FORESIGHT, BEHAVIORAL ECONOMICS, DISRUPTIVE TECHNOLOGIES, AND OTHER WICKED PROBLEMS

1. FORESIGHT, BEHAVIORAL ECONOMICS, DISRUPTIVE TECHNOLOGIES, AND OTHER WICKED PROBLEMS Presented By: Derek Ireland To the Foresight Synergy Network (FSN) April 4 2017 DMS 7170 12:00-14:00

2. Purpose of Presentation Discuss and Receive Feedback from FSN Members On Recent Research Regarding • Applying a Behavioral Lens to • Wicked Problems and Their Characteristics • And Their Implications for • Policy, Regulation, Foresight, Transformative and Disruptive Technologies • And Any Other Issue of Interest to FSN Members

3. Standard Definition of a Wicked Problem Not Necessarily Wicked in the Evil Sense • But rather are problems that are difficult or impossible to resolve • Because of incomplete, contradictory, changing and “mutating” requirements • That can often be difficult to recognize • And even more difficult to understand • And because of complex interdependencies • Attempts to solve one aspect of wicked problems can reveal or create other problems

4. Wicked Problems from the Literature (1)

5. Wicked Problems from the Literature (2)

6. Major Characteristics of Wicked Problems (1)

7. Major Characteristics of Wicked Problems (2)

8. Major Characteristics of Wicked Problems (3)

9. Very Different From Tame Problems With: • Problem and goal statements that are simpler, more straight-forward, well-defined, easier to understand • Moral, ethical, normative and political attributes that are more limited, less likely to impede resolution • Simpler and more linear cause-effect relationships

10. Very Different From Tame Problems With: • Fewer solution options that can be objectively evaluated and compared as “good or bad” -- optimal or sub-optimal • Simpler and more implementable and remediable solutions • Characteristics that are similar to other already remedied problems – providing learning opportunities • More broad-based support from various stakeholders

11. Key Difference Between Wicked and Tame Problems • All wicked problems are complex • But complexity is exacerbated by many of the characteristics discussed earlier • Which makes the problem even more complicated, unique, intractable, & wicked • Many tame problems also have complexities and complications • But only a limited number of the other characteristics and therefore are easier to “tame”

12. Two Major Lessons and Mistakes from Comparing Tame and Wicked Problems • Defining wicked problems as tame and applying tame solutions to wicked problems –- leads to disaster • Presuming that all problems which are controversial and complex are wicked • Governments, their bureaucrats, strong advocates, are often guilty of the first mistake • Many academics may be guilty of the second • Yours truly may be in the second camp • But many of the of policy problems I have addressed over the past five decades probably had wicked characteristics • This is likely true for all other FSN Members

13. Wicked Problems, Behavioral Economics, Neuroscience (1) • Likely activate virtually all of the emotional responses, behavioral biases, aversions, fast, frugal and flawed heuristics, and cognitive deficiencies • In the behavioral and neuroscience literatures • With both significant commonality and variability between wicked problems Especially active are the “emotionally charged” aversions to anticipated and actual • Losses (prospect theory), risk and the risk as feelings concept, uncertainty, ambiguity • Complexity, unpredictability, loss of control, regret, betrayal by others, probabilities, and • Making decisions in complex and aversive contexts

14. Wicked Problems and Behavioral Economics (2) Related Behavioral Biases and Heuristics Such As • Present oriented biases, immediate gratification, the endowment and status quo effects, inertia, reference dependent preferences, myopia/lack of foresight • And related problems with intertemporal choices and decisions • Hindsight, confirmation, conformity, availability, salience and recency heuristics and biases • And selecting, assessing, and interpreting information in a manner that confirms our interests, beliefs and ideologies • Self-attribution, self-serving, self-interested and motivated reasoning biases

15. Wicked Problems and Behavioral Economics (3) Related Behavioral Biases and Heuristics • Procrastination and delaying required decisions • Finite pool of worry, the single action bias, and the action bias • Strong preferences for the familiar and simple, the attribute substitution heuristic and the bias blind spot • Limited self-awareness of people regarding their own • Emotional responses, behavioral biases, flawed intuition, instincts and heuristics, and cognitive limitations • Frames, framing and various forms of strategic and opportunistic framing

