. They don't see, like I can tell you, because these are my clients, like, they don't see this.

[Karina Montez]

Yeah. For example, the documents were very, very full of exchange words, were very, very long with a lot of regulation reading. These were not simple, were not easy to understand.

[Melina Palmer]

This one thing you're trying to get them to do is on page 78 of a 250 page.

[Karina Montez]

Yeah, exactly like that. Exactly like that. And the lawyer was saying, but I need to put all the, all the regulation because it's the law. And I said, come on, why? So, for example, in the case of government to government, the complaint case, we put all the regulation in the back of the letter because lawyers was telling us we have to put of the regulation of all the obligations. And I said, okay, it's going to be on the other in another page, right.

[Melina Palmer]

So then removing some of that sludge, like we're saying the stuff that can be there, you can go find it if you want and need it, but it's not going to mess things up so that you don't get the point. We're not going to miss everything because of all this stuff we have to say. We can still say that, but could it be said somewhere else so that what's relevant is made obvious and relevant to get the action that you're trying to get?

[Karina Montez]

Yeah, yeah.

[Mario Drago]

And it seems pretty obvious. For example, I'm going to give you some detail about one of the five experiments in this experiment about liability acknowledgement. The problem was that there was a very low rate of companies that acknowledge responsibility. After the administrative process began. Just 1.4% of the companies acknowledged responsibility. And as a consequence of that they can have this discount. We were talking about in the define just 1.4%. And everybody knows, at least every lawyer that is into regulatory matters know that the that the law, because it's not a discount that is given like a discount of some merchandising or product of a product company, it's stating the law so you can find it. And everybody knows what the law says. The law says if you recognize your responsibility, if you acknowledge your responsibility, your liability, you can have the discount. Everybody knows. And even knowing that, and even me sitting in the same table with the lawyers of the company saying you can have the discount, they preferred to litigate the case for five years. So after knowing that, what could we do to make them understand that this could be benefit for their companies? So we changed just a document. It's pretty simple that you said Melina a document and frame the equation in a profit like a profit framing. And an effective communication was I'm going to tell you in this document, how can you be able to get the discount in a case that you will lose not in five years, but in two years? Because the statistics says that of a wins 95% of the cases that they are initiated after knowing this information that it's known, but you now have it in this little piece of paper. The rate came from 1.4% as I said to almost 35% of companies that in mining, for example.

[Karina Montez]

And it's still growing and it's still.

[Mario Drago]

Growing that recognizes this liability and were benefit with the discounts and 35% in binding and the less the result that was not so impressive. Is 12% in the fishing industry. That is a lot. 12%. It's a lot. In an academic research, you can find 3 or 4% and everybody is clapping and saying it's a beautiful result. Yeah, a beautiful outcome. But when you have 12, 15, 25, 35% of difference between the control group and experimental group, just by designing a little document of one page, that's just saying the same that the law says. And everybody knows it. It's like, why didn't everybody was just doing this if the information is out there? And that's when you understand that it's not about providing information, that it's some of the axioms of regulation and law. It's provide information that people will understand because we are rationals. It's about how you sell this information to people and how they internalize this information. You don't only have to provide it, you have to be. To be sure that they are not only reading it, understanding it, but also internalizing it and getting part of their mental process in the right moment. And when the right incentive, that not only could be economic incentive, it could be also reputational incentive or another kind of incentives.

[Melina Palmer]

Yeah, I love all of that. And like you said, it's investing the time up front to make sure you know what you're doing. And then it's not a hugely expensive endeavor to change the way it's written on the sheet of paper that gets sent out. Right. But it ends up saving on the back end, I'm sure hundreds of thousands, millions, you know, switching from all this litigation that's not having to take place and just a huge impact. Also environmental benefits being the core reason why, you know, BUEFA and UEFA is here, you know, to be helping this and clearly well deserved in. I see that you won a National Public Innovation Prize for the work that you all have done. It's amazing.

[Karina Montez]

Yeah, it's amazing. Thank you, thank you. We're very proud. There's the National Public Innovation Award here in Peru, and we won it in 2020 for our work. And I think that also because I want to complement what we were talking, that seems easy, but also there's something. You have to have information and data, because if you want to say, for example, OFA wins 95% of the cases, you have to know that rate. And if you want to know if your results are getting better or are getting worse, you need to measure. So this is also about information and data.

[Melina Palmer]

Absolutely.

[Karina Montez]

As a public agency, if I can do any recommendation for others, have a lot of data you have to invest in information and quality information.

