Book Review: Priceless, by William Poundstone

One might hope that the real estate bubble and 2008 bust might shatter once and for all the myth of the rational consumer, but unfortunately our profligate ways don't show any signs of slowing. John Stuart Mill coined the term homo economicus, to refer to an idealized human consumer who always behaved with rational self interest. Salespeople, however, whether hawking Cadillacs or Gucci loafers, have long realized that J.S. Mill was a little off the mark. When it comes to money, human beings are, well, more than a little bit crazy. While a few notable psychologists and economists have been chipping away at the efficient market hypothesis since the 1950s, their thinking hasn't yet trickled down to the business community. With his book Priceless: The Myth of Fair Value (and How to Take Advantage of it), William Poundstone finally takes the last 40 years of economic psychology from the lab to the showroom.

While the cover of Priceless shows a price tag in relief with successive markdowns and the subtitle includes the parenthetical "and how to take advantage of it," Priceless spends far more time on the history of economic psychology than the pricing games any prospective seller can play. That said, the source material that Poundstone is drawing from is exceptionally dry and often mathematical, so readers should be thankful that the author does an exceptional job of presenting difficult to grasp material in an entertaining and engaging way. Priceless is cut into short quick chapters that bounce quickly through decades of research and science using anecdote and analogy, before settling down into analysis and application about halfway through the book.

In the beginning Poundstone introduces us to several colorful characters such as S.S. Stevens. Stevens once created an entire fake optometrist's office on a moving gimbal to see how much lateral motion a subject could tolerate before getting queasy ... his work ensured that while present day skyscrapers may induce vertigo, they don't induce nausea. Later he introduces the Allais paradox, which proves, economically, that a bird in hand is worth two in the bush. Allais hit upon the idea that human beings treat certainty differently than risk. To illustrate, imagine how much you would pay to have a bullet removed from a gun with which you had to pay Russian roulette. If you're like most people, you'd pay more to remove one bullet from a gun that had only one in the chamber than you would to remove one bullet from a gun that had four in the chamber. Although in both cases your chances of survival improve by 1/6th, the comfort derived from removing the last bullet from a gun is very nearly priceless. These observations were initially cast as economic "paradoxes" until two Israeli psychologists demonstrated that virtually all human beings had systematic biases under uncertainty.

The work that Daniel Kahneman and Amos Tversky did in what they called "Prospect Theory" ultimately won Kahneman the Nobel Prize in economics, but their work on economic thought included other biases such as anchoring and ultimatums. Any of these topics is worth a book of its own, but Poundstone covers enough of each to give the reader a background sufficient to tackle the last section of the book, where he discusses the application of pricing theory in the real world. While anyone curious about the ultimatum game can consult Wikipedia (trust that Poundstone does an eminently more readable version), the best way to address anchoring and prospect theory is to deal with them in the real world.

Of the two, anchoring should be of far more interest to anyone in a sales job. Poundstone spends the whole book working up to the subject, and he does a masterful job. Put simply, nothing in the human sensory experience is absolute. As artists and designers, certain facets of this concept should be simple. Painters know that color is entirely relative. When a child draws the sun they place a yellow smear against a white background. Since the yellow rarely confers brightness sufficient to get the metaphor across, adults everywhere are forced to feign appreciation of radiating lines of "brightness" that totally fail to convey the spectacle that is our sun. An artist, however, takes advantage of contrast, using the darkest portions of their pallet right next to the spots that they want to look the brightest. Amazingly, price functions the same way. Want an ostrich handbag to look cheap? Place it next to a $7,000 alligator clutch.

Several common pieces of folk wisdom collapse when viewed through this lens. Although common wisdom states that job seekers should ask the employer to make the first salary offer, Poundstone dissents. Since prices are perceived on a relative basis, applicants should always request a salary figure. Simply by putting a number out there frames the conversation and sets the mark for the rest of the conversation. Obviously, the effect of highballing your salary demand fades as your salary demand gets larger, but simply asking for significantly more than you feel you deserve shifts the entire conversation upward.

