Interview with Richard Seiler, Nobel laureate in economics: smart disclosure of untouched rough stones in China

This article first appeared on the WeChat public account: Harvard Business Review. The content of the article belongs to the author's personal opinion and does not represent the position of Hexun.com. Investors should act accordingly, at their own risk.

On the afternoon of October 9, 2017, the Royal Swedish Academy of Sciences announced that the 2017 Nobel Prize in Economics was awarded to Richard H. Thaler, Professor of Finance and Behavioral Sciences at the University of Chicago, for his contribution to the field of behavioral economics. .

In 2013, on the occasion of the publication of Professor Taylor's heavy article “The Information is More Spiritual, Buyers Are More Fine”, Xiaofoye paid an exclusive interview. At that time, AI, big data, etc. have not really attracted widespread attention, but Taylor's many application rules for selecting engines still apply to the business world now and in the future. The following is the full text of the interview. For the convenience of everyone, we will also present the excerpts of its heavy article "The Information is More Spiritual and the Buyers Are More Fine".

Richard H. Thaler

Richard Taylor is a very "alternative" economist. As a pioneer in modern behavioral economics and behavioral finance, he always looks at the paradoxes and anomalies in economics and then pioneering economics. Interpret it in conjunction with many disciplines that seem to be inconsistent. His partners also come from a variety of fields, including 2002 Nobel Laureate Daniel Kahneman, Professor of Law, Director of the Office of Information and Control Affairs of the Obama Administration, Kas Sunstein, and the more refined information buyers Another author of the book, Will Tucker, vice president of ideas42 at Harvard University think tank. Not only that, but the peculiarity of the interdisciplinary “alternative” master is that many of his insights are theories, methods, and experiences that can always be put into practice at an alarming rate.

The Harvard Business Review Chinese version (HBRC) published an exclusive interview with Taylor on the “Information is getting better and better”, in order to further explain the status quo and future of intelligent disclosure to Chinese readers.

HBRC: The selection engine is expected to give consumers more power. Recently, the US and UK governments have implemented a series of measures to improve the level of intelligent disclosure. Is the driving force behind them from voters, consumers, or shareholders? Is it possible to promote the development of selection engines in a market-based way of industry self-regulation?

Taylor: Efforts to improve the level of intelligent disclosure mainly come from the government. The market for selecting engines is only just beginning. The most mature development may be the selection engine market used in the tourism industry. Consumers can use the selection engine to search for hotel and ticket prices very efficiently. However, increasing cost transparency can further improve search efficiency.

How to regulate the selection engine market is an important issue. A first principle is that the business model of the selection engine should be transparent, for example, whether it receives a commission. Aggregated sites such as Kayak can regulate the selection engine, making it possible for the market to self-regulate, while the government or non-profit organization can also pretend to be a shopper to supervise the selection engine.

HBRC: The rise of the selection engine is based on intelligent disclosure. In your opinion, which step the US is now taking (if it is scored from 1 to 10)? How long does it take to fully realize?

Taylor: I think that the United States is just getting started in this respect. If you score in your way, it is about 2 to 3 points now. We still have a long way to go.

However, the selection engine is developing very fast. My Chicago recently disclosed the geographical location of the snowmobile in the city to the public. People can know when it is safer to go out after the heavy snow.

HBRC: What is the nature of behavioral economics? Has the theory you presented in this article been applied consciously?

Taylor: The essence of behavioral economics is that in a complex situation (such as when choosing a home loan), a highly rational economic model that is unmistakable does not explain all behaviors. Intelligent disclosure is designed to enable real-world consumers to make better choices.

HBRC: In China, the government's transparency and privacy protection are relatively weak, and how China should conduct intelligent disclosure.

Taylor: Smart Disclosure will be a major breakthrough in China, but it must be developed in parallel with privacy protection. Maybe it is still too early in China.

HBRC: Implementing smart disclosures requires deepening government regulation, and this may irritate those who oppose the “big government” from the bones. The big government has always been considered a Chinese tradition. What do you want to say to these opponents?

Taylor: I think smart disclosure can be a substitute for other more intrusive forms of regulation. For example, if there are smart disclosures for call packages, credit cards and mortgages, it may not be necessary for regulators to write down different types. The specific charges are compliant or not.

In general, the market is most effective when all costs are transparent and easily understood by consumers. Other applications of the smart disclosure concept can also make rating agencies less important.

For example, if all of the information on mortgage-backed securities (MBS) is readily available, anyone with the expertise and computing power can risk rating the securities. Basically, these information provided by the market can reduce the demand for specific rating agencies that have performed extremely poorly in recent years.

