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Social Innovation

Nobel Prize winner x Hitachi Special Talk vol.3
Society seen through
behavioral economics
Happier people are
37% more productive

What can data on human behavior and behavioral economics tell us? Before his special speech at the Hitachi Social Innovation Forum 2018 TOKYO in October 2018, Dr. Richard H. Thaler, a recipient of Nobel Prize in Economic Sciences and a professor at the University of Chicago spoke with Dr. Kazuo Yano, a Fellow at Hitachi, Ltd., who quantitatively measures and analyzes human behavior using wearable sensors. (Part 1 of 2)

What we learn from 12 years worth of “daily life data” from a former semiconductor researcher tells us

Yano I have been working at Hitachi for 34 years. In the first 20 years of my career, I had been involved in research in semiconductor business. However, 15 years ago, Hitachi decided to stop the semiconductor business, so I had to change my entire field from semiconductor devices and design to something new...

When we talked a lot what we should do next, computers and software would be very big business, but I thought data would become much bigger in the future. In 2004, there was no big data, but we bet our effort to that and started to measure human behavior.

In 2006, we built wearable sensors on the wrist or chest. Since then, more than 12 years of my life has been recorded in a computer.

Kazuo Yano Fellow and Corporate Officer at Hitachi, doctor of engineering, IEEE Fellow, Visiting Professor at School of Computing, Tokyo Institute of Technology
Joined Hitachi in 1984. In 1993, he achieved the world's first successful operation of single-electron memory at room temperature. Since 2004, he has led the world in wearable technology, as well as the collection and utilization of big data. He is known for his specialist breadth and depth from artificial intelligence to nanotechnology. His literary work, "Invisible Hand of Data: The Rule for People, Organizations, and Society Uncovered by Wearable Sensors" (Soshisha Publishing), was selected as one of BookVinegar's 2014 10 Best Business Books. He is a recipient of many international awards, including the 2007 MBE Erice Prize, and Best Paper at the 2012 International Conference on Social Informatics.

Thaler What are the sensors measuring?

Yano I measure my response, or my physical motion.

Thaler So, this graph is your history?

Yano That’s right. My movement is recorded 24 hours a day. Red shows that I am active, blue shows that I am still.

Thaler I am sorry to tell you, but you are getting older.

Yano Yes, exactly (laughs).

Thaler It is good to see you are sleeping well. Does the blue during the daytime indicate you are taking a nap?

Yano That is when I am travelling abroad, and there is a time difference.

Thaler Oh, I see. Maybe a business trip to New York.

Yano This is the day I moved into my new house.

Thaler No sleep, right?

Yano I was unpacking boxes all day long.

Thaler Has the type of data that is been collected been changing over time? For example, like you could add your heartbeat along the way?

Yano We eliminated. First we had it but as we were getting to know more about the depths of the information included in this physical motion, we decided to put more focus on analyzing physical motion.

Thaler That is surprising.

Yano This is a year’s worth of data from four individuals. Person B wakes up at five o’clock every morning. Person A wakes up late on weekends. Person C is showing the very flexible pattern by days.

Thaler Person C is probably very capricious.

Yano Maybe so.

You see these stripe-like shapes in Person C’s data show that the person is very regularly commuting, taking lunch and commuting back home.

The two lines shown in Person D’s data show that the person is changing trains twice everyday.

Thaler I see.

Yano Each piece of data alone is insignificant, but if you combine them, they have much higher meaning.

For example, you would think that each person is different according to their personality, values, or cultural background. However, when the quantitative data of physical motion for each person is accumulated, an identical shape emerges in accordance with a beautiful statistical law called U-shaped distribution.

Through another experiment, we learned that the characteristics of physical motion were strongly correlated with the person’s satisfaction and level of well-being, or simply happiness, which is thought to be more deeply embedded within human being.

Collaborative researches with psychologists

Yano These discoveries were just 10 years ago. Since then, we have collaborated with psychologists to study how to extract deeper meaning from the physical motion data.

One of our collaboration case is with Professor Mihaly Csikszentmihalyi at Claremont Graduate University regarding the correlation with the motion of focusing at work. Professor Csikszentmihalyi is well-known for naming the psychological state “flow,” in which a person performing an activity is fully immersed and feel enjoyment from that activity.

Thaler He also served as the head of the Department of Psychology here at the University of Chicago.

Yano That’s right. In the joint research with Professor Csikszentmihalyi, we discovered that people who often become immersed during their activities tend to maintain a certain physical motion pattern. We have published with him about this discovery.

