Dan Ariely Startup Lab CAH

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One of the most dangerous assumptions that any startup can make is that the consumer behaves rationally. 

Over the past few decades, the field of behavioral economics has determined that humans often make decisions that don’t align with their personal interests. In instance after instance, research shows that traditional predictions about human behavior fall short of reality. For entrepreneurs undertaking a pursuit already wrought with risk and uncertainty, the irrationality of consumers becomes yet another obstacle on the road to success.

That’s where the Center for Advanced Hindsight (CAH) at Duke University comes in. This fall, the center launches a one-of-a-kind incubation program that helps entrepreneurs incorporate behavioral insight into their business models. While developing products or services, the entrepreneurs will also familiarize themselves with the center’s literature on consumer behavior, learn proven statistical methods for making decisions, and determine, with the help of experts, how to leverage research tools into their process.

The idea for the program came from Center founder, professor and award-winning author, Dan Ariely. While he spent time in Silicon Valley last year as co-founder and chief behavioral officer of Timeful, a mobile application that helps you schedule items on your to-do list (now a part of Google), Ariely noticed that most incubator programs gave advice on things like how to navigate legal issues or how to expand your network. The use of academic research was largely absent from the entrepreneurial process. As an expert on behavioral economics and psychology, Ariely was aware of how much social science knowledge could help answer a lot of difficult questions faced by new ventures.

Center for Advanced Hindsight Office
The Center for Advanced Hindsight, located on Duke's campus in Durham, conducts research on irrational human behavior.

He thought CAH, which he initially co-founded in Chicago in 1996 and moved to Duke after his time at the MIT Media Lab in 2010, would be the best fit for such an incubator. Its leaders and researchers already had experience advising organizations on behavioral economics. For the past two years, the center has received support from the Bill & Melinda Gates Foundation to work with nonprofits focused on nutrition in African countries. Recently, it helped one of them sell orange-fleshed sweet potatoes to combat Vitamin A deficiency in Uganda by recommending simple changes, like selling the vegetables on an orange tarp to reinforce the message that orange was healthier. 

The center has also worked with a local credit union to help get low-income clients to participate in direct deposit savings programs. By designing and testing several versions of the sign-up form using behavioral concepts, the center has assisted the credit union in achieving higher participation rates. Beginning this fall, Ariely will work with graduate students at Duke's Sanford School of Public Policy to advise easy interventions for local municipal governments, as well.

The Startup Lab program isn't just open to Duke students or faculty. Domestic or international startups are welcome to apply, but the teams must relocate to Durham for a 6-9 month incubation period. That's to ensure full access to the CAH’s resources and technical expertise, as well as opportunities to receive mentorship from leaders at other Duke schools, like the Fuqua School of Business and the Pratt School of Engineering. Moreover, the teams will be able to engage with the larger Triangle entrepreneurial community, which is already bustling with many successful accelerator programs.

The center will provide office space and a small internal operating budget, as well as assist teams in arranging housing. Ariely expects to begin with a handful of either nonprofit or for-profit teams consisting of 3-4 members each. The goal is to recruit primarily health and financial startups, since these are the industries in which the center has conducted most of its research.

The CAH's research shows that even great ideas can fall short if the consumer doesn’t recognize it as a great idea. Behavioral economics unfortunately explains how there are mechanisms in our brain that prevent us from taking actions that may be in our best interest, making it even more difficult for consumers to acknowledge what may be good for them.

This paradox can be extremely daunting for entrepreneurs. Luckily, “social science research has shown that simple tweaks to the way services and programs are offered to consumers can greatly increase uptake,” says CAH Research Development Associate Rebecca Kelley.

By offering academic expertise, the CAH Startup Lab will allow startups to address the irrational sides of their audiences, and give them that critical hindsight, in advance.

CAH Startup Lab Dan Ariely Team
Dan Ariely, center, is pictured with the team of professors and students at the Center for Advanced Hindsight. Credit: CAH

The deadline for the application is approaching. If you are interested in applying, please email a one-page summary about your business to Rebecca Kelley at rrk9@duke.edu by July 1st, 2015.

Title image credits to Dan Keinan.