16. Wicked Problems and Behavioral Economics (4) And Related Cognitive Deficiencies Resulting From Finite cognition, and cognitive scarcity and overload, such as problems with • Foresight and understanding and using probabilities, discount rates, and expected values • Understanding and dealing with complex and ambiguous cause and effect relationships • Addressing more than one problem/worry at a time • Future gains, losses, and abstract threats • Potentially catastrophic and other highly negative events, outcomes, consequences • And “imagining the attitudes, beliefs, preferences and decisions of our future selves”(Levin et al 2009 and 2012)

17. Wicked Problems and Behavioral Economics (5) With Complex, Little Understood and Under-Analysed Interactions • Between these aversions, biases, heuristics and emotional responses often in a negative/downward direction which results for some people in • Many accumulated frustrations from operating in wicked environments trying to solve wicked problems • Leading to anxiety, stress, fear and anger from unrealized expectations regarding our own conduct, decisions and outcomes, and disappointments from the conduct, decisions and perceived and actual mistakes of others • And undue pessimism, “learned helplessness and hopelessness”, fatalism, rational apathy and ignorance, and conditioned defeat • When people simply give up and stop trying

18. Wicked Problems and Behavioral Economics (6) While for Other Actors and Wicked Contextsthe result is • Overconfidence, too much optimism including the exaggerated optimism of the planning fallacy • “Epistemic arrogance” and the illusions of control, competence, explanatory depth and “superior foresight and other capabilities” • Overestimating our knowledge and underestimating what we do not know • The action (“we must do something”) bias leading to decisions based on little thought and even less analysis • Opportunistic and unethical conduct to profit from the wicked situation at the expense of the economy, society and other people

19. Wicked Problems and Cognitive Strain and Burden (1) Wicked Problems and Contexts place major burdens on our scarce cognitive resources including • Cognitive and moral reasoning, strategic thinking, and executive control functions that are needed to • Correct the decision errors resulting from our emotional responses, biases, aversions, flawed intuition and instincts, and fast, frugal and flawed heuristics • Collect and process the complex and ambiguous information, cues and stimuli generated by wicked and often negative and emotionally charged contexts • Continually update our beliefs, information, knowledge and learning from our own and other people’s decision errors and from often negative and discouraging events and outcomes

20. Wicked Problems and Cognitive Strain and Burden (2) Unfortunately, Scarce Cognitive Resources are Not Always Available When people are operating in complex, ambiguous, threatening and wicked contexts where • Commercial, social, other transactions/interactions with other individuals and organizations are often contentious, unsatisfactory and unsuccessful • Information and transactions costs are high, and cooperation, trust, and reciprocity of trust are limited • Opportunism, shirking and other unethical, anti-social and corrupt conduct are becoming more frequent, consequential, entrenched and profitable

21. Wicked Problems and Cognitive Strain and Burden (3) And When People are Operating in complex, ambiguous, threatening and wicked contexts where • Information, cues and stimuli are complex, ambiguous, contingent, difficult to process and understand and often • Negative, discouraging and threatening • Errors by yourself and others are more frequent and consequential • And continual learning is both absolutely essential and very burdensome and cognition intensive

22. Next Slide Provides a Conceptual Schematic Of The Implications of Systems 1 and 2 of the Human Brain For • Preference formation, conduct, decision making and learning • Arrows indicate complex cause-and-effect relationships and interactions in wicked contexts between: • Systems 1 and 2, external contexts, behavioral biases and heuristics, System 1 and 2 learning • And behaviour, events and outcomes in wicked contexts • Broken arrows indicate potential contingencies in relationships depending on context, the actor, other variables • Two-way arrows indicate interactive, cumulative, feedback, lock-in, context-dependent, and path dependent effects that are especially important to wicked problems

