← The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics
The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics
565. Navigating the Unknown (Uncertainty Aversion)
00:36:13
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Welcome to episode 565 of the Brainy Business Understanding the Psychology of why People Buy Today's episode is all about uncertainty aversion.
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Ready?
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Let's get started.
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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.
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Hello. Hello everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. These days it feels like uncertainty is everywhere, whether it's AI and job security, changing algorithms and experiences, and sharing thought leadership on social media. Not to mention all the instability around the world right now. And I'm guessing since you're a human person, that you don't like the way that uncertainty feels. It might impact other areas of your life and work and sleep and relationships, even when you don't want it to and know it might not be logical. And while that may feel frustrating, the good thing to know is that it's totally normal. We humans have an aversion to uncertainty and ambiguity and it impacts the way we act, buy, show up at work, and so much more. This concept is of course the focus of today's refreshed episode, and while it originally aired back In December of 2022, I think we can all agree it probably feels more relevant now than ever, which is why I felt it was important to bring back today. As you listen today, I invite you to consider where you might be avoiding uncertainty or feeling anxious about ambiguity in a way that's impacting other areas of your life in a negative way. Spotting them is the first step to stopping them really quickly. Before we get into the episode, I want to be sure you know there are links in the show notes for my top related past episodes and books where I ways to get in touch and more. It's all within the app you're listening to and at the brainy business.com 565. Now let's jump right in and learn about uncertainty aversion.
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So what is ambiguity aversion? This is also known as uncertainty aversion and is probably one of those concepts that's pretty easy to grasp on the surface. For that reason, I'm not going to spend a ton of time on the research studies today. There are a few linked for you in the show notes, including the original research study from 1961 that really kicked off this line of thinking, and some research on how this applies to doctors and how their preferences change. When recommending treatment options as well as some other applied areas. At the end of the day, the most important thing to know is that we don't like the unknown, we don't like uncertainty in our choices, and we prefer known risks over unknown risks. And also because our brains are lazy and rely on rules of thumb often, which will avoid making complex calculations and even some not so complex ones which you heard about in Tuesday's episode on numbers biases, which I affectionately called math is hard. Even if the odds may be clearly really bad in the known space, we're more likely to choose it than the unknown space. Just because that fear of the unknown is something we don't like. And we tend to look at the worst possible scenario. When it's something that's a little bit scary again, that's bringing in that loss aversion again. When it's something that could be positive, though, we may look and let our optimism bias guide and look at how things could be really good and we maybe will do something a little bit more risky. So consider the stock market here. That can have unknown risks and so people can feel hesitant to put their money there even when the probabilities and rates of return are known. Especially now with all the news about crypto and the volatility of NFTs. I'm sure there are a lot of people who feel even less confident in the stock market and are more likely to avoid it because of the stories they've heard and the fear that they could lose everything. There is of course some availability bias in there where the stories we've heard more often, those things that are on the news or in movies, impact how we feel about a particular situation. So if you've heard more stories about big fluctuations and maybe know people who lost a bunch of money when the dot com bubble burst or at some other time in the market, it can impact your willingness to enter into the unknown of what might happen. And that fluctuation, that fear could keep you from investing in the stock market. You may opt to take a much lower return on a savings account, or back in 2007, you may have felt like it was much safer, basically a guarantee to have your money in real estate. But when that bubble burst and a sure thing went away, that can make any investing that isn't under your mattress feel scary, even though, you know over time things tend to average out and really work out in a way that's much more predictable than it may seem on the surface. This does bring up an important thing that we tend to ignore, even certainties aren't certain, nothing is known for sure. So hopefully you can use that to help you be a little more open to taking on unknown opportunities instead of immediately disregarding them for the status quo. As with everything, when you present information, how you talk about it matters more than what you're saying. And how it's presented to you is an opportunity to consider. Is this everything that you should be thinking about? Is there more to this? Is there something else you can ask? So when you're presenting things, you can frame the information to highlight what is known to make it easier for someone to see the positive. If you dwell on all the things that aren't yet known, all the ambiguity and uncertainty, people probably won't like that, regardless of what the change is. If you really stress all the bad things and all this vagueness, it's just going to make people feel nervous and make them want to turn away from whatever you're presenting to them. It may feel like you're being honest and transparent and sharing all the research you've done and that you would want to know every little detail, but it's more likely to backfire. So find the balance of doing the due diligence that is very important and giving people the facts and sharing information in the best way possible to help people