For most people, price is an abstraction. It's an ordinal scale with no upper bound. Interestingly, price obeys a power law. How much money would you need to receive to be twice as happy as if you received $100 in an envelope? Chances are it's more than $200. Indeed, experimentally, most people say they'd need about $400 to be twice as happy ($100 times (2squared)). Aside from trial lawyers, however, most people don't think about price in this way. While large companies hire price consultants to help them navigate the inconsistent mind of the consumer, sole proprietors rarely have access to this sort of information.

Unfortunately, prospect theory, which won Kahneman and Tversky the Nobel Prize, is s a little harder to apply in the everyday world. Knowing that human beings value losses and gains asymmetrically is not a surefire way to make money unless you own a casino with some very complicated rules. Poundstone spends a significant portion of the book discussing the leading edge of behavioral economics, but those discussions don't quite square with the subtitle of his book. Although the cover implies that financial rewards can be gained by understanding the myth of fair value, the actual application of the concepts contained within is a little thornier. We're quite certain that any reader who picks up Priceless will find a variety of pricing tricks that they could apply to their business, it's hard to predict offhand which ones will work for them. Consequently, rather than being a how-to manual on exploiting irrational consumers in the shopping aisle, Priceless spends most of its pages explaining some rather arcane concepts that by their very nature resist understanding. As such, Pricelessstands as a wonderful eye opener to some little grasped facets of human behavior, but Core77's audience might have to do a little further research if they want to apply leading edge economic thinking to their particular product pricing today.

Theo Core77

Book Review: Change by Design, by Tim Brown

About halfway through Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation, Tim Brown repeats Tom Peter's much cited comment that "the MFA is the new MBA." In doing so, however, he doesn't fully endorse the sentiment. Instead Brown observes that the dynamic skills required in business share as much in common with the creativity required for a design practice as they do with the critical thinking required for the MBA. On the back of the book jacket the author observes, "this is not a book by designers for designers, this is a book for creative leaders who seek to infuse design thinking into every level of an organization." In that way it straddles the gulf between the MFA and the MBA. Clearly learning to draw is a far sight from learning how to run a discounted cash flow analysis and the skill set doesn't overlap. We need both MFAs and MBAs. But the crux of what Brown is getting at is what McKinsey & Company referred to as the "T-Shaped" person, where the vertical axis represents the depth of the skill set that forms their core competency. Valuable design thinkers, however, "cross the T," holding not only deep familiarity with their core role, but also a disposition for collaboration across enterprises. A "design thinker" isn't just an artist and isn't just a number-cruncher. Instead they need to be knowledgeable enough about each to be conversant: to be a member not of a multidisciplinary team but of an interdisciplinary team.

If this all sounds a little like business-jargon-tinged self-help ... well, it is. Business books tend to be written in a peculiar dialect somewhere between anecdote and allegory, and Change by Design is no exception. Perhaps owing to the Harvard Business School case method, it seems de rigeur in business books these days to present lessons as anecdotes about business interactions (e.g. Shimano's core business of bicycle sprockets and derailleurs was flattening) followed an analysis of the market and the causes of said shift. At the "B-School" the initial case would be followed by rigorous debate and a written analysis of what the company should do to change its position. In Change by Design, the reader learns what solutions IDEO reached (e.g. returning to the comfort and familiarity of coasting bikes from childhood). Regardless of the success of that coasting initiative, however, the real lesson is in the allegory as Brown provides that proves the centerpiece of the book: "The reason for the iterative, nonlinear nature of the journey is not that design thinkers are disorganized or undisciplined but that design thinking is an exploratory process; done right, it will inevitably make unexpected discoveries along the way, and it would be foolish not to find out where they lead." Reading that, then, perhaps industrial designers should be thrilled; the processes that we learned for "needsfinding" and "directed research" truly are akin to the case method. Perhaps that's what Peters was getting at after all.