23. Competition/conflicts between path-dependent and other influences involving various regions of the human brain System 1 memory, emotions, expert and other intuitions, moral and other instincts. Which are more unconscious, automatic, and effortless, and easier, earlier and faster -- leading to cognitive ease and good mood) System 2 cognitive resources, cognitive and moral reasoning, rational benefit/cost type calculation: which are more conscious and effortful, emerge later and take longer than system 1. And at times can be strained, over-used, distracted, lazy, and not accessible, reliable and functioning -- related to cognitive strain and bad mood System 1 emotions, intuitions and instincts signal system 2 to get busy and contribute to solving a complex, novel and/or threatening problem System 2 control and correction of system 1 emotions, intuitions, instincts, heuristics – at times not available because of cognitive scarcity & burden System 1 Learning – Based more on favorable and unfavorable perceptions, impressions, inferences and memories of actions, rewards, punishments etc. Rather than reasons for ethical or unethical conduct and outcomes System 2 social, goal-directed and other more conventional learning. Based on more conscious, rational, calculative and strategic thinking about experience, conduct, outcomes, errors, lessons and interactions with others. Learning from a more functional not truth-seeking perspective The many emotions, feelings, behavioral biases and useful and flawed intuition, instincts, and heuristics of behavioral economics. Positive and negative interactions between them and their implications for path dependence, context dependence, a more negative wicked trajectory, and system 1 and system 2 responses, thinking and processing. Which require greater research. Complex, ambiguous, and path-dependent market, social, cultural, organizational, institutional, policy, regulatory, negotiating, learning, and other wicked contexts. Which often generate negative/pessimistic information, cues and stimuli. Numerous, complex and conflicting decision options. Complicated, highly technical, and contested information to digest, and major differences between actors. Role and importance of system 1 and 2 functions, behavioral biases, “fast, frugal and flawed heuristics”, intuitions, instincts, emotions/affect and regulatory contexts in influencing and determining the incentives, motivations, preferences, conduct, choices, decisions and actions of all regulatory actors: regulators, regulatees, potential and actual beneficiaries and victims, professional bodies, civil society groups, other stakeholders. And the differences between actors, and the implications of these differences for the quality of their decisions, the quality of their interactions, debiasing, shared learning, and for their contributions to mitigating the wicked problem. 23

24. Possible Approaches for Making Progress on Addressing Wicked Problems That(1) Ameliorate Negative Contexts, the Downward Trajectory • Building more positive and proactive narratives • Publicizing and rewarding contributions and contributors that reduce the “wickedness” • Wicked (good) leaders, new forms of leadership that • Are more open, entrepreneurial, inquiry-based, collaborative • Have appropriate humility and modesty and know what they don’t know • Promote wicked (good) collaborative solutions that enhance system resilience , adaptability and flexibility • Have strong abilities to tolerate, manage and when appropriate capitalize on ambiguity • And build ambiguity tolerance within their organizations

25. Possible Approaches (2) • Policy, legal and regulatory regimes that are reflexive, resilient, responsive, inclusive • Polycentric/shared responsibility, knowledge and learning based, capable of renewal and reform • And that emphasize • Small, incremental and remediable improvements and wins that have • Positive interactive, cumulative, externality, lock-in, network, and path dependent effects • That constrain our future selves • And emphasize capitalizing on the wisdom of the crowd rather than depending solely on “experts”

26. Possible Approaches (3) “Clumsy Solutions, “Messy Institutions, Methods, Approaches” (see Ney and Verweij 2014) that encompass “nimble, flexible, and creative mixtures” of • Individualism, competitive processes, self interest • Egalitarianism -- open and honest deliberation • Hierarchy whereby stakeholder interactions are “steered” by relevant experts and authorities • A certain degree of fatalism, randomness, unpredictability, good fortune, and • Small incremental steps and “muddling through” • And the cultural theory concept of the “hermit” • Whereby stakeholders can temporarily distance themselves from their usual social contexts, pressures and related biases and interests

27. Possible Approaches (4) Holistic, Multi-Disciplinary, and Mixed Methods Research Approaches which encompass the full range of • Research, analytical, policy, legal, regulatory, institutional, social, and behavioral tools/solutions • With greater emphasis on resilience, adaptability, flexibility, appropriate redundancy, trial-and-error based policy experimentation • And incremental improvements, small wins, “muddling through”, and “fighting complexity with complexity” • Rather than technical efficiency, optimality, cost-effectiveness, and conventional cost-benefit analysis