feel good about their decision. You can always find something ambiguous or unknown to dwell upon, because like I just said, even the certainties are never really certain. But if you do that with everything, you're never going to get anything done. So it's important to do that due diligence and find the right way to present information that's not going to get so sucked in on things that may feel risky because they're unknown. And like I said before, unknown may feel more risky, but that doesn't mean that it is. Those don't have to go together. So let's jump in on those applied examples I promised. First, I want to discuss change communication. You know that humans have an affinity for the status quo and that they don't like uncertainty and wondering about what might happen when a change is presented. And there are a lot of unknown elements in there, as there often are, it shouldn't be surprising that someone doubles down on their current experience. Even if it's objectively bad or risky or worse, it's than what they would potentially get in the new scenario. When you're presenting a change at work, there are so, so so many variables at play. And if you leave a lot of uncertainty and ambiguity, say you share too early or in an incomplete way, there's a good chance that people will rebel against that unknown future state, even if it's objectively better than where they are now. Considering what people need to know, when and what questions they might have, what matters to them and what will cause a strong aversion if it's ambiguous in a way that could ruin their feelings toward everything that's going to come after is important before you share anything now. A real problem I see a lot is that the person who already has the information can suffer from a confirmation bias focusing illusion problem where they feel a compulsion to to share much, much sooner than they should. The closest thing I relate this to is feeling both guilty that you know something other people don't and focusing on it. It feels like everyone knows and they're going to judge you and be mad at you if you didn't tell them when you knew the thing. Like you know a secret and it feels like everyone can tell you know a secret and it's all you can think about. This stress, this worry about being rejected from the herd can be really, really agonizing for people, especially if they're not prepared for it. So the real problem that can occur a lot and something that's unfathomably detrimental to change initiatives at work is when someone is given the information and it's ambiguous and they feel the need to get their own brain relief by reducing their mental burden and wanting someone to help fill void in a way that they'll find any possible way to justify telling someone else, or in some cases many someones, to cover up and kind of bury that uncertainty. This person may say they wanted to give someone a heads up as early as possible because it's the kindest thing to do that they deserve to know. The problem is this often backfires as the urge to tell comes before there's enough information where it would be valuable to tell. So let's say you tell someone in confidence about a big change that's coming so they have time to prepare. That's what you justify yourself. They need the time to prepare. You wish you would have been given that gift. So you may say, hey, I don't have any details yet, so don't say anything, but I wanted to give you a heads up that we might be merging or that the company's considering a rebrand, or I might get promoted and I need to recommend a replacement, or I might be moving to another job and want you you to know it might be on the horizon, or we may be moving to the other side of the office or there may be a whole new system coming. We need to prepare for whatever the change is. It doesn't really matter. When you drop this little bomb of possibility with no details, what good do you think can come from it? We've all done this, so promise. It isn't my intention to shame you. This is a natural human tendency to want to share. But how can this end well for you, the company and the person on the other side? There's a whole lot of uncertainty and unknown and ambiguity in that knowledge bomb and the mind will start racing with possibilities and speculation to fill the gaps as George Lowenstein has proposed. Curiosity is like an itch on the brain that we need anything we can find to scratch that itch. When there's information to be found, we can fill the gap with positive helpful learning when there isn't. Like in these scenarios, it can be gossip and fear and doomsday style planning for the worst. Just lots of speculation that's going to cause people to rebel against the potential future before it even has a chance to blossom. It may feel like a gift to give people information early because you think that's what you might want or what you would have wanted. Now you've heard me talk before about how people are really bad at predicting what they will want and what will make them happy. So know that what your brain is telling you you would have wanted or what other people will want isn't always correct and often it's wrong. As the manager or whatever level you are in the organization that you're getting information or you're being part of creating the Change Initiative projects, it is so critical to plan who gets to hear what, when and not under Share too early. Now I know you've heard of over sharing, but I'm warning you about sharing too little too early as it can unintentionally sabotage entire projects before they can have a chance to succeed. Everyone needs to be trained on how to share the information and when and make sure the message is properly framed with regards to all the ambiguous pieces that could cause people to revert to the known instead of embracing the possibilities of the unknown. If you're someone who's been known to share a little too early, if you related really closely to the don't say anything but scenario from before, I encourage you to take a step back and consider what your brain is trying to do for you, what it thinks it would want or wants now, and what is really the best, best thing to do for the person you're putting the burden of this information and all its unknowns upon as well as the business and project as a whole. Note how I very intentionally framed that Sharing information with someone too early is a burden you are putting on them. Is it worth it? Do they need to carry it? Sharing with them will not remove the knowledge from you or make anything less ambiguous in your space. So consider wisely