But if Tim Brown was right, and this isn't a book "by designers for designers," what can we get out of it? The rigorous analytic thinking that MBAs learn in finance classes isn't presented here. Instead we see the softer/touchier side of "inspiration, ideation, implementation" of which long-time prototypers and experimenters should already be aware. IDEO, however, has managed to out-business corporate America through design, so perhaps there's something to be learned here. Ultimately, the difference between design and art is commerce and function, so most designers will eventually need to reach out or at least speak to corporate America. Through his years as CEO of IDEO, Brown knows as well as anyone how to communicate with suits ... even if he has an MFA. Consequently, while we (designers) may not be the target audience for the book, there is certainly something to be learned here for us to "cross the T" and speak to MBAs.

The first half of the book consists of multiple cases, from HBO to Marriott, that are all used to illustrate two core concepts: (1) The "design brief" and its inherent constraints make the design and (2) all design is "human centered" design, even if the people interviewed can't articulate their concerns. Some anecdotes are stronger than others. For us to hear about Kristian Simsarian strapping a camera below his hospital gown and experiencing a hospital visit at the SSM DePaul Health Center on a gurney should be enough to send most designers out into the field. Other commentary, like how Brown thinks it's important to let workers know that it's OK to fail seems like something that would be pinned to Dilbert's cubicle wall, however true it may be. That said, Brown throws out a lot of concepts and a lot of anecdotes. Some are bound to stick for each reader. As he observed about Linus Pauling's statement "To have a good idea, you must first have lots of ideas," well, Linus Pauling won two Nobel Prizes.

The early portion of the book struggles with the stifling realities of the corporate American workplace, even unintentionally demonstrating how binding cubicle life can be. Upon learning that a company like Mattel needed to create a "retreat" so that cross disciplinary employees can have a "fun" space in which to collaborate, this reader wondered couldn't help but wonder if it was that hard to have fun at a toy company, the rest of corporate America must be in trouble. Clearly the MFA is more fun than the MBA, but the MBA drives the world, ... and the economy. Perhaps there's something horribly ill about corporate America and that's what Brown is getting at. Either way, many of the case studies, even in their success, should serve as cautionary tales about the nature of corporate structure. Those of us who get our hands dirty, either with actual dirt and grease or with hot glue and Chartpak markers should be happy.

In the second half of the book called "Design Thinking Meets the Corporation," Brown begins to tackle enormous, near-insurmountable problems. From treating Procter & Gamble's ability to help housewives better clean their bathrooms in the early chapters, he lurches into the "big issues." A short story illustrating Oral-B's successful product launch of a toothbrush designed for the small and awkward hands of children, suddenly turns into an environmental parable when the lead designer of the toothbrush found one washed up on a beach in Mexico largely intact. Although not discussed in detail in the book, IDEO has shifted focus in recent years to pay more attention to global human problems, and that's a good thing. In the early pages, Brown talks about how important it is to have a well structured design brief in order to better frame the problem. In the latter pages, he even tackles the United Nations' Millennium Development Goals like "Eradicating extreme poverty." After a short admission that statement is too broad to form an effective design brief, he reframes it immediately as a series of more specific initiatives like: "How might we enable poor farmers to increase the productivity of their land through simple, low-cost products and services?" These are not simple questions, but as Charles Eames responded, when asked how whether he came up with his lounge chair in a flash of insight, replied yes, "a kind of 30-year flash." With people like Brown codifying design thinking, the tools are out there to solve our problems if a few people are willing to attack them with that sort of tenacity.

Theo Core77

Design of hard drives seeks to disappear

One of the things they taught us at ID school was that a product about to go extinct will, in its dying design throes, begin to resemble its successor; its designers will fruitlessly mimic the look of the incoming technology in a bid to prevent the incumbent from being eclipsed. Thus landline phones, the thinking goes, will in their last iteration look like cell phones, and even muscle cars like the Mustang of the '60s sadly started to look more like the Honda CVCC's of the '70s.

Which brings us to an interesting question: What will external hard drives look like before they disappear? Since the replacement technology--offsite storage--is invisible, what will they mimic?

In some cases they will mimic...nothing, or should we say, nothingness. For example LaCie's line of Sam-Hecht- and Neil-Poulton-designed hard drives are ultra-minimal black boxes with as much in the way of visual features as Wonder Woman's invisible jet.

On the other hand Seagate, which announced its revamped-design hard drives this morning, is mimicking something else sitting on some customers' desks--Apple laptops.

