Nudging – the Tool of Choice to Steer Consumer Behavior? Or What?

By Dirk Helbing (ETH Zurich/TU Delft/Complexity Science Hub Vienna)

Back in 2008, Thaler and Sunstein suggested “nudging” would be a great new way to improve health, wealth and happiness. The method was euphemistically called “liberal paternalism”, i.e. the nudger would be like a caring father, while the nudged one is claimed to have all the freedom to decide as preferred, even though he or she would often not notice he or she was tricked.

People would be helped by companies or the state with subconscious nudges to correct their so-called “misbehaviour”. This earned Richard Thaler the Nobel Prize – but not Cass Sunstein, who had written a critical book in the meantime, entitled “The Ethics of Influence”.

Let me say upfront that I don’t see a problem with putting the ecological energy mix on the top of a choice list or to label it “green energy”. This is pretty harmless. People understand the trick, but they will often anyway agree.

However, nobody ever told us that we would be nudged every day, all the time, with personalized information that is tailored to us with personal data that was collected about us mainly without our knowledge and agreement – effectively by means of mass surveillance.

This “big nudging”, which combines nudging with big (personal) data, must be criticized, as it undermines the very basis of our democracy, self-control, and human dignity.

Let us look back for a moment.

Already in the 60ies, the first climate studies by oil companies pointed out that there is a negative effect of carbon-based energy on climate. But for a long time, it seems nothing was done to change this.

Then, in the early 70ies, the Limits to Growth study warned us that, in a world with limited resources, we would sooner or later run into an economic and population collapse. No matter how the model parameters were changed, the predictions said humanity was doomed.

The Global 2000 study commissioned by then US president Jimmy Carter basically confirmed these predictions. However, it was again assumed that we would not change the system of equations, i.e. the socio-economic system we live in.

Finally, the United Nations established the Agenda 2030, pressing for urgent measures towards a sustainable planet.

So, 50 years after our sustainability problem was diagnosed, is “big nudging” really the best solution to our sustainability problems? Should companies digitally steer the behaviours of the people?

This kind of assumes that companies would be the good guys, who do the right things and should therefore have all conceivable freedoms: in particular, they should develop, produce and sell products as they like. The people, in contrast, would be kind of the bad guys, who show “misbehaviour”, as Richard Thaler would call it, and whose behaviours would therefore have to be corrected and controlled.

What would this mean? Let me give two examples:

• The above approach foresees that producers of sweet lemonades would sell unhealthy products and advertise for more consumption, while our health insurance would give us minus points for buying and drinking lemonades, and charge us higher tariffs. 
• The car industry would go on selling as many cars as they could, but politics or some citizen score would forbid most of us to use them most of the time. The Diesel scandal, which will forbid many car owners to use their cars in central parts of many cities, would be just a glimpse of what is to come.

Does such a model make sense? I am not convinced. Are you?

So, is the proposed solution, which comes under names such as profiling, targeting, neuromarketing, persuasive computing, big nudging, and scoring, really our saviour?

Unfortunately, as advanced as these technologies may be, they tend to be totalitarian in nature.

The Chinese Citizen Score, for example, has been heavily criticized by all major Western media.

But the situation in Western democracies is not so much different. Tristan Harris, who worked in a “control room” at Google, where public discourse was shaped, recently exposed the mind control of billions of people that a few tech companies exert every day.

Moreover, if one traces back the actors and history of the underlying technologies and science, we end up in the 1930ies with their infamous behavioural experiments. This link to fascist times and thinking doesn’t make things better.

How could things come that far?

We are living in a society, which thrives on the combination of two very successful systems: capitalism and democracy.

Unfortunately, this model is not good enough anymore. It hasn’t created a sustainable future, and so, as I have pointed out before, our world is heading for a doomsday scenario, if we don’t change our system.

Unfortunately also, neither the public nor scientists were informed well enough that – in the past 50 years – we should have done nothing else than re-invent society.

Furthermore, unfortunately, democracy and capitalism today do not have aligned goals. Capitalism tries to maximize profit, i.e. a one-dimensional quantity, while democracy should continuously increase human dignity, i.e. strive for multiple goals, including knowledge, health, well-being, empathy, peace, and opportunities to unfold individual talents.

Everyone should have understood that, if we did not manage to align the goals of both systems, one system would sooner or later crush the other system. It recently often appears it is democracy that would be crushed.

Let me shortly talk about the new kind of data-driven society that was created:

We now have a new monetary system, which is based on data. Data is the new oil. This data is mined by what we call “surveillance capitalism”, where people are the product.

We also live in a new kind of economy: the attention economy. People are flooded with information. Attention became a rare good, which is marketed among companies. This allows them to influence people’s consumption, opinions, emotions, decisions and behaviours.