28. Possible Approaches (5) • As well as greater emphasis on linkages, synergies, feedback, lock-in and network effects, and other interdependencies • Between different super wicked problems • Insights from behavioral economics can play an important role • For example, nudges are useful for some aspects of wicked problems • But may be less appropriate when fundamental changes are needed in • Attitudes, perceptions, frames/framing, behaviour, preferences, decision making, • Formal and informal institutions, social norms and values, and motivation and incentives, and in how • Markets, industries, economies and societies are structured

29. Brief Case Study of an Emerging Wicked Problem In The Digital Marketplace (1) Based on Wicked Applications of Advanced Technology/Algorithmic Intelligence on the Internet and in the Crowded Digital Marketplace • The algorithmic consumer who outsource their purchasing decisions to company operated algorithms (Gal and Elkin-Koren 2017) • Robo-sellers: the algorithms used by sellers and suppliers, automated pricing systems and the resulting pricing strategies that cannot be executed by human beings (Mehra 2016 and Lynch 2017) • Government and non-government digital intermediaries/regulators (Van Loo 2017)

30. The Crowded Digital Marketplace (2) • Other digital intermediaries, firms and platforms and more conventional companies now using • Algorithms, robots, algorithmic intelligence (AI) to increase efficiency and profits, reduce labour costs, better serve their customers, and survive • Algorithmic power, “algorithmic educators” and the digital governance of public education (Williamson (2015) • Platform cooperatives of Scholz (2016) • Similar to traditional cooperatives would be owned by their members and compete with, challenge • And hopefully partially replace the “giant” and other platform capitalists

31. The Crowded Digital Marketplace (3) • Apparently the full range of participants found in conventional markets • Are now functioning, interacting and in some cases competing in digital marketplaces • Often with active government financial and other forms of support and participation • Leading to interesting, under-analysed and mostly ignored questions on what • Interacting and competing algorithms and algorithmic intelligence “entities” mean for • Consumers, other market participants, market efficiency and fairness, and economic performance, equality and inequality • Are we entering the world of Kubrick and 2001: Space Odyssey

32. The Crowded Digital Marketplace (4) • Digital economy and marketplace is becoming increasingly complex, dynamic and cluttered • As well as attractive to an expanding number of consumers and other customers and users • Who wish to “exit” from the conventional regulated marketplace • For a wide range of goods and services • And for a wide range of reasons • Which involve an interesting and complex mix between: the outsource economy, the sharing economy, advanced technology, robotics, algorithmic intelligence, and other attributes

33. The Crowded Digital Marketplace (5) • Posing challenging, complex, new, and totally unfamiliar and unprecedented wicked problems for • Competition, consumer protection, product safety, privacy, financial sector, securities markets (e.g. weird algorithm generated events on stock markets), corporate governance (e.g. new forms of hidden insider trading) • And other policies, laws, regulations and regulatory authorities • Regarding how the competitive and regulatory game will be played by all of these algorithmic entities and their designers and owners which to date has • Received very little attention from governments, academics, civil society and other groups

34. Possible Problems with the Crowded Digital Marketplace (1) • Market concentration and increased market power for current, emerging and future “corporate giants” • New forms of price, fee, & product attribute complexity, confusion, deception and shrouding to hide true costs and value from boundedly rational consumers • Undisclosed biases and self-interest of operators that can favour large suppliers, higher priced products • Information barriers faced by digital intermediaries, algorithmic consumers, platform cooperatives etc.

35. Possible Problems Digital Marketplace (2) • Poorly designed and implemented digital nudges and their computer software algorithms • Protected and proprietary nature of many of these innovations through IP, other laws, national security • Intentional or unintentional unethical, non-compliant and illegal conduct and harms from • Poorly designed and operated algorithms, digital platforms and related software programs that are • Designed and operated by self-interested and boundedly rational human being “technologists” who • Often do not understand them and their outcomes • Which allows digital companies to pass on the blame for problems to designers and their innovations

36. Possible Problems Digital Marketplace (3) • Danger that too much faith, confidence and trust will be extended to robo-sellers, algorithmic consumers, digital intermediaries, and other algorithms and platforms • And “trust in the code”, algorithms, blockchain technology, and the Internet • Would replace and undermine trust and reciprocity of trust between individuals and organizations • Subtle implications and influence of “algorithmic power and educators” in public education • On teachers, administrators, students, and future consumers, firms and other market participants • Leading to major questions on whether conventional policies, laws, regulations and regulators will be effective