Both companies' designs seems to be trying to disappear, either vying for invisibility or seeking to blend into objects already on the desk surface like a chameleon. Almost like they're saying "Maybe if they can't see us, they won't throw us away!"

Theo Core77

Infectious Ideas: Using Antimicrobial Copper Alloys in Hospitals, by Alice Ro

Top: Hospital room with sani-station and touch-point hardware: grab bar, faucet, and light switch. Bottom: Sani-station in hospital lobby.

Copper Touch is a system of antimicrobial touch-point hardware and sani-stations (alcohol gel dispensers) designed to be deployed in hospitals to reduce infection. The system kills germs in areas people are most likely to touch while addressing some of the behavioral challenges of infection control: hand-washing and cleaning surfaces. The products also showcase the newly-proven antimicrobial properties of copper alloys; the sani-stations act as communication points to brand the material at the place where germs are top of mind.

The project began when the Copper Alloy Association (CDA) approached us at Pensa with the problem of encouraging hospitals, CDA's target market, to adopt copper alloys. Studies proving that these materials kill microbes faster and more effectively than any other antimicrobial material on the market and an EPA registration permitting health claims about these properties were not enough, so the CDA asked that we identify and design compelling hospital products that would inspire designers and manufacturers to use copper alloys wherever there was a need to fight infection.

Consistency, patient compliance, and error avoidance are all crucial factors in effective delivery of a therapy. This is the space where we excel: applying an understanding of human behavior to create solutions that work within our imperfect world.

To develop a solution, we first had to understand the challenges of infection control in hospitals and the experiences of a range of hospital stakeholders, including infection control officers, cleaning staff, administrators, doctors, nurses, patients, architects, and facility managers.

Antimicrobial effectiveness: copper vs. the competition. Copper alloys have also been proven to kill Staphylococcus aureus, Enterobacter aerogenes, Pseudomonas aeruginosa, and E. coli, in under two hours.

Design and medical science
The number of Americans who die every day from hospital-aquired infections (HAIs) is equivalent to one jumbo jet plane crashing every day, according to Donald Wright, MD, MPH, of the US Dept. of Health and Human Services. Surely, there would be an uproar if our society allowed for such continuing aviation disasters, but HAIs just don't have the same prominence in public awareness. Hospitals are under a lot of pressure to rectify the situation—pressure that includes the cessation of Medicare payments in cases of HAIs and several state laws mandating transparency or reporting of HAIs—but fixing the problem is a struggle. The problem of the quantity of infections is compounded by antibiotic resistant "super bugs," created by the overuse of antibiotics.

In a real hospital room, it's quickly obvious that microbes on surfaces aren't the only issue. How many people touched this table? How does it get cleaned?

"The tasks of medical science fall into three buckets. One is understanding disease biology. One is finding effective therapies. And one is insuring those therapies are delivered effectively. That third bucket has been almost totally ignored." —Peter Pronovost, pioneer of medical checklists

Through the work of Peter Pronovost, we came to understand that infection control is largely an issue of effective implementation. The medical establishment already knows how to prevent infection in an ideal world (hand-washing, for example), but they struggle to implement that knowledge effectively in the real world. Even beyond infection control, the issue of effective delivery is one of the major challenges in healthcare today. Consistency, patient compliance, and error avoidance are all crucial factors in effective delivery of a therapy. Fortunately for designers, this is the space where we excel: applying an understanding of human behavior to create solutions that work within our imperfect world. This is what we needed to achieve with copper: the CDA has already shown it kills microbes (effective therapy), but the key issue for us was effective implementation.

Wash your damn hands!
To help us identify what products most needed an antimicrobial surface, we spoke to many infection control officers. But time and again, as we tried to get an inkling of where copper alloys would be most beneficial, they responded with a variation of "That's nice, but we wouldn't need it at all if people would just wash their (damn) hands!"

Hand washing is the top weapon against the spread of infection.