We further have a new legal system: “code is law”. Algorithms decide what we can do and what we can’t. They are the new “laws of our society”. “Precrime” programs are just one example for this. The algorithmic laws, however, are usually not passed by our parliaments.

Altogether, this has also lead to a new political system: where companies such as Cambridge Analytica, Facebook and Google manipulate the choices of voters, and thereby undermine democracies and the free, unbiased competition of ideas.  

A digital sceptre, enabled by the combination of big data and nudging, would now allow to steer society and correct the claimed misbehaviours of people, as it is currently tested in China.

This “brave new world” was created without asking the people. It hasn’t been passed by parliament – at least not openly. While these developments have gone on for more than 15 years now, probably for decades, the public media have not informed us well and in advance.

We have been sleep-walking – and for a long time, we have not noticed the silent coup that was going on. But now we are discussing these developments, and that’s why democracy will win.

What do we need to do?

We must build “democratic capitalism”. This means to democratically upgrade capitalism and to digitally upgrade democracy.

We need information platforms and technologies, which have our constitutional, societal, cultural and ecological values in-built. We call this approach “design for values”.

And it’s coming. The IEEE, the biggest international association of engineers, is already working on standards for ethically aligned design.

What does design for values mean for our society? That the democratic principles, i.e. the lessons that we have learned over hundreds of years in terrible wars and bloody revolutions, would have to be built into our technologies.

This includes: human rights and human dignity, freedom and self-determination, pluralism and protection of minorities, the division of power, checks and balances, participatory opportunities, transparency, fairness, justice, legitimacy, anonymous and equal votes, as well as privacy in the sense of protection from misuse and exposure, and a right to be left alone.

How to enable informational self-determination in a big data world? Assume every one of us would have a personal data mailbox, where all the data created about us would have to be sent. The principle to be legally and technologically established would be that, in the future, we decide who is allowed to use what data for what purpose, period of time, and price. An AI-based digital assistant would help us administer our data according to our privacy and other preferences. Uses of personal data, also statistics created for science and for politics, would have to be transparently reported to the data mailbox.

With this approach, all personalized products and services would be possible, but companies would have to ask in advance and gain the trust of the people. This would create a competition for trust and eventually a trust-based digital society, in which we all want to live in.

Furthermore, we would have to upgrade our financial system towards a multi-dimensional real-time feedback system, as it can now be built by means of the Internet of Things and Blockchain Technology. Such a multi-dimensional incentive and coordination system is needed to manage complex systems more successfully and also to enable self-organizing, self-regulating systems.

So, assume we would measure – on separate scales – the externalities of our behaviour on the environment and other people, for example, noise, CO2 and waste produced, or knowledge, health, and the re-use of waste created. Suppose also that people would give these externalities a value or price in a subsidiary decision-process. (Some people would call this a tokenization of our world.) Then we could build our value system into our future financial system. I call this system the socio-ecological finance and coordination system (or finance system 4.0+).

People could then earn money with recycling. Companies could earn money for environmental-friendly or socially responsible production. In this way, new market forces would be unleashed that would let a circular and sharing economy emerge over time.

Personally, I don’t think there are not enough resources for everyone in the world. We don’t have an over-population problem. Our problem is rather that the organization of our economy is outdated.

I think we are living in a time, where we have to fundamentally re-organize our society and economy in the spirit of democratic capitalism, based on the values of our society.

I am also convinced that energy won’t be the bottleneck. But we will have to take new avenues. In the past, the focus was often on big solutions, which would produce energy for a lot of people. I propose that we should focus more on solutions, which are oriented at decentralized, local and more democratic energy production.

Modern physics knows that our universe is full of energy. In fact, it is totally made up from energy. It wouldn’t be plausible to assume we could not learn to use it.

I expect that a more democratic production and use of energy, goods and services will lead our society to an entirely new level. It is high time to focus on this transition, and how we can accomplish it together.

The instrument of City Olympics, i.e. of competitions of cities for sustainable and resilient open-source solutions to the world’s pressing problems could help us find the way.

The Blockchain Age: Awareness, Empowerment and Coordination

It may be the next step in human, social, cultural evolution

(Pdf of of this article can be downloaded here)

Currently there’s a lot of hype surrounding blockchain technology. But the best ways to use it are still to come. Blockchain is often seen as a revolutionary technology, a public decentralized registry that allows for trusted peer-to-peer transactions without middlemen such as banks or other institutions. Blockchain technology is used for new kinds of money and payment systems such as Bitcoin and Ether. However, it also enables to create distributed autonomous organizations (DAOs).

Besides the financial sector, blockchains may revolutionize supply chains, the health system, administrations, humanitarian aid and law enforcement. Like any other technology, however, one must pay attention to possible side effects and ethical implications. For example, if you are late paying the interest rates of your loan, you may not be able to rent a car, or your access to other services might be blocked.