37. Possible Problems Digital Marketplace (4) • Danger that boundedly rational and “self-interested” governments and their officials and regulators • Will design and administer new laws, regulations, rules, regulatory functions, and “digital regulators” • In different jurisdictions at various spatial scales that will do more harm than good • Through minimizing the innovation benefits, limiting access and increasing their costs and potential risks and harms • And will use private and government run digital intermediaries as an excuse for deregulation • And reducing government regulatory budgets

38. Possible Problems Digital Marketplace (5) Finding the Right Balance Between The potential benefits, costs and risks of consumers and other purchasers • Potential Benefits: easier, faster, better and less emotional and biased consumer decisions • Reduced information, switching and other transactions costs • Enhanced availability of and access to many goods, services and suppliers • And perhaps lower product prices from business entry and more efficient and hopefully fairer markets

39. Possible Problems Digital Marketplace (6) Which Can Be Offset by Potential Costs • Reduced consumer sovereignty, autonomy and choice • Control, manipulation and exploitation of consumer choices by designers and owners and their algorithms • Credence good “you gotta believe” aspects of these algorithms • Reduced learning opportunities from their purchases • Consumer harms from abuse of dominance, price discrimination, other anticompetitive and anti-consumer business practices • Consumer failure to recognize the greater risk of regulatory harms • When transferring purchases to under-regulated and unregulated digital marketplaces which represents • A form of deregulation through consumer choice and exit

40. Few Comments on a More “Every-Day” Wicked Problem (1) Payday Loans, Other Very High Interest Lenders • Pawnshops, auto title loans, reverse mortgages and so on • That have expanded greatly and prospered over many decades despite • High interest rates, questionable business practices, poor reputations, and negative commentary from many sources and • Proposed and actual legal and regulatory interventions including • Outright prohibitions in some jurisdictions

41. Payday Loans Etc. (2) • Have many if not most of the characteristics of wicked problems noted earlier including • Chronic policy and regulatory failures from applying “tame” solutions to a wicked problem • Can be considered as the “cockroaches” of the financial sector because of • Their probable ability to survive the financial equivalent of the “nuclear holocaust” • In some ways, they benefit from their questionable marketing and other practices • Through “living up to” their poor reputations and the minimal expectations of consumers and others

42. Payday Loans Etc. (3) Possible Reasons for Continuing Success and Expansion • Governments, policymakers, regulators, academics, civil society, other critics treat this as a tame problem • And ignore the wicked and related behavioral characteristics of the payday loan etc. industry and “problem” • Payday loan and other companies in this market are highly innovative in their • Advertising, marketing, targeting key consumer groups, product development, minimizing costs and risks, getting around regulations, & using technology • Many are now operating in an aggressive manner as online and mobile phone lenders in the digital marketplace

43. Payday Loans Etc. (4) • In many ways, this represents another battle between the “elite critics” and “real people” • Critics say how can you be so stupid to pay annualized interest rates of 400% plus • Customers say where else can I go “smart ass” to get a short-term loan with • My low income, poor credit history, maxed-out credit cards, and no access to regular banks • The only alternative for many payday loan customers is the “friendly Mafia loan shark”

44. Implications for Foresight (1) • By their very nature, most foresight issues are also wicked problems • Especially in today’s unpredictable, high risk, emotionally charged, and wicked • Political, economic, social , regulatory, and other contexts and environments • As captured in mass migrations, global terrorism, Brexit and the “Trump Effect” • Foresight practitioners therefore need to more often apply a behaviorally informed “wicked problem lens”

45. Implications for Foresight (2) • Develop a better recognition of the wicked characteristics of foresight issues and problems • And of the insights from the behavioral, psychological, neuroscience, sociology, institutional, political science • And other less conventional literatures and multi-disciplinary approaches • That will increase our understanding of how to address wicked foresight problems in the future • Interesting perhaps that a quick Google search identified only a few studies that directly link foresight with wicked problems