The more information, the more refined the buyer

Changes in technology change and disclosure rules will help consumers make more informed purchasing decisions. Get ready for the emerging "choice engine"!

Whether it is a highly educated expert or a government official, most of the audience cannot fully absorb all the information we pass and make the choice of maximizing profits. The reason is not that people are too careless or dull, nor are they interested in gaining benefits; rather, they are normal people and have the common problem of human beings: the inertia and limitations of rational thinking.

We always receive some very important but obscure information. Many people have done a lot of attempts to improve information disclosure, including the conversion of complex contract language into "flat language", but with little success. But we cannot rely on this to identify those who are trying to make a change in their ability or insufficiency. On the contrary, it only shows how difficult it is to explain complex things in simple language. Do not believe, you try to prepare a "lace instructions."

Despite the difficulties, we are still optimistic that with the effective combination of modern technology and new policies, the form of information disclosure will change, and the way in which many industries operate in the economic field will also change. Government-owned data and information disclosed by private companies will increasingly adopt “machine-readable” formats that will advance the development of new technology services –

"Choice Engine", the data interpretation technology.

For companies, the rise of choice engines is both a threat and a huge business opportunity. Information disclosure will make the market more effective, and those that use the means of deception, confusing, or using consumer information to collect inertia will eventually fail. The biggest winners will be companies that leverage new data resources to design products and services, especially those that use selection engines to help consumers make informed decisions.

This judgment sounds too good or terrible, so unbelievable, but the history of the Global Positioning System (GPS) can prove that this doubt is superfluous. Nowadays, GPS is everywhere, we have been ignorant of it, but in fact, until 2000, after the US government ordered the cancellation of the specific satellite data of the Ministry of Defense, GPS developed rapidly. In 2011 alone, GPS contributed about $90 billion to the US economy. We believe that compared to GPS, the choice of engine boom will bring greater and more significant changes to the national economy and the lives of consumers.

open

Government

Data sharing is undoubtedly the key to the success of GPS, and it is now running through all US government policies. Unprecedented data openness combined with advanced technology provides policymakers and business leaders with a valuable opportunity to create a virtuous circle of invisible – consumers, businesses and entrepreneurs will beneficial. Faced with such a huge value temptation, any modern economy is reluctant to miss the opportunity.

Successful entrepreneurial cases show that the government's information disclosure policy will quickly achieve economic returns. In 2008, San Diego's two brothers, Mike Alfred and Ryan Alfred, founded a company called BrightScope. The company is committed to assessing the endorsement plan 401(k) of US employers' regular contributions. When an independent third party began to evaluate an enterprise's pension plan, some interesting phenomena emerged. For example, when BrightScope gave a lower rating due to the high cost of a company's pension plan, the company's asset managers and program directors carefully reviewed the plan, each offering a lower-cost, higher-rated alternative. On another occasion, a member of the board of directors of the company was disappointed after viewing the BrightScope score of the company, so he took the company's pension plan directly to the board of directors for discussion. These explanations show that after companies disclose data according to government requirements, they can often find their own problems and improve them.

We are very much looking forward to the emergence of a large number of startups as the smart disclosure and selection engine begins to enter a period of rapid development.

magical

Intelligent disclosure

When policymakers turn their attention to the business world, their ideas for promoting information disclosure are similar to those in the public domain. The only possible difference is that the business sector is more extensive. Ironically, however, products and services are becoming more complex, making it harder to make informed purchasing decisions, and the potential benefits for businesses and consumers come from here. The good news is that we have a smartphone that allows us to do things we couldn't imagine ten years ago; the bad news is that we don't understand monthly smartphone bills.

But if you use the selection engine to process data, whether you are dealing with complex mortgages or simple electricity bills, we can grasp the key in the endless stream of new things. Just as Amazon and Netflix (online movie rental service) can help you decide which book to read and which movie to watch, the selection engine can help you make more important decisions.

“People don’t always make rational decisions as they wish,” says Daniel Kahneman, a Nobel laureate and behavioral economics pioneer. “People are affected by complicated appearances and are dragging and You won't pay attention to the small word terms. You have to create conditions for people to make better decisions for themselves."

Unfortunately, disclosure and regulatory policies have implicitly assumed a hypothesis: they only focus on the cost of obtaining information, and the structure and format of disclosure is not important. The chore of deciphering and understanding public information is lost to consumers.