In an over-regulated world, strict law enforcement might even make our economy and society inefficient and dysfunctional. Our old world used to be a world where it was possible to do things that were morally undesirable. With blockchain we are moving to a world where the morally undesirable is made impossible. Even though this may sound good at first, it may actually prevent learning from mistakes and, furthermore, seriously obstruct innovation – since innovation always challenges established solutions.

A further concern is the tendency that non-commercial content in the Internet may gradually be crowded out. Before we are able to get creative, we may then have to deal with a lot of intellectual property rights. To illustrate the implications, just imagine how ineffective it would be, if we had smart contracts for use of language and, therefore, had to pay for every word we use, when communicating with other people. This would be the end of shared culture as we know it.

Over-commercialization and loss of creative freedoms are, therefore, seriously issues to be considered. This is particularly important in times where automation is forcing us to be more creative, and access to data is very limited for ordinary people, start-ups, small and medium-size businesses. According to the WEF and OECD, wealth inequality is already a serious obstacle to economic growth. However, the inequality in accessible data volumes in today’s attention economy is even greater.

Nevertheless, if properly used, blockchain technology is a possible means to reach the next level of human, social, cultural evolution. It can provide society with awareness and collective memory, if the slowness and significant energy consumption of today’s blockchains can be overcome. It could be used to boost creativity, innovation, coordination, sustainability and resilience, hence, enable an entirely new, efficient and trustable organization of the world’s societies at large.

Human evolution depends on the ability to coordinate people with diverse interests and goals. When genetic favouritism (giving advantages to relatives) was partially replaced by direct reciprocity (“an eye for an eye, a tooth for a tooth”), societies reached the next level of cooperation. In the past centuries, cultural evolution has further progressed with the implementation of more sophisticated cooperation mechanisms such as “indirect reciprocity” (i.e. reputation- and trust-based systems). Now, with the invention of the blockchain and similar technologies, the next level of society appears to be within reach, as it is possible to establish trust in a peer-to-peer way even between selfish actors, without the need of intermediary institutions.

Blockchain is giving societies an unalterable ledger of our dealings with each other – a veritable registry, on the basis of which reputations can be assessed, and deceit can be unmasked. It is now possible to create collective awareness of how events are actually playing out and how they come about. Blockchain allows one to build a digital society, in which the legitimacy of interactions can be checked and verified.

Delft University of Technology has years of experience with primitive ledgers to record interactions. For instance, the BarterCast ledger records who shared Internet bandwidth with whom. Even when interactions are anonymous, such as in Bittorrent peer-to-peer file sharing environments, using interaction records it is easy to identify and discourage unfair, non-reciprocal use of resources in the system (here: bandwidth).

So, what does this ultimately imply for the way we may all interact in future societies? With the concept of decentralized autonomous organizations (DAOs), blockchain technology can not only cure all sorts of blown-up bureaucratic structures, by coordinating people, resources, and processes in more transparent and efficient ways. It will even allow one to build a new form of socio-ecological, liberal, efficient and democratic kind of capitalism. This will consider externalities of everyone’s activities on their environment and others by combining blockchain technology with the Internet of Things, creating a socio -ecological finance system. In such a way, it is possible to boost a sustainable circular and sharing economy, with a variety of incentives, i.e. new socio-economic feedbacks.

Evolutionary biology shows that human language has evolved to give us the ability to talk about each other. This has boosted survival in a life-threatening world. Next, social intelligence evolved. Now, blockchain technology may create a new basis of truth and trust. A tamper-proof escape from lying, cheating, and hurting others would be a major leap forward in human evolution. We can do this now.

Today’s world lacks memory and awareness of the reality we influence and which influences us. With blockchain technology this can now be changed. However, given that there are different ways of building a blockchain-based society, we must avoid to fall into the trap of a totalitarian post-privacy world, in which people might be restricted – and unnecessarily restrained in unfolding their knowledge, ideas, and talents. If we want to see a world with a level playing field for everyone, we need to insist on responsible blockchain innovations and on using distributed ledger mechanisms for the greater good, rather than allowing them to be usurped and harnessed by a very limited group of people for private interests.

It is important to figure out (e.g. by means of multi-player online games or Virtual Reality experiments) what information should be disclosed to whom and at what point in time, while avoiding harmful information asymmetries. Human dignity, socio-economic diversity, and the outcomes of social self-organization may significantly depend on this.