because you you can't unring that bell. As I said, a misstep like this early on can set a whole initiative on a negative trajectory that is hard to undo if you aren't careful. So with all that being said, here are some questions you can ask yourself to help determine when it's the right time to share information first, why do I feel like I need to talk about this now? Is it to scratch my own brain itch of uncertainty? What can come from them hearing this information now? What's the best case scenario? What's the worst case scenario? What ambiguity exists that they might have questions about? If their brain was to start to spiral, what would it be on? What am I not thinking about? How much about telling them is for me feeling better versus helping them to be prepared? And is it worth putting that burden on them? What do we know now that can be shared with them? What information are we missing that we should have before sharing? What's the status quo or known risk they could revert to if we get this wrong? How will I and my bosses feel about this in the long run? What's the benefit of waiting? What's the consequence? As you can see, there's a lot to think through. And yes, these questions are all waiting for you on that freebie worksheet I mentioned, which is in the show notes@the brainybusiness.com 243 just forcing yourself to take a step back and having a calming breath as you consider what's really happening. Putting in some thoughtful, beneficial sludge can be really, really helpful when it comes to not under sharing too early. You may want to get out and take a walk or sleep on it, or whatever else you can do to gain perspective. And working that into your process can be really valuable for yourself and those around you who could benefit from not sharing too early as well. And as you can see from the questions, the hard part is in separating from your brain's logic and what it wants you to focus on, to really see the differing perspectives. You can gloss over those questions really quickly and say no, there's no downside. They need to know now. Or you could look for lots of other data that's going to prove you right, and that's not helpful here. Take the time to do the work. Really look for the opposites of what your brain is telling you and consider how your choices might change based on the framing or whether you may be gaining something or losing something, or that they are. How you like the known versus the unknown and what that might look like in this situation. What are their brain's choices and how's it going to fill in gaps? What's the worst possible scenario if you share the information too early, with too much uncertainty now? It doesn't all have to be doom and gloom, of course. There's always an opposite side of the problem. So the flip side of this is that you don't want to wait too long to share anything, because often people can start to sense that something is up if you're on the opposite side, always waiting until things are perfect and set in stone before you share even the tiny details. People can often tell something's happening, but they don't know what. And then there's curiosity and uncertainty and ambiguity all over that. On the other side, water cooler conversation is nothing but gossip about what might be going on and why it's being kept from us. The scenarios people build up in their heads are almost always worse than whatever's actually going on. And they may go looking for certainty somewhere else to say, another job at another organization where at least they know what they're getting. And so you don't want to unintentionally drive people away by not sharing enough about what's going on. So again, you really have to find the right balance and understand where ambiguities exist and how you can help people to feel like they have control and that they know what's going on, but without sharing too much information, because that can cause overwhelm, which is stressful and creates its own avoidance. So again, it's all about sharing the right information in the right way at the right time to the right people. Easy, right? I am linking to the episode on inequity aversion which talks about equality, equity and fairness and how to balance all that in business as they aren't all the same thing for our purposes right now. Remember that fair isn't always equal and different people need to hear different information at different times. And keeping that in mind, when you are sharing information can still be equitable, even if it's not equal. How you share information and when is so important in change management. This is basically the whole premise of my book. What your employees need and can't tell you and the it's not about the cookie framework. One of the big things you can work on is where the uncertainty is and framing the message to shift the focus to where there's certainty and things aren't quite as ambiguous. So let's tie this back to another example of sure things and certainty that totally went out the window when everything changed in a way that no one expected, which is the COVID 19 pandemic. The early days of COVID are such a perfect case study for what happens when we feel uncertainty and a lack of control and how it can spiral into everything. When people feel a lack of control and like they can't do anything to protect themselves or their families or their jobs, they may strive to find control in other areas, like hoarding toilet paper. It feels like you're doing something and can reduce some of that stress. I'm linking to my episode from the early days of COVID where I talked more about what's going on in our brains during a pandemic. But one thing to keep in mind from the business side is how differently the same scenario can feel depending on which side of the decision making situation you're on. So let me tell you more about what I mean. If you were in a position of authority in an organization in the early days of COVID it felt like things were going by at warp speed. You were scrambling and barely able to step away from your desk for a moment. Late nights, early morning, non stop stress. So many decisions. You're trying to figure out how you can move your entire office remotely and who need these computers and how to keep people employed and pay your bills and vendors and all these things. There are a lot of people who in those situations figured that everyone was in that same fast paced stress and so waiting to give updates until tomorrow or three days from now when we know more feels like the best thing. Maybe you said to yourself, people know we're working on it. They'll