New Horizons in Science: Frinky Science

This term, I swear, has been coined by the researcher himself, Dr. Baba Shiv, also of Stanford. (Can you guess who was hosting this conference?) Think of freaky and funky rolled together. I'm not sure where the "i" comes from, now that I think about it. Anyway, Shiv teaches marketing in the Graduate School of Business, but he has also become involved with neuroscience. He likes to come up with unusual theories and explanations. Hence, frinky, I guess.

The first study Shiv discussed relates to the current financial crisis. He designed an experiment where a participant is given 20 $1 bills. Each round, the player can invest $1 or pass. 50% of the time, the investment will result in $1 loss, and 50% of the time, the investment will result in a $2.50 win, or a gain of $1.50. So what is the optimal solution? Well, to invest 100% of the time of course. Shiv says most participants recognize this and will start the game at the 100% level. However, every time a player loses, the emotional experience in the brain creates negativity. This overwhelms any positive emotion. Slowly, participants' emotions "hijack the cognitive brain." Emotions cause a person to stop investing even though they know they should. Hence, part of the problem with our financial crisis. In a related note, lots of wins increases positive emotion which can lead to greed...

In another study, Shiv exposes a price placebo effect. We've all heard about the placebo effect in medicine, where patients get better when fed a sugar pill, probably because they believe it is a real pill. Well it turns out that when the sugar pill is more expensive, the effect is even stronger. In a study that won an Ignoble Prize, Shiv's research group showed that at least 60% of people in a study who were fed sugar pills and told they were pain killers said they had pain reduction. But 84% of people who received the "pain killers" at full market price had pain reduction. The others had received the "pain killers" at an enormous discount. Related studies also show that people like wine better when they are told it is $90 than when they are told it is $5. Even when it's the exact same wine.

Shockingly enough, not only do people report less pain and better taste with "expensive" products, they also actually experience less pain and actually prefer the expensive wine, as shown through fMRI. Some people speculated that this effect would not work with "real," objective diseases. In other words, cholesterol-lowering drugs or antibiotics would not be subject to this effect because the diseases they treat are not subjective as is pain.

However, Shiv believes, and is currently attempting to verify through research, that this is not the case. Here's why.

The research has shown that predicted utility influences experienced utility. Americans tend to associate low price with low quality. So the region in the brain that deals with pleasure prediction, the striatum, will send less dopamine to the region that actually encodes pleasure if the product is cheaper. Although the biophysical pleasure may actually be the same with cheaper and more expensive versions, the strong connection between the pleasure predictor and the pleasure encoder decreases the overall pleasure experience.

Even more interesting, low reward prediction caused by low price can actually lead to stress and the production of cortisol, which shuts of repair mechanisms in the body to focus on some perceived threat. Shiv believes this cascade of events will also make the price placebo effect very real for even antibiotics. He encourages doctors that when they prescribe a generic, they should make sure to tell their patients from their position of authority that the generic will be just as effective as the brand name. He thinks that this may help to reduce the price placebo effect. (I sure hope that my brain isn't telling my body that my generic birth control pills suck...)

My favorite study was the IKEA fruits of labor study. First Shiv discovered that products that come in hard to open packages are returned less frequently. Then he discovered that if someone else assembles your IKEA furniture for you, you are less willing to give it up. If you do it yourself, you actually like the furniture better.

Finally, someone has explained my non-rational attachment to my IKEA dining set, which was assebled painstakingly slowly by yours truly!

So what are the implications of all this? Shiv believes he exists to make people think in new ways. He hopes that people will use this knowledge for good, and amazingly enough, he does not do consulting! And he's a professor!