Why Product Nerds and Behavioral Nerds Should Be Best of Friends – I recently had the pleasure of sitting with Jordan Birnbaum, the Chief Behavioral Economist at ADP Ventures to talk about how Product Nerds and Behavioral Economists can co-exist to create better products. Jordan and I sit just feet from one another each workday, and so it was exciting to take both of our expertise and merge them together in this interview. Here is part one…
Dominic: Jordan Birnbaum. Tell us a bit about yourself. What got you here?
Jordan: Oh here I could take the whole hour.
Dominic: Let’s let’s take the next two minutes…Lol.
Jordan: I started along the entrepreneurial path. Mainly having to do with startups in various fields, and I realized along the way that I was incredibly fascinated by the science of motivation. So later in life, I had an opportunity to go back to school and get my Master’s in industrial and organizational psychology, which led me to the field of Behavioral economics. My career plan was to launch a Consulting practice centered on the Nexus of Behavioral economics and Industrial-organizational psychology. The first big client that I landed was this company called ADP and I came in to help in the application of Behavioral economics into new product development. The timing was particularly good because EDP was just beginning a product called Columbus that was in its absolute infancy. And so having had the opportunity to come in and contribute to the development of that, ADP eventually made me an offer I couldn’t refuse and I came on full time as she favored lock promised awesome.
Dominic: So if you were to describe to a Product Nerd who has never come across an IO Psychology professional before, how would you describe that discipline and that area of expertise?
Jordan: Well, I can give you both a high level and micro level. So at the high level I would say it is the psychology of work. It’s understanding what happens in the workplace and how we can do better and so high level that encompasses everything relating to people and that’s why sometimes IO Psychology is considered the science behind HR, but at a more granular level, I can tell you exactly what IO psychology is.
So, generally speaking, “I” is the industrial and “O” is the organizational and they tend to split based on quantitative versus qualitative. So industrial psychology includes training, Personnel selection, and Performance Management. These are all Quant heavy exercises that can be statistically analyzed and because they are so tangible. They lend themselves to significant measurement.
On the flip side organizational psychology, which is just as important, is just a lot harder to measure so organizational psychology tends to be more on the qualitative side and that includes leadership motivation and organizational development. This is where we are now focused on the less tangible dynamics that have a huge impact on performance understanding and how we can try to capture those how we can try to coach towards those and what kinds of interventions would be most impactful in various kinds of corporate environments.
And then the last piece of IO psychology is not mentioned in the name, but its R which is for research. With any social science having a firm grasp of Statistics is crucial because you need it in order to be able to evaluate whether or not something is real. So without some working knowledge of Statistics, you cannot practice IO psychology.
Dominic: So I’m going to flip the script a little bit and ask you from your understanding what is Product Management?
Jordan: I think that product management as holistic ownership of everything that the user experiences and so when I think about a product, what I conceptualize are someone using it and ultimately that is what matters that is where the impact is happening. And so if someone is a product owner or a product manager, I would think that they would probably have a maniacal focus on user experience. And I know as I say this I’m starting to sound a little bit like the old Amazon, you know crazy focus on the customer. I do think that the Amazon focus on the customer is the best practice for a product manager.
Dominic: Cool. I agree by the way. So you talk about research being a big part of IO psychology. So in this day and time right now, what are some of the behavioral trends that you’re seeing in the research that is producing insights you think most product managers should know about or should at least delve a little bit into to understand related to human behavior?
Jordan: Okay, so I’m actually going to Pivot on your question a little bit and then I promise we’ll get back to it. But I think to be able to answer that question best. I have to first differentiate between behavioral economics and IO psychology, okay?
So I gave you a very in-depth description of IO psychology. And what I would say is that another way to define IO psychology which is behavioral economics focused exclusively on the workforce. So if you think about what we were talking about within an organization now, think about the whole world and try to capture it and that’s the behavioral economics piece. So the definition I suppose I would say is that IO psychology is to behavioral economics like a detective is to a police officer. All types of police officers are not detectives. All IO psychology is behavioral economics, but not all behavioral economics is IO psychology, got it?
So behavioral economics is the study of how people actually behave. Now that sounds kind of almost absurdly simple until you realize that classical economics is actually the study of how people ought to behave when driven by Perfect rationality. Now classical economics is hugely important for more reasons than I can possibly articulate. But if we are going to assume perfect rationality and human beings in the real world, we’re going to make some really bad guesses. And so this field of Behavioral economics has sprouted up and is more psychology than it is economics. Instead of assuming rationality in any given decision-making context we’re measuring to see what gets in the way of good decision-making. We’re trying to figure out what happens in The Human Experience where behaviors don’t necessarily match conscious intentions. Or people are making decisions that are unquestionably against their own self-interests and yet it will continue to make the same “mistake” time and again, and so the field of Behavioral economics is really trying to understand what’s responsible for this what is causing this systemic mistakes or systemic irrationality and trying to figure out what those causes are so that we can start to anticipate them and counter-program for them.
And so one word that has become explosively popular over the last decade is the word nudge and a nudge is a shorthand for a behavioral intervention some type of user engagement or interaction that is intended to provide them with guidance. How to make the best decision for themselves but without forcing it because as well learn, whenever you try to force people to do anything you’re actually encouraging them to do the exact opposite. So having this understanding of Behavioral economics can be very useful to answer your original question.
But what I will do first is just provide the most basic example of Behavioral economics to make it a little bit easier to conceptualize and we’re going to use the example of framing. A doctor can say to you you have contracted a disease with a 90% survival rate OR the doctor says you have contracted a disease with a 10% mortality rate. Scientifically speaking that is identical information – yet Human beings will have massively different reactions to hearing either of those two sentences and it will have a meaningful difference in their subsequent Behavior.
So when we talk about rationality, this is it. Now I’m not saying it’s not understandable. I would much rather hear about my disease in terms of survival rate, but it is irrational because if we were perfectly rational beings we should have an identical reaction to identical information. And so that’s what we’re talking about with behavioral economics trying to get a sense of where people’s irrationality might come into play so that we can try to help them avoid it.
To be continued…