Changing behaviour: loss aversion and the “Anti-charity”

Posted by Kevin Bishop - May 26, 2011
Filed in Changing behaviour

“If, when you think of one, you get a sharp intake of breath and start to feel a steely resolve inside to follow through, it’s probably the right one”.

What was my friend Toby talking about that would have such an impact on me?  The answer – an Anti-charity.

The concept of the Anti-charity comes from stickK a website started in 2007 by two Yale University professors, Dean Karlan and Ian Ayres.

During graduate school at M.I.T., Karlan and a colleague, John Romalis, made a wager to lose 40 pounds each and to referee one another so as to stay on target.  They created a contract to do this, and both signed up.  They also promised to pay each other $10,000 if they didn’t lose the weight by an agreed date.   If they both both failed, the one who failed by least would get $5,000.

They were using the concept found in behavioural economics called loss aversion.  Loss aversion refers to people’s tendency to strongly prefer avoiding losses to acquiring gains.  It implies that someone who loses $100 will lose more satisfaction than another person will gain satisfaction from a $100 windfall.  Some studies suggest that losses are twice as powerful, psychologically, as gains. (*1)

Happily, both Karlin and Romalis succeeded in shedding the pounds and in 2007 Karlin and some other colleagues launched stickK, a website based on this contractual approach to achieving tough personal goals.

Users set up a “commitment contract” where they agree to achieve a certain goal, such as losing weight, exercising more, quitting smoking, or conserving energy.  As part of the typical contract, an independent referee must be appointed to monitor whether the goal has been reached and to inform stickK.

And if the contract is broken?

When setting up the contract you can commit a certain amount of money to be forfeited if you don’t complete a task (i.e. $5 every time you didn’t go the gym when you committed too).  The money could go to a friend, a charity you choose, or the one that really got me interested was the money would go to an Anti-charity.

An Anti-charity is any organisation whose views you strongly oppose, or one which promotes values that are most contrary to your own.  As they say on the website;

“The purpose of an Anti-charity is to provide an added incentive for you to achieve your goal. By designating an Anti-charity as your recipient of stakes, you’ll certainly work that much harder to ensure that your money never falls into the wrong hands.”

So for example is you were:

  • a very happy smoker who was worried about the number of challenges of your right to smoke, the money could go to say the Non Smokers; Movement of Australia who are, according to their website, there; “Protecting the rights of the Non-smoking majority from tobacco smoke and from the tobacco industry’s propaganda“.
  • a practising Christian the money could go to the Atheist Foundation of Australia (or vice versa)
  • someone who was working to reduce the effects of climate change and educate others to do the same, your forfeited money could go to the US organisation ‘The Stop Climate Chaos Coalition’
  • a proud gun owner who believed in your right to keep and bear arms your Anti-charity could be the Educational Fund to Stop Gun Violence
  • a sports fan, and the money would go to your arch enemies supporters club (i.e. a supporter of Carlton footie club here in Melbourne and the money going to Collingwood, or to the NSW State of Origin fund if you were from Queensland, or to Celtic Football Club if you supported Glasgow Rangers).

When we first started using stickK, Toby and I decided to test a few things out.  His challenge was to cook himself a home cooked meal every night for three months.  Not that easy for an early 20s, single bloke, living alone, surrounded by takeaways.  For me it was about exercise and undertaking some form of it three times a week.

We started off setting up any forfeits we incurred to go to a charity.  However what we quickly found was that it had no impact on whether we did the task or not.  What was the worse outcome if I didn’t exercise, $5 would go to World Vision?  Didn’t feel like much of a punishment.

We therefore changed it to for the money to go to our Anti-Charity and that is where the conversation that started this blog came from.  When, as an Arsenal football (soccer) fan, Toby said the $5 could go the the Tottenham Hotspurs (Spurs) Supporters club (our arch enemies), I had the exact reaction he mentioned - a sharp intake of breath and start to feel a steely resolve inside to follow through.

Our natural desire to avoid loss, coupled with the concept of the Anti-charity really resonated with me and did play a part in me exercising far more regularly.  The thought of paying out to a bunch of Spurs fans if I didn’t meet my commitments to exercise, had me reaching for the phone to make that squash court booking right then and there!

 

(*1) Kahneman, D. & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica 47, 263-291.

 

2 Responses to “Changing behaviour: loss aversion and the “Anti-charity””

  1. Elizabeth Says:

    Hi Kevin
    Haven’t you got the smoking example back to front?

  2. Kevin Bishop Says:

    Hi Elizabeth – great spot! Have now updated the blog post and changed that example. Thanks for pointing it out