What is the big deal about hand washing? Yes, it's key to preventing the spread of microbes, but why the frustration? It seems simple to do. But, the infection control profession has tried every educational method under the sun and papered hospitals with reminder posters, and compliance rates are still not sufficient. It became clear to us that the infection control officers' priority isn't a new technical solution (antimicrobial material), so much as a better behavioral solution.

Each piece of equipment has its own cleaning protocols, different people are responsible for different objects, and the systems for letting staff know whether an object has been cleaned are far from fool-proof.

This brought us back to the idea of design playing a crucial role in effective implementation—in this case, of hand-washing. Design changes have already proven quite effective at improving compliance. Architects practicing Evidenced Based Design—a movement in health care design that emphasizes measuring the impact of design interventions on patient outcomes and building on the results— showed that strategic placement of hand sanitizer dispensers and sinks leads to more hand washing. Maybe our solution could improve compliance in a similar way through product design.

Cleaning chaos
When observing hospital cleaning staff, we discovered that they deal with a surprising amount of complexity. Each piece of equipment has its own cleaning protocols to ensure it isn't damaged, different people are responsible for different types of objects (furniture vs. personal electronics vs. highly specialized medical technology), and the systems for letting staff know whether an object has been cleaned are far from fool-proof. This complexity leads cleaning managers to resist the introduction of new materials that require any special care, like polishing. We also found that cleaning, in general, is not very effective. Study after study showed dangerous microbes left behind even after thorough attention. It's another area in which hospitals are exerting a lot of effort but getting spotty results.

An improvised way to track if something needs to be cleaned.

Of course, copper alloy products would still need to be cleaned, but if we used low tarnish alloys, we could ensure that the cleaning staffs' work load would be unchanged. Cleaning could be made even easier by using only smooth, wipeable shapes. A distinctive look could be used as a reminder of key places to clean, like a visual checklist.

Infection control professionals realized that, while neither cleaning, handwashing, nor antimicrobial materials are enough on their own to prevent the spread of infection, combining tactics is very effective. They created "bundles," checklists of tasks that prevent infection together. Like bundles, our product(s) needed to work in a combination of ways to be successful.

Copper's tenacious mythology
The silver color on a quarter is a copper alloy—but hardly anyone knows it. In fact, nearly every designer and engineer we spoke to said the same thing about copper alloys: they're not hard, not strong, they tarnish, and they look old-fashioned. Architects feared using copper would result in a 'steampunk' hospital. But in fact, there are registered copper alloys that resist tarnish and rival steel in strength and hardness. These come in colors ranging from silver to yellow to red, and include nickel silver, brass, bronze, and copper nickel.

Copper and many of its alloys are already informally 'branded.' For example, copper is associated with electrical applications, cookware, and high quality plumbing, while brass is linked to sailing equipment. Our challenge was to create a new association with antimicrobial action while highlighting the material's unexpected capabilities.

Many administrators have come to recognize that the patient experience impacts outcomes; stressed patients recover more slowly. Ignoring the patient experience puts the hospital at a competitive disadvantage.

A patient's journey
Patients' perceptions of the safety of their hospitals, in terms of cleanliness, are based on the things they see during their first experiences there. Stefanie, a woman with an auto-immune disorder that required frequent infusions, described how her perception of one hospital was negative from the moment she entered the lobby. The dirty trash can beside the entrance immediately created a sense of mess and disorder. As she made her way through the hospital to the infusion department, she noticed all the doorknobs and elevator buttons she'd have to touch and worried about what germs could be growing there.

Trash can at a hospital entrance.

Fortunately, the hospital industry is beginning to pay more attention to the patient's point of view, diminishing unpleasant experiences like Stefanie's. Many administrators have come to recognize that the patient experience impacts outcomes; stressed patients recover more slowly. Ignoring the patient experience puts the hospital at a competitive disadvantage.

Copper Touch
Our insights and analysis led to Copper Touch (pdf), a system of touch point hardware—doorknobs, light switches, grab bars, wall guards, drawer pulls, etc.—punctuated with sani-stations dispensing alcohol gel. Imagine how different Stefanie's experience would be if she went to a Copper Touch hospital: When Stefanie first enters the hospital lobby, she sees a standing sani-station. She uses some hand-sanitizer and germs naturally come to mind. This makes the sani-station the perfect place to inform her about the importance of hand cleaning, antimicrobial copper alloys, and the safe-to-touch hardware throughout the hospital that shares the same style and logo. As she walks throughout the hospital, she sees more sani-stations on the walls that enable her to clean her hands and that remind and enable others to clean their hands as well.