understand. They're busy too. But on the other side, time was not operating at the same speed at all. Every minute and hour was agonizing, waiting to hear the next statistic or find out what you were supposed to do. What the recommendations were refreshing the CDC website every 15 seconds and searching to see what other companies are doing and checking to see if there is an update yet from your company company on what you're supposed to do and if you even have a job to come back to. That uncertainty was agonizing and time took eons. Every minute you weren't Getting updates may have felt like things were being kept from you, especially if other companies were posting things publicly or you had friends and family members who knew what to expect and you didn't. People maybe were starting to wonder what it all really means and they were all, I don't want to say gossiping, but reaching out to other people and asking if they know. And so much productivity completely lost and people are stressing out and waiting for and speculating about what bad thing was going to be coming next. So what can you do? What do you do if you're on the side of being able to present information, the ones making the decisions, but maybe you don't have anything to say yet. This is a situation where the no update update is really helpful for companies to overcome that ambiguity aversion. So I know especially at this point when it feels like everything all eyes are on you. It's a really stressful time. You probably want to wait until everything is perfect to share and you want everyone's eyes on it. You really, really want to focus on it being perfect. But that rumor mill is going to be piling up in a way that is working against you. And you owe it to your employees to relieve some of that stress periodically to help them feel comfortable and safe, even when you're not able to give them a ton of stuff at one time. So this could have been done by saying that at 3pm every day you're going to send an update. And note in this case, 259 is not the same as 3:01. You always want to be posting earlier than you promised. So if you say 3:00pm better not be 3:01, make sure you're posting earlier than what you agree to. So because people, again those seconds are agonizing and give an update on what's being worked on, what you decided, what's next on the horizon, what you've put a pin in, what's going on. Share anything that you can. You could say something like today we met about laptops and decided that we need to send them out in three phases. In tomorrow's 3pm update, we'll send the list of who's in which phase and know that you're going to be paid for all your days of work, full days until you get your computer set up, even if you don't have one. There's no need to be stressing about your job. We have you covered. We also have these other five things on our list that we're going to be discussing in the coming days, but we're tabling them until the laptops can be provided and VPN can be set up as that the most critical next step. This is showing people that you're thinking about multiple things they are on the horizon. You're looking at health insurance or whatever else you know may matter, or child care or FMLA or whatever else you can have in that list. But say this is coming. We are talking about it. There's a team working on this but there isn't a decision yet is something you are wanting to share even if it feels like you're not really saying much of anything. You could even have it be saying nothing was decided today so we don't have definitive updates. But we met and made progress on laptops and setting up VPN access for those who don't have it yet and how we're going to handle calls and meetings from home. More to come in tomorrow's 3pm updates. Those no update updates can be really helpful again to diffuse some of that pressure when there's a lot going on and things are scary on the other side of the decision. And it doesn't have to be a pandemic, but standard changes, mergers or new reporting structures or rebrands or reorgs. All these things are points where you have a lot of ambiguity and uncertainty internally and what may feel like over sharing from the top of the organization is still going to feel like under sharing to the people who have lots and lots of questions. One note on the no update update before we move on is that you can't do too many of these in a row without actually sharing things before you are creating a new problem where people think you're not doing enough. So you need to again have balance and be really making decisions as you go and as clear with expectations as possible and over deliver again on promises. So don't say you're going to have an answer tomorrow and then say ooh now it's going to be Thursday. I mean Friday. That's going to make things worse. So be careful whenever making promises and setting public deadlines. Commit to things that are further out than what you really think you need. Because planning fallacy is real, especially in really high stress situations. And yes, I'm linking to episodes on planning fallacy and availability bias and herding and all the other things I've talked about. Bike shedding. They're all going to be in those show notes for you. And while there are a million possible examples and we could spend weeks talking about change communication, I'm going to leave that there of course every scenario is different and there's real nuance to this. So if you have follow up questions or if your company is coming up on some change or or in the midst of some and can tell that you really need help, send me an email. Melina atthebrainybusiness.com this is part of the consulting we do here at the Brainy Business to help companies better navigate change. I'd love to talk with you to see if we're a fit for each other. So send me an email to start that conversation. Again. Melina the brainy business.com all right, so let's look at the customer facing side of this now and this example is going to apply both to the experience design and how you pitch or advertise your products or services. We like to think that people want a lot of choices and to be treated as individuals with very unique experiences. While that can be true, there's also a real issue with the ambiguity side of things. If we allow ourselves to rest on the easy answer of its customers sometimes, not always, but more often than we might like to think, having a custom offering is an excuse to not commit to creating a process which is something that takes a lot of time and effort to produce. This is another take a step back moment to ask