The factors consumers need to consider are too complex and too many, so they have difficulty finding the products and services that best suit their needs. None of us can tell the average and peak value of the calls and data traffic that we use on our mobile phones (although our telecommunications companies can definitely), not to mention whether the prices offered by other telecommunications companies are more cost-effective or better (even Our suspicions are true). Even if the amount involved is higher, we are equally difficult to make rational choices. For example, when choosing a mortgage, even if the shop can save a lot of money, most people will choose the first offer they get. It is precisely because of this that companies are competing to devote time, energy and talent to confuse consumers' audio-visuals—for example, by cloning product features in small-word terms in carefully crafted text. Once companies use this means to capture market share, market efficiency, other companies and consumers will suffer.

A good electronic information disclosure mechanism should ensure that consumers know what they can get and can compare. The more consumers understand the characteristics and prices of the products and services they purchase, the less regulators intervene. In the book "Nudge:Improving Decisions About Health, Wealth and Happiness" published in 2009, Richard Seiler and Law The scholar, Cass R. Sunstein, proposed the RECAP framework (RECAP refers to records, evaluations, and optional price comparisons).

Both the Obama administration and the Cameron cabinet have adopted RECAP in a different way and have added a more catchy name to it. In the United States, it is called “intelligent disclosure”, which means “in time to publish complex information and data in a machine-readable standard format for consumers to make informed decisions.” In the UK, it is named “Self- "Midata", currently focusing on retail banking, energy and mobile communications data.

Selection engine

The coming of the age

Regardless of the name given, intelligent information disclosure can be classified into the following four categories:

Officially collected and released product and service data;

Personal data issued by the government (such as social insurance contributions and tax returns);

The price and characteristics of products and services that the government urges private companies to disclose electronically;

Government-supervised consumer personal data that products and service providers disclose to consumers.

Up to now, the first two categories of the above four types of intelligent disclosure have achieved initial results. Sometimes, what government agencies need to do is to find a better way to pass information. However, the more common situation is like the development of GPS - entrepreneurs will only have a substantial breakthrough if they finally find a new way to apply government data. For example, when many cities disclose real-time location information for subways and buses, developers quickly release apps designed for office workers. Next, entrepreneurs using the data provided by private companies to develop apps will launch a revolution in consumer decision-making and corporate decision-making.

The selection engine presents a different business model: the ticketing website is typically based on the extraction of fees; while the aggregation platform does not directly sell, it can earn advertising revenue. Of course, these services are not perfect. For example, it is difficult for you to learn how to charge for excess baggage or parking fees for hotels through these websites. Despite this, most people believe that it is easier for consumers to purchase products online in the travel market. Full implementation of smart disclosure will make all expenses as transparent as the price of air tickets or hotel rooms, thus further promoting the development of the online travel market.

Technology is not a hindrance to the selection engine from the testing phase to the subversion of the market. Of course, it is not because of insufficient information needs, lack of innovative ideas, and it is not lack of entrepreneurs who are struggling to make a difference. Nor is it because of the lack of information storage and information processing capabilities. On the contrary, hard disk prices are falling, and computer computing power is increasing. Strong, the network coverage of the population is getting wider and wider. The only obstacle is the ease of getting the data.

In many cases, the selection engine requires two types of data. One is the terms of sale: price, fine, time limit for payment, etc. The other is the use of data: Take the choice of the phone bill package as an example. If you do not carefully consider the changes in data consumption after the mobile phone upgrade, you can't choose the right one. Package.

There is no doubt that entrepreneurs have designed a selection engine like BillShrink that analyzes the usage of your mobile phone data and then suggests for the next call contract. But now, you need to provide BillShrink with your username and password on the mobile operator's website, and many consumers still have concerns. Even if this problem is solved, Bill Shrink has to "crawl" price data from competing carrier websites. If the price changes frequently, or if a different charge is made based on credits like a credit card, it is difficult for the selection engine to generate personalized recommendations. In such areas, modern market regulation can provide powerful help to the selection engine industry.

Admittedly, user data disclosure involves two important issues: privacy and security. Companies that provide data to consumers have been required to provide data in a secure manner, so companies using consumer personal data and providing them with appropriate services should not threaten personal privacy. In many cases, consumers can verify the accuracy of the data by obtaining personal data. But this does not mean that companies and governments do not have to emphasize security. For example, several family members may share a shopping card, the seller should allow the shopper to abandon data tracking for a specific reason, and the entire family should have the right to choose to withdraw collectively.

Richard H. Thaler, Will Tucker |

Richard H. Thaler is a professor of outstanding service behavioral science and economics at the University of Chicago Booth School of Business, Ralph and Dorothy Keller, and an important figure in the field of behavioral economics and behavioral finance. He and Kas Sonstein co-authored "Nudge: Improving Decisions About Health, Wealth and Happiness" (Penguin Press, 2009).

Will Tucker is vice president of ideas42 at Harvard University think tank.

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