Hall with wall sani-stations and touch point hardware: doorknobs, wall guards, push plates, and elevator buttons.

This approach is in line with the Broken Window Theory, which posits that shoddy environments encourage shoddy behaviors like vandalism, while well-cared for environments encourage good behavior. The cohesive look of the Copper Touch hardware serves to create an atmosphere that is conducive to best practices and keeps hand cleaning in the forefront of the minds of staff, visitors, and patients like Stefanie. It also provides Stefanie with a sense of security, knowing that this hospital has given infection prevention top priority.

Assorted Copper Touch hardware, made mostly of nickel silver ( a copper alloy that has a steel-like finish) with details in copper nickel (a pale peach alloy) to remind users of the copper content.

Design for health
This project was initially conceived with laboratory science addressing efficacy while design would simply contribute style and appeal. But shifting the focus to the real goal of lessening HAIs allowed Pensa to hone in on the issue of effective implementation of this exciting material. While Copper Touch's antimicrobial copper alloys protect common hospital touch points, the cumulative impact of the system also works towards changing human behavior and increasing hand washing, addressing the issue that concerns hospitals most.

In a larger sense, Pensa's design concept, the Copper Touch system, illustrates how effective delivery of a therapy (which in this case is antimicrobial material) is as necessary to success as the effectiveness of the therapy itself. The healthcare industry is in need of improved delivery of all sorts of treatments, and the knowledge and approach of designers will be crucial to addressing this need.

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Alice Ro is director of research and strategy at Pensa, a strategic design consultancy in Brooklyn. For more information about Copper Touch, download the project pdf here.

Theo Core77

New 1 Hour Design Challenge Launches TODAY! Theme: Gestural Interfaces

In our newest 1 Hour Design Challenge, Core77 and Seattle-based design firm Teague ask you to design a provocative gestural interface, using an everday object as a starting point. Teague will donate $500 in the name of the first place winner to NPower Seattle and in the name of the second place winner to Project H Design. The first place winner will also be awarded an Arduino Kit, to make those interfaces real.

THEME:
Gestural Interfaces

DOORS OPEN:
May 5, 2010

DOORS CLOSE:
May 31st, 2010
11:59 PM PST

BRIEF:
Digital interfaces, while compelling and empowering, drive us towards a flatness that's disorienting and boring. We're losing the richness that makes the physical world so compelling. Worse yet, we're replacing intuitive interactions with poor substitutes in our effort to make everything 'fit' on screen.

This 1 Hour Design Challenge invites designers to come up with a meaningful counterpoint to the all-in-one interface of the screen. You are tasked with creating a simple but engaging interaction that does not rely on a screen for input or output. You are free to appropriate an everyday object or to create a unique piece of geometry, but your solution must invite the user to interact with information or their surroundings in a way that encourages discovery while delivering an element of performance.

For example, in the diagram above, flipping over a chair switches an 'open' sign off. What if you could turn off your reading light by simply closing a book? What if your pen became heavier as you wrote larger checks? The best solutions combine object, ritual and context. What will yours be?

To learn more about the inspiration behind this challenge visit Teague.

HOW TO ENTER:
Participants must execute their design in only 1 hour, based on an honor system. Upload sketches, diagrams or hi-res photos and a brief text description of your design to the designated submission forum. To discuss the challenge and the entries, visit the 1HDC discussion forum.

JURY:
Winners will be selected by Core77 along with Ben Collette, Adam Kumpf and Tad Toulis from Teague.

CRITERIA:
Judging will be based on degree of innovation, strength of concept and ambition of idea.

PRIZE:
The first place winner will be awarded an Arduino kit and Teague will donate $500 in their name to NPower Seattle. The second Place winner will receive a $500 donation in their name to Project H Design.

ENTER NOW!

Theo Core77