Feb 9, 2014

Making Better Decisions

In middle school, I would use the Encyclopedia or go to the nearest public library to research homework assignments. 15 years have passed. When I sat down to research this blog, I googled "poverty and decision-making." In .31 seconds I retrieved 58,600,000 links. It has become completely normal for us to make several decisions based on the intake of massive amounts of information. I'm sure that by the time I have children, they'll laugh if I mention an Encyclopedia.

Most technologies in our current society advocate that we have access to information in increasing amount and complexity. The Power of Heuristics, a new paper released by ideas42 shows us that simple rules of thumb, heuristics, are what actually help us to make better decisions. Ideas42 is an organization that focuses on solving intricate social problems through the use of behavioral economics.

There are three reasons that ideas42 suggests heuristics for improved decision-making:

  1. Simple information is more easily absorbed and recalled
  2. Heuristics take less time to implement, which reduces the risk that people will procrastinate to implement them
  3. Providing a lot of secondary information can distract people from absorbing the key message

These same concepts can and have been applied to poverty reduction in the developing world. To give you an example, a typical person who lives in the Chennai, India slums may face several difficult decisions every day. A husband, the sole earner in the household, may only be able to find temporary work meaning household income is uncertain. The wife, who manages finances, is then uncertain about a slew of things from how much money should be rationed for meals to if the family can afford their children's school tuition. On top of this, studies have shown that the poor have increased cortisol levels, a steroid hormone due to stress, impairing decision-making even further.

It is clear that a household such as this can't afford any additional risk. In an ideal world, each product the household purchases is of high quality. With increasing choices in products, poor quality information, and impaired decision-making this rarely happens.

This is where TulaLens, the venture I am working on, steps in. Tula means balanced in Sanskrit. TulaLens hopes to utilize technology to increase connectivity and help the poor improve decision-making. As I described in my post, "A Marketplace for the Poor," customers can review and retrieve feedback on products using this system. Unlike the review sites that we normally use, a low-income person will type in the product they are looking for. TulaLens will provide information on the named product, specifically a few with the highest reviews in the user's area. Listing all products and the ratings and reviews that customers provide for each can be confusing for the consumer. On the other hand, providing streamlined information will make it easy for consumers to act.

TulaLens understands that reviews are one method to address a highly complex problem. However, the consumers we're working with agree that having reasonably good information beats having poor information or no information to make decisions any day.

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