The digital society we have in mind would offer protection and fair opportunities to all, while fostering collective intelligence, based on the sharing of knowledge and ideas. Openness, interoperability, fair access, and participatory opportunities would allow everyone to stand on the shoulders of others, thereby boosting a thriving society without avoidable shortages. This new digital age would empower everyone to be better informed and more innovative. With a subsidiary form of organization, it would allow everybody to participate in the co-creation of the spheres of life we care about, while helping us to coordinate our creative forces. By considering externalities, this can now be done in a way that minimizes harm to the environment and others while maximizing beneficial effects. So, what are we waiting for? Let’s build the blockchain age together!

Authors

Jeroen van den Hoven is full professor of Ethics and Technology at Delft University of Technology and editor in chief of Ethics and Information Technology.

Johan Pouwelse is an associate professor of computer science at Delft University of Technology. He is founder of the TU Delft Blockchain Lab.

Dirk Helbing is full professor of Computational Social Science at ETH Zürich.

Stefan Klauser is a political scientist and fintech expert at ETH Zurich.

Global Reset: Upgrading Society in the Digital Age

By Dirk Helbing

Foreword

 

We are free. We are free to reinvent the world as we like. Most people have not realized it yet. However, even though the US military budget exceeds that of all other countries in the world together, the era of American supremacy has ended. Now that the USA needs to focus on its own domestic affairs, and we are left free to make our own choices. The people of the world can finally figure out their own ways of living – now that they have to. It is no longer necessary to wait until the USA and its strategic think tanks tell the rest of the world what to do.

This is actually a historic opportunity – for us, for the world, and for America, too. The America-dominated era had industrialized the world, and created previously unseen levels of luxury. It also created a financial industry to make it happen, and a digital infrastructure to watch and control the world. Yet, it has failed to solve the existential challenges of our planet: climate change, environmental destruction, resource depletion. This lack of sustainability is causing wars, mass migration, and a future heading for disaster. A new approach – one that brings people and nature in balance – is urgently needed.

It turns out that the reinvention of the world has already started. The digital revolution provides us the tools for a new historical age. Within the space of a few years, we have seen many new technologies, ranging from cloud computing to Big Data, from Artificial Intelligence (AI) to cognitive computing to robotics, from the Internet of Things to Blockchain technology, from Virtual Reality to 3D printing. Now is the perfect storm. All products, services, and business models can be digitally reinvented – and it is happening right now.

The world’s attention has turned to Google’s self-driving cars, Tesla’s electrical cars, and Uber’s transport as a service. While Germany, once famous for its car industry, has plagued by the diesel emission scandals. Suddenly, new players (such as Uber and Tesla) and outsiders (such as Google when it comes to cars) are invading well-established sectors of economy. And this is just the beginning...

The company AirBnb, even though it does not own any hotels, now sells the most overnight stays in the world. Bitcoin has reinvented money, and banks have started to worry about their future. 3D printers can now build entire houses in a single day for just 10,000 Dollars, and  a 57-storey skyscraper has been built in just 3 weeks. This is a revolution!

The digital revolution is also behind a new wave of automation – and it is bigger than any such wave before. Artificial intelligence systems can now read text, talk, and translate languages in real-time. They can recognize patterns and contents of pictures. They can learn anything that works according to rules or is repetitive. AI systems can therefore potentially take over anything from to administration of medical diagnoses, to jurisdiction. AI technology threatens not only low-skilled labour, but also white-collar jobs.

It becomes increasingly clear that no sector of economy will stay the same, and all institutions of society will change – without exception and within a very short time. For Europe, this is a particular concern, because the leading hardware, software, and data companies (with very few exceptions) are located in other continents. Even though “industry 4.0” seems to be successful in creating automated solutions for industrial production – do you know the names of the leading companies?.

This is probably a side effect of globalization as we know it. We thought that we do not have to excel in every single technology, and that every country would specialise in producing what it is best in, and buy the other technologies elsewhere. However, in the case of digital technologies, this was obviously a mistake. Now, we depend on hardware, software, and data we can’t trust anymore. As we will later see, the sovereignty of people, companies and countries is seriously under threat.

To date, it appears that Europe lacks a coherent digital strategy. We have a digital single market, but what are the products and services? Even if Europe would now manage to mobilize the capital, the patents, the technologies and labour force to generate the same growth rate as the Silicon Valley – this backlog would grow further and increasingly faster, because of the exponentially accelerating nature of the digital sector. This in principle would apply, if we continue the same digitization strategy.

However, there are alternatives. One approach that promises to produce faster than exponential growth is combinatorial innovation. This would be based on openness, and require sufficient interoperability based on a reciprocity principle in order not to be exploited. Such an approach would produce a participatory information and innovation ecosystem, in which everyone could benefit from.

The possibilities of the digital realm are unlimited, because the digital world is non-material in nature. This is a game-changer. If we understand and use this well, we can live in a world of sustainability, prosperity and peace. We could be world leaders in the creation of this new age – a new historical era! So, what are we waiting for?