Netflix and Human Tendencies

I joined Netflix about a month ago and so far it’s been an incredible experience. I’m finally catching up on a long list of movies I’ve been meaning to see for ages. Problem was, when I hit the video I either couldn’t think of the movie I wanted or decided that it was too serious and went for something easier to swallow (of course a lot of the movies I’ve rented like North by Northwest and What’s Up Tigerlilly aren’t really serious at all).

Instead of talking about what I’ve rented, though, I’m more interested in the ways that Netflix actually allows me to act against the human tendency to devalue the future. This is actually one of the core tenets of behavioral economics.

Broadly “speaking, “People act irrationally in that they overly discount the future,” says Bazerman. “We do worse in life because we spend too much for what we want now at the expense of goodies we want in the future. People buy things they can’t afford on a credit card, and as a result they get to buy less over the course of their lifetimes.” Such problems should not arise, according to standard economic theory, which holds that “there shouldn’t be any disconnect between what I’m doing and what I want to be doing,” says Nava Ashraf.

That comes from a Harvard Magazine article titled “The Marketplace of Perceptions”. Basically we place a premium on the now. That’s why there’s so much credit card debt and why people don’t go to the gym: It’s easier to put off what’s best for you today until tomorrow. To quote the article again, “Now we want chocolate, cigarettes, and a trashy movie. In the future, we want to eat fruit, to quit smoking, and to watch Bergman films.” We know for our ‘well-being’ we should see the classics, but it’s a lot easier to grab Dumb and Dumber off the shelf of the video store (no offense to Dumb and Dumber, it’s just an easy target).

What Netflix, and specifically the queue, allows you to do is pre-commit, thereby working against your predisposition to devalue the future. Because you add movies to a list and then they just send them, it’s easier to place all those films you’ve always wanted to see on there and just wait for them to arrive. Sure you can go in and rearrange, and most certainly do at times. But for the most part I’d guess people just let the thing flow. (Is this accurate?)

In a way this is not much different than something like a 401(k) (also talked about in “The Marketplace of Perceptions”) in that it forces you to commit to something and then just stick with it. The beauty of a 401(k) is it all just happens in the background. Like Netflix, to change your contribution or cancel it entirely, is actually more work than just getting that percentage taken out of your paycheck each month. In a way both services use our tendencies towards laziness for us instead of against.

Wouldn’t it be great if more services considered factors like this and helped us fight our bad tendencies?

As a side note, I have a few more Netflix entries in my mind. One’s about the ‘Hotel Rwanda Effect’ where people rent a serious movie and then it just sits around for hours because there’s never a particularly good time to watch a movie about genocide. The other is about friending on Netflix. If you have any thoughts on either I’d be curious to hear.

November 3, 2006