yourself if your custom experience is a crutch or really the best scenario. I'm guessing that whatever industry you're in, you could sell more if you had an unambiguous process that was clearly documented up front. When there's a lot of unknown, it can feel risky to take the leap, so your potential customers may delay making a choice or ask a lot of clarifying questions, or worse, go to a competitor whose process which may be inferior to yours is known and easily shared. When you can say once you sign your contract, you'll get an email with your intake forms to complete and once those are done, we kick things off with a 90 minute conversation to identify the goals and get the team acquainted. And after that we do interviews with staff. For most of our clients of your size and industry, this should be completed within two weeks. The review of those takes another two weeks and then we do this and then you get the idea. Now again, watch out for the overwhelm problem. But a clearly documented process feels safe and calming. And did you notice that most of our clients of your size and industry herding language when people feel uncertain, they're also more likely to look to what others like them do in this situation. So testimonials, social proof, case studies, and the like are all your friend in fighting ambiguity aversion. You don't want or need to share all the nuts and bolts, but at least let them know that there is a process. And don't let your brain tell you that you can't do this until you finalize every tiny nuance. Like you can't start until it's perfect because that is a bike shedding tactic. Document what you can and focus on those little pieces of what happens when people work with you. It can and will grow with time. And no, this doesn't mean you need to have a boxed set of offerings with no customization. I'm definitely not recommending that as customization is good. However, you need to customize from something that they can understand, a process they can grasp to know what they're buying and to help them feel comfortable, which allows them to ask about their own circumstances and potential tweaks to the norm. If you don't have this set up already, here are some simple questions to start with Again. These are on your free worksheet@the brainybusiness.com 243 so start by asking what happens every time? What should always happen first? What will the outcome be at the end if there's a deliverable what's always in that? What does it look like? What's the format? How much time should they expect to spend? Are there spots where you can include videos or forms that you don't have to be redoing things in the process every single time? This helps with efficiency too. You know there's a benefit for you on the other side. How long do things usually take? What can people give you without needing to be on a call or in a meeting? How can you make things automated and expected and what can you share with them up front? There's comfort in knowing there's enough experience to have a documented process. You owe it to your clients and customers to take the time to make this as easy and streamlined as possible. And the benefit is it's going to make it easier for people to choose you and do business with you as well as helping you to be more efficient and effective. It's a win win win win win. Alright, I think that is enough for your brain to chew on for a bit. So let's wrap things up on ambiguity and uncertainty aversion as you think about everything you've heard about in this episode today, what are you going to do first? Which process is most important for you? Is it on the internal communication side or more on your experience and customer Facing side Is it best for you to start by looking at your own reactions to things and see where you may be making a choice? That's all about avoiding uncertainty, even when the thing you're choosing is actually worse or has a higher chance of failure. Where could you take some more risks and see better outcomes if you embraced some of that uncertainty?
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So what got your brain buzzing as you learned about uncertainty aversion today? For me, I always go back to the power of the no update update. It's such a small thing, but it's so impactful and I love that sort of intervention. When the brain is overwhelmed with uncertainty, people will revert to the status quo. It's just the way it is. And when you're trying to implement changes at work, which really is something you're doing constantly, this is the enemy of the progress you want. The good news is you can help people feel a little safer, a little less uncertain, if you communicate just a little more often, assuming it's done in a thoughtful way. While I talked about this in the context of COVID communication in the original episode, this of course applies to many other scenarios. Take the massive shifts to AI going on right now. If you think your team members aren't concerned about their jobs and AI, let me tell you right now that you are mistaken. There are people feeling that fear whether you talk about it or not, whether you're looking at AI or not, whether you think they should be concerned or not. It's impacting the way they are showing up for work, whether they choose to articulate it or not. And sometimes they don't even consciously realize it. But you can proactively and thoughtfully communicate on a consistent schedule to help make that easier for everyone. When you have an update to share, give it in a clear way. When you don't share what you can and don't over promise and under deliver, it's never worth it. Be concrete and clear when you can and when you can't. Explain why and what you can share. Make it as tangible as possible to avoid that feeling of uncertainty that comes from abstract language. And of course, if you or your team are interested in training on this type of work, including how to frame problems and communicate in a more clear way. I'd love to talk. Send an email to melinathebrainybusiness.com or go to our website thebrainybusiness.com contact to schedule a time to chat with me. There are of course links in the show notes to make it easy, along with ways to connect on social media my top related books and past episodes and more. It's all waiting for you in the app you're listening to and@thebrainybusiness.com 565. And just like that, episode 565 on uncertainty aversion is done. 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 be thoughtful.
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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.