46. Selected Sources Alford Kristin, Sarah Keenihan and Stephen McGrail (2015) “The Complex Futures of Emerging Technologies: Challenges and Opportunities for Science Foresight and Governance in Australia” Journal of Futures Studies June 2012 16(4) 67-86 at http://www.jfs.tku.edu.tw/16-4/A05.pdf Anany Mike and Taylor Owen “Ethics and Governance are getting lost in the AI frenzy” Globe and Mail March 30 2017 at http://www.theglobeandmail.com/opinion/ethics-and-governance-is-getting-lost-in-the-ai-frenzy/article34504510/ Beer, David (2009) “Power Through the Algorithm? Participatory Web Cultures and the Technological Unconscious” New Media and Society 11 (6): 985–1002 Deloitte (2014) Strengthening Ontario’s Payday Loan Act: Payday Lending Panel Findings and Recommendations Report Prepared by Deloitte on Behalf of the Payday Lending Panel May 2014 at http://www.ontariocanada.com/registry/showAttachment.do?postingId=17182&attachmentId=26292 Finland Futures Research Centre (2015) “Futures Studies Tackling Wicked Problems” Special Conference Edition of the Centre’s Newsletter 11-12 June 2015 at https://www.utu.fi/en/units/ffrc/Documents/Futuuri_special-issue_2015.pdf

47. Selected Sources Cont. Gal Michal S. and Niva Elkin-Koren (2017) Algorithmic Consumers Forthcoming, in an updated form, in the Harvard Journal of Law and Technology (2017) Levin Kelly, Benjamin Cashore, Steven Bernstein, and Graeme Auld (2009) “Playing it forward: path dependency, progressive incrementalism, and the “Super Wicked” problem of global climate change” Climate Change: Global Risks, Challenges and Decisions IOP Conference Series: Earth and Environmental Science 6 (2009) 502002 Levin Kelly, Benjamin Cashore, Steven Bernstein and Graeme Auld (2012) “Overcoming the tragedy of super wicked problems: constraining our future selves to ameliorate global climate change” Policy Science (2012) 45:123–152 Lynch David J. (2017) “Artificial Intelligence and Robotics: Policing the digital cartels; Price-setting algorithms mean regulators must now tackle collusion among machines” Financial Times January 8 2017 at https://www.ft.com/content/9de9fb80-cd23-11e6-864f-20dcb35cede2 Mehra Salil K. (2016) Antitrust and the Robo-Seller: Competition in the Time of Algorithms Temple University at http://www.minnesotalawreview.org/wp-content/uploads/2016/04/Mehra_ONLINEPDF1.pdf

48. Selected Sources Concluded Navarro Jesus, Peter Hayward and Joseph Voros (2008) “How to solve a wicked problem? Furniture foresight case study” Foresight 10(2): 11-29 at https://www.google.ca/#q=navarro+how+to+solve+a+wicked+problem Ney, Steven M. and Marco Verweij (2014b) Messy Institutions for Wicked Problems: How to Generate Clumsy Solutions January 20, 2014 Available at SSRN: https://ssrn.com/abstract=2382191 or http://dx.doi.org/10.2139/ssrn.2382191 Scholz Trebor (2016) “Platform Cooperativism: Challenging the Corporate Sharing Economy” Rosa Luxemburg Stiftung New York Office January 2016 Van Loo Rory (2017) Rise of the Digital Regulator Boston University School of Law at file:///C:/Users/Owner/Downloads/SSRN-id2902238.pdf Verweij (2014) “Wicked Problems, Clumsy Solutions and Messy Institutions in Transnational Governance” Chapter 10 in The Problem-Solving Capacity of the Modern State: Governance Challenges and Administrative Capacities Edited by Martin Lodge and Kai Wegrich Oxford University Press pp. 183-197 Williamson Ben (2015) “Governing software: networks, databases and algorithmic power in the digital governance of public education” Learning, Media and Technology 40:1, 83-105

49. Final Comment Now I Would Like to Hear Your Additional Comments • On these very preliminary ideas and “work in progress” on • Wicked Problems, Behavioral Economics and Foresight • And I will be happy to send further material to you on request djirel@sympatico.ca