The Power of Defaults

The below chart shows the organ donation consent rate for a number of countries in Europe. What’s striking is tat countries which one would imagine are fairly similar such as Denmark and Sweden have stark differences in consent rates.

What might explain these differences? In countries such as Denmark and Netherlands, organ donation consent is “opt-in”, meaning people have to fill in a form and check a box to choose to donate their organs. In countries such as Austria and Sweden, organ donation consent is presumed. People who don’t want to donate their organs have to essentially fill out a form to “opt-out”, meaning by default people consent to donate their organs.

The large difference in organ consent rates is essentially caused by a difference in defaults in the two sets of countries and illustrates the power of defaults.

The default effect is the phenomenon where making an option the default among a set of choices increases the likelihood of it being chosen.

Where does the default effect come from?

Now if you’re getting worried about your free will, fret not. There are a number of reasons for the default effect — some of which are even rationale.

Effort

Choosing something that isn’t the default requires some effort. And we all know that people are lazy and don’t want to put in effort.

The effort required could vary from a lot (such as having to filling out a form and mailing it in to change something) to almost nothing (such as changing something from the default option on a dropdown while filling out a form online).

In general, “laziness” aside, it is rational for a user to stick with the default if the incremental benefit from switching is less than the effort required to do so.

An area where this plays out is default apps on phones. For example, Google Maps is widely regarded as being better than Apple Maps on iOS, but Apple Maps comes pre-installed on iOS and is the default. Unsurprisingly, it is used almost 3x as often as Google Maps¹ on the iPhone.

One thing to note is that when it initially launched, Apple Maps was so bad that many users felt the need to install Google Maps. As it has continued to improve, even though Google Maps might still be better, since the gap has narrowed, but the “cost” to switch is about the same as it was before, it makes sense for less new iOS users to make that switch because the cost is the same but the benefit from the switch is less for them, so one can imagine over time, less and less new iPhone users will feel the need to download Google Maps.

Risk and Loss Aversion

Often the default (especially if the person with a choice trusts the intermediary providing the options) is viewed as the recommended option. In such a situation, switching away from the option might be deemed risky, in that the person making a decision might feel that they aren’t considering some factors that the knowledgable party made when setting the default.

This factor tends to be particularly important when people are deciding between choices that they aren’t very familiar with or are complex or when the party presenting the choices is trustworthy.

For example, data from Vanguard Research shows that among new hires, participation rates in retirement saving plans more than double to 91% under automatic enrollment compared with 42% under voluntary enrollment. In this case because people trust their employer (among other factors), they feel good about sticking with their employers “recommendation” of being enrolled in a retirement plan.

Additionally, people tend to view the default option as the base case (or “already in the bag”). If outcomes are uncertain and switching to another option could lead to a gain or a loss, then people tend to be more averse to the potential loss from the switch, and so tend to stick with the default.

Changing of Norms

Over time, it’s possible that the the way defaults are set can change the meaning of the choices themselves, and so over time lead to even more people choosing the default option, thus re-enforcing the default effect.

Going back to the organ donor example presented at the start, the chart below shows how people in an opt-in country perceive donating their organs relative to those in an opt-out country. As you can see, in the opt-out country, donating organs is viewed as not a big deal. But in the opt-in country, it’s viewed as a very generous act, akin to giving away half you wealth. Other options are viewed similarly, indicating that cultural and other differences are minimal.

What this essentially shows is that because of the default effect, the actual act associated with the default is over time viewed as less substantial. In such a way, the setting of the default has actually over time changed people’s views of whether a certain act was a big deal or not.

The good and the bad

The default effect can clearly nudge people and influence their choices. As one might imagine, it has been used both for good and bad in the past.

Take the organ donor example, where using opt-out consent as a default was clearly a good thing. Or take the example of Disney which changed the default choices in its kids’ meals from soda to juice and french fries to fruits and vegetables. Guess what happened? Kids consumed 21% fewer calories and 40% less fat and sodium.

But on the flipside, consider that until fairly recently banks by default included overdraft protection from consumers, which was one of the biggest source of revenue for banks. They made $38.5 billion in fees from overdrawn accounts in 2009. In order to better protect consumers, the Fed began requiring that banks secure explicit opt-in from consumers for the service in 2010, essentially changing the default by regulation.⁵

Now that you’re familiar with the default effect you will be more cognizant about default options, and whether the entity setting them had good intentions in mind or not.

Applying the default effect

In addition to being more cognizant of defaults around you, you may also want to apply the default effect either in your personal life or work². Here are some things to keep in mind as you do:

• You can offer people multiple options, but if there is a default option the vast majority will likely choose that.
• If you really want to know what people will choose among a certain set of options, then do not set a default. This forces them to actually make a choice.
• The likelihood of switching away from a default is inversely proportional to the effort required to do so. By increasing the friction to “switch”, you ensure the default is stuck to more often.
• The more complicated the set of options are, the more likely the person making the choice will stick with the default.
• The more someone trusts the person offering the choices who has chosen the default, the more likely they are to stick with the default.

In closing, I’ll leave you with one of my favourite examples in every day life which follows from the default effect. When you’re trying to pick a restaurant to meet a friend, if you

• Want to go to a specific restaurant: ask them “I was thinking restaurant A. Does that work?” (default with friction to get more options)
• Are indifferent between a few choices and want them to make a decision: ask them “how about restaurant A or restaurant B?” (no default)
• Want them to choose a place: ask them “how about McDonalds?” (set a bad default and anchor them — they’ll do the work of offering up alternatives now because even the friction of finding new options themselves is worth the effort for them of switching from McDonalds³)

Footnotes

¹ That was in 2015 per 9to5Mac. My guess is that the number is even higher today.

² I’ve found it valuable to keep in mind as I build products, but also in general to help me build better habits (staying healthy, reading more) by setting smart defaults (keep healthy snacks at home, keeping my kindle by my bed but my phone far way).

³ Note this could backfire if your friend likes McDonalds, so please ensure you substitute McDonalds for a restaurant that you know your friend hates.