We have also collaborated with Professor Sonja Lyubomirsky from University of California, Riverside, who is famous for happiness quantification. In an experiment we conducted together, we discovered that just by writing three good things that happened that week makes people happier and their physical motion becomes much more active in the morning.

Another person we are collaborating with is Professor Fred Luthans, an authoritative figure in organizational behavior studies. The subject of this research is whether a correlation can be found between the positive and developmental state of an individual -- called “psychological capital” --and physical motion data. Whether happiness can be generated through training or accumulating experience is another important topic.

Happier people are 37% more productive

Yano Anyway, for the last ten years, even before concepts like the Internet of things (IoT) or big data came into place, we have measured human behavior data and put some meaning to it in collaboration with psychologists.

By analyzing a massive amount of data, we now know that those that with a high degree of happiness are competent at work. Quantitatively speaking, happy people are 37% more productive and 300% more creative on average.

When employees can work happily, it benefits both the employee and the company. We have conducted many experiments pertaining to improving productivity by raising the happiness level.

Thaler That is very interesting. By the way, do you provide feedback to the individuals that are wearing the devices?

Yano Yes, this is just one example, but two years ago, we asked 600 sales persons at Hitachi to wear a badge-type sensor. As well as physical motion, we measured face-to-face communication in the workplace. Then the captured data was ultimately analyzed by artificial intelligence to study what kind of behavior, use of time, or communication is correlated with the actual happiness of the people,

Thaler That sounds very interesting.

Yano At first, it was something very small like the task meter shows that you are better to meet your boss in the morning rather than in the afternoon.

And actually, it matters a lot and the team who used that application got happier next month significantly and the team who have got happier had achieved 27% productivity enhancement.

Thaler So you were able to experiment that by improving the activation level of individuals and organizations, productivity along with the employee’s level of happiness can be enhanced.

Utility function in behavioral economics

Yano You named the concept of “Nudge” as a method to guide people to favor the desired outcome. I believe that improving happiness or productivity by holding meetings in the morning is similar to “Nudge.”.

In your book, you also wrote on happiness. It seems that the utility function in traditional economics is quite different in behavioral economics.

Thaler For example, under the premise that marginal utility of wealth gradually diminishes, traditional economics assumes that even when the wealth of a high-earning individual increases by a small amount due to extraordinary income, its utility is minimal. In behavioral economics, on the other hand, a change in wealth is considered more important than the state of wealth.

When an opportunity to profit is within reach, people tend to avoid the risk of not gaining the said profit. When the potential for loss is expected, people tend to act toward preventing that loss.

Richard Thaler, recipient of the Nobel Memorial Prize in Economic Sciences and professor at the University of Chicago Booth School of Business
Thaler received the Nobel Memorial Prize in Economic Sciences in 2017 for his contributions to behavioral economics. He studies behavioral economics, which is the interdisciplinary science between economics and psychology, as well as studying finance and decision making science. Thaler is the co-author of the global best seller “Nudge.” His other major publications include “Misbehaving.” Thaler taught at Cornell University, MIT Sloan School of Management, and Center for Advanced Study in the Behavioral Sciences at Stanford University among others, before joining the University of Chicago faculty in 1995. He is a member of the American Academy of Arts and Sciences, a Fellow of the American Finance Association and the Econometric Society, and in 2015 served as the President of the American Economic Association. 

Yano If technology can be used to obtain specific data on changes in happiness or satisfaction, I believe we can analyze human happiness in much more detail and visualize emotional changes in people’s daily lives. What do you think is the potential?

Thaler Well, my friend and a behavioral economist Daniel Kahneman (a recipient of Nobel Prize in Economic Sciences in 2002), is very interested in this topic and for 20 years, he has been interested in trying to measure happiness. He’d certainly be interested in this research.

He and his staff conducted phone surveys to people and ask how happy the interviewees are and what they are doing at different times of the day. As a result, they discovered things like how people hate to commute, or how people don’t like taking care of their children, though they love them. This is literally the dawn of big data utilization.

However, when using big data, the data needs to be anonymized and privacy must be respected. This is the responsibility of companies that possess data.

Social media companies are currently facing serious issues. The future of the firms really depends on they can solve this problem.

Yano Privacy is definitely a major issue.

Thaler Anyway, the role of behavioral economics is let people to make choices that are more satisfiable and happier with by considering people’s emotional mechanisms.

Dr. Yano, your study focuses on quantifying and improving happiness levels through technology. The objective of trying to achieve a happier society, as well as the approach of collecting, analyzing, and verifying data through experiments are just a few of the many things that we have in common.(Continued in Vol. 4

Release Date:October 2018
Production:NewsPicks Brand Design