Simon Reader* | 16 APRIL 2013 | BDLive
Companies and organisations: Eskom
THERE are few more divisive questions than asking how much control the state should be allowed to exercise over the choices of its citizens.
Take smoking in Australia as an example. What started out as medical advice has culminated in a regulatory bloodbath with images of elderly dead people printed on cigarette boxes (costing about R170 a box). Being the president of a Jimmy Savile appreciation chapter would be far more socially acceptable than smoking, and Australians quote this as one of many examples of big-government, ham-fisted, bureaucratic fascism.
The problem with this style of government is that despite its best intentions of influencing cohesion and order, it is invariably perceived as patronising, turning the state into the product of a forced marriage between a humourless social engineer and an authoritarian management consultant.
But, something unusual is happening in Westminster, London. A group of highly qualified academics is undertaking a psychological approach to altering human behaviour with a specific focus on government interaction. The intention is to establish a set of subtle prompts aiming to save the British government money, making certain necessary exercises attractive and, most importantly, making those exercises easy. A series of remarkable results hints that common sense may be re-entering the exchange based on deductive reasoning and some risk, characterised by the complex associations and consequences of supposition.
The first example of the work of the behavioural insights team called the “Nudge Unit” involves loft insulation. When the British government embarked on this subsidy-driven campaign in 2011, the lack of interest in what was literally the free offer of an insulated attic confounded Whitehall. The task of assessing the response was handed to this new team, which quickly identified the problem. It appeared that home owners found the short-term prospect of clearing an attic too unattractive to consider the long-term benefits, so the team offered the solution of companies that would first clear the attic and dispose of any rubbish before it laid the fibreglass rolls. Interest almost immediately increased, despite additional costs, and once these costs had been reduced, the uptake increased again, to more than 60%.
While this could be calculated as a solution to blatant apathy, a second example involves convenience. A police campaign encouraging people to park their cars in garages, following a spike in thefts, yielded poor results. The team commissioned empty skips next to garages with signs indicating junk may be dumped for free. People soon started clearing out their garages and parking their cars inside, leading to a decline in thefts.
A third example is less discreet but no less successful. When mandatory car-tax demands were largely ignored, the team reworded the letter into a faint, personalised threat: “Pay your tax or lose your car”, accompanied by a photograph of the car in question. The number of people paying their car tax nearly tripled — again, almost immediately.
Winter is arriving in South Africa, where Eskom’s reputation has barely recovered from the dramatic events of 2008. Despite a prolific increase in profit thanks to departing chief financial officer Paul O’Flaherty and a largely incident-free 2012, the power utility remains an object of annoyance, rage or ridicule.
Its precarious position by way of its coal supplies and subsequent ability to generate power is worsened by meaningless, shallow campaigns broadcasting energy-consumption barometers on television in the evenings. It is a victim of distraction: its performance is not necessarily monitored or evaluated on successes (which, believe it or not, there are many), but rather on its alleged agreements with the likes of BHP Billiton, its capitulation to the unions, the opaque political circumstances of the Medupi and Kusile procurement processes — and its brattish, sulking response to being awarded only an 8% annual price increase.
It forgets that its alarmism — the recent announcements pertaining to possible power cuts — is inextricably linked to these issues, and they only serve to entrench public contempt, regardless of whether it is warranted. It is clear South Africans are intolerant of Eskom’s expectations and demands but it does not have to be this way: whereas we do not have much choice in the level of control Eskom exercises, it can choose how it communicates its requests or warnings — and this may salvage its credibility, quite possibly re-friend its estranged customers and achieve the goal of establishing more energy consciousness.
By the application of what appears to be common sense coupled with the management of psychological impulses tuned to habits and routines, unprecedented advances are being made by the British government in sensitive areas — without the appearance of provocation or interference. The behavioural insights team has had its scope increased tenfold and is now addressing public health issues. Eskom need only see the prospect as thus: if this practice can work in a politically sceptical, bureaucracy-sickened society, there is absolutely no reason why it can’t in one upon whose survival it depends, and vice versa.
*Reader is the co-founder and chief investment officer of RE:RE Capital.