[Melina Palmer]

Thank you. Yes, absolutely. And I'm all about the importance of testing. I have an episode on designing experiments that I'll put in to the show notes here too. But if the. These are impressive results. If you were to just say oh, and. And it got better is different than saying we went from 1.4% to 35% compliance. Right. Like that is a very different thing to be able to say. And when just say oh, and we're pretty sure, you know, we could tell, you know, less people are going through this process. You know what, like that's not, that doesn't mean anything. It doesn't inspire change. Right.

[Mario Drago]

Yeah. And you can find experiments in which we, we have a 60 and 70% of difference between the control group and the experimental group. Yes. By changing something. And the best of this was that it was a little investment and a very, very, very big outcome from this. It was just about changing the.

[Melina Palmer]

Way.

[Karina Montez]

Of communication also the way of we communicate with them.

[Mario Drago]

Something that I think it's important to know is that you don't have to trust your gut if you want to have outcomes that you can measure. Because after doing this, someone reads this and says, it's pretty obvious if you do this, you will have better outcomes. But it's not that easy. First you have to understand why you're going to do that. Because as you said a moment ago, if the public policy goes in for a bad bat and against a sledge, there's no way back. It's not like a particular, a private company promotion that. Well, the only that that's going to be hurt is yourself. You're hurting citizens, people, and you're using public money to do this. So it's pretty important that you are pretty sure that what you're going to do.

[Melina Palmer]

Right. And I know we didn't really talk about it too much, but there's also this additional benefit that you saw in creating the UEFA of finding something that people were excited about. You had hundreds of people applying to be able to be part of this. We got a little bit of kind of like an IKEA effect of being able to be part of building this new program for the 30 that were chosen. And then those who want to apply into the future, we have this new, new for them having this intrinsic motivation of being able to make something amazing that they're so proud of and they love their jobs, I'm sure, because they get to be part of this and proud of the prizes you win. Right. And so it's not all about accolades and awards, but also seeing this, helping to energize an internal team to show this passion that they have in a way that brings about such amazing results is just truly fantastic. And I'm honored that you both who were able to take some time out of your day of saving the world to come and speak with me.

[Karina Montez]

Thank you. Thank you, Melina. Thank you for the invitation.

[Melina Palmer]

Absolutely. And like I said, there is a paper that has been published talking about these five interventions. I'm hopeful and planning to share both in English and Spanish in the show notes for everyone who wants to to check those out. So thank you again. Is there anything else that we that you want to add before we wrap up our conversation?

[Mario Drago]

Maybe I know your podcast is about business, particularly about business, but if you are an aural economist or are interested interested in behavioral sciences, there's a lot of space to work in the public sector. So if, if you want to have a career in behavioral economics, you can also have the public agencies as a client. So you can say it could be some kind of business if you want to.

[Melina Palmer]

I'm all about the business is many things, whether it's a nonprofit. It's to coaches, to consultants, to public policy. It's all, it's still, you know, it's all business or life at the end of the day. Right. It all fits here. So no.

[Mario Drago]

Thank you very much.

[Melina Palmer]

Thank you.

[Karina Montez]

Thank you. Thank you very much, Melina. Thank you for the invitation.

[Melina Palmer]

Of course. Thank you again to Karina Montez and Mario Drago for joining me on the show today. What got your brain buzzing in today's conversation? For me, I keep coming back to this idea that compliance isn't just about rules and it's about friction. So often we assume that people don't care when really they just don't know where to start or the process feels too complex and overwhelming. Maybe they put it off for later. Be awayfa's work shows how being thoughtful down to the tone of a letter or timing of a message can completely transform outcomes. It's a powerful reminder that behavioral science can be a force for global good. So what systems in your business or industry could benefit from similar thoughtful nudges? Where are you over complicating something that could actually be quite simple? Come share it with me on social media. I would love to hear about it. You'll find me as the brainy biz pretty much everywhere. And as Melina Palmer on LinkedIn, there are links in the show notes to make it easy as well as links to be awayfa's work, my top related past episodes, books, and more. It's all waiting for you in the app you're listening to and@the brainybusiness.com 544. And thank you again to Karina and Mario for joining me on the show today. It was a delight to chat with and learn from you. Join me next time for another Brainy episode of the Brainy Business Podcast. It's going to be a lot of fun. You don't want to miss it. Until then, thanks again for listening and learning with me, and remember to be thoughtful.

[Mario Drago]

Thank you for listening to the Brainy Business Podcast. Molina offers virtual strategy sessions, workshops, and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness.com.