Why Persuasion Techniques Are Important

February 09, 2025

Table of Contents

These are just a few notes on cognitive biases and the importance of using persuasive techniques. Or to put it another way - people will frequently make the wrong decision if not helped.

The Princeton Experiment

Researchers at Princeton conducted an experiment where they asked doctors to imagine that they were preparing for an outbreak of a virus or other disease in their town or city. If nothing is done it is approximated that 600 people will die. There are two alternative programs proposed to limit the damage of this deadly disease.

Treatment A was predicted to result in 400 deaths, whereas treatment B had a 33% chance that no one would die but a 66% chance that everyone would die

If program 1 is adopted 200 people will be saved.
If program 2 is adopted there is 1/3 chance that all 600 people will be saved.

It is up to the doctors at the local medical board to select which response is appropriate. When this hypothetical was presented to doctors as part of this study 72% of medical doctors chose program 1.

After they were given the above question the same doctors were given the same scenario when 600 people are expected to die if nothing is done. This time however they were given the follow 2 mitigation strategies to choose from:

Program 3 in which 400 people would die.
Program 4 in which there is a 1/3 probability that nobody would die and a 2/3 probability that all 600 people would die.

This time, 78% of the same doctors chose program 4.

Some of you right now are shaking your heads. For the rest of you let me explain.

Programs 1 and 3 are the same. Programs 2 and 4 are the same. The fact that a group of qualified doctors changed their answer from Program 1 to Program 4 would suggest they didn’t understand the numbers. Yet, these are qualified MDs who have done significant math to get to where they are. The only explanations for them changing their choice are either they didn’t understand the options or a cognitive bias. They either did not understand the options or cognitive bias influenced their decisions.

In another study two groups of people were told they would be asked to try some ground beef. The first group were told that the beef was “75% lean”, the second group was told that the beef was “25% fat”. Before trying the meat the group that were told “25% fat” estimated the meat to be 31% lower in quality and 22% lower in tasted than the group that heard, “75% lean”.

What is a cognitive bias?

Cognitive biases are the brain's way of streamlining the overwhelming flood of information it receives so as to minimize the energy it uses. (The human brain makes up about 2% of our body weight but uses 20% of our energy. Habits, autonomic processes, cognitive biases are all really the same thing - easier paths for the flow of energy between neurons that have already been forged. Human brains are lazy and unless they perceive a threat they will always take the path of least resistance.

Some Examples of Cognitive Bias

Some examples of cognitive biases include:

Anchoring Bias: Anchoring bias occurs when an individual uses an initial piece of information (the "anchor") as a ‘centralish’ reference point when making a decision. This initial information sets a reference point and can skew subsequent judgment and analysis.

Examples: 

Job Salary Negotiations: After being told the previous employee's salary was $50,000, a candidate feels compelled to negotiate around this figure, even though they originally aimed for $60,000.
Car Purchases: A customer is initially quoted $25,000 for a used car; despite finding several flaws, they only negotiate down slightly, feeling anchored to the original quote.
Retail Discounts: Seeing a sweater originally marked as $100 now on sale for $75 makes it seem like a better deal than if it had been priced at $75 from the start.

Status Quo Bias

Definition: This bias leads individuals to prefer things to stay the same by doing nothing or sticking with a decision made previously.

Investment Portfolio Inertia: An investor keeps their money in low-yield savings accounts because they're used to it, even though switching to slightly riskier investments could potentially increase their returns.

Life Insurance Update: A client with an outdated life insurance policy may resist updating it, even if their current needs have outgrown the policy's coverage. They might feel that keeping things as they are is safer or easier than evaluating new options, leading to potential under insurance or missed opportunities for better financial planning.

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Past Experiences Lead to Present Biases

Here’s the twist though - Imagine that your brain has or is, your own personal assistant who is always in a rush to get things done, perpetually flustered and often getting things almost comically wrong. This assistant doesn’t just deal with numbers or raw data. This assistant is also responsible for your schedule, who and what you prioritize, it handles your perceptions, your judgments and your decisions. And it does all of this based on past experiences. It ‘learns’ based on repetition or if it is exposed to something that is emotionally stressful. Let me give you three quick examples and we’ll get back to how this affects the ethics of persuasion in financial planning.

Example 1: Little Johnny at the age of 2 is attacked by what is perceived to be a large and nasty dog. He isn’t hurt but is very upset, crying and confused. Everyone around him tells him how dangerous it was and that he shouldn’t have approached the dog (or at least that’s how he perceives it at the time). He forgets about the incident but has a lifelong aversion to large dogs and feels nervous and worried whenever they are around.

Example 2: Little Wendy was always told to be scared of strangers. As a child her mother would tell her to be wary of approaching strangers. When she was young she heard a story about a woman getting into an elevator alone with a stranger who attacked her. These ‘safety’ lessons manifest as a phobia and Wendy is unable to enter any elevator if she’s alone and there is a man in it who she doesn’t know.

Example 3: Howard had an uncle who wasn’t mean but wasn’t very nice to him. This uncle had a particular style of moustache and tended to smell of Old Spice. The uncle thought he was being friendly and cute when he would play tricks on Howard as a child and told him fanciful stories he believed. When as a little child Howard acted or shared this information with his friends he was ridiculed. Today Howard met with a financial advisor who was highly recommended to discuss buying life insurance. Despite agreeing with everything the advisor said Howard just doesn’t feel a connection. Something was missing, something was ‘wrong’ with this person. It just so happens the advisor wore Old Spice aftershave.

(Note: these particular examples are of learnt biases, cognitive biases tend to be ‘hard wired’)

The Ethics of Using Persuasion Tactics

So what is the point of all of this? Qualified doctors making a medical decision about how to save (or lose) hundreds of lives make the decision based on the words in front of them rather than their meanings.

In the previous scenario there is no difference between ‘200 people will be saved’ and ‘400 people will die’ yet 3 out of 5 doctors appear to have changed their viewpoint on how to treat a disease just because they were explicitly show the number of deaths vs the number of people saved. Trained medical professionals, who were given the same questions, minutes apart, made different decisions based on the language used. If a Doctor after medical school and residency, who knows he is being observed and recorded, makes a life or death decision because he sees the words ‘will die’ instead of ‘will be saved’ - what chance do any of us have of making rational and sound unbiased decisions? If the body of behavioural science we are collecting is to be believed, the answer is none.

In a survey of 138 fee for service financial planners it was found that after people bought and paid for and completed a financial plan with them, less than 1 in 3 clients implemented 20% or more of the suggestions that they had paid thousands of dollars to receive, in the following 6 months. One in 5 clients who went through the full process with an advisor and voluntarily paid their own money to develop a plan, did nothing.

People make bad decisions all the time. Sometimes they don’t know its a bad decision and at other times people choose a decision knowing its the wrong one due to their emotions and biases. It is incredibly difficult to help people if you cannot persuade, and push them towards the correct decisions.

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Behavioural Finance Examples

Behavioral finance is a burgeoning field and due to the incredible amount of data we now have on people’s behaviour - due to connectivity we are, for the first time in human history we are able to compare what individuals claim they do with what they actually do. The data from both experiments and studies is consistent and overwhelming - people don’t act the way they believe they do. And education isn’t an antidote to bad decision making. If your goal is to help as many people as possible, or to help a few people as much as possible, you have to accept this reality: It is essential that people feel they have autonomy in their decision making, however without guidance, guidance that goes beyond simply making information available to them, they will make poor decisions. People are irrational and make irrational decisions. Our job is to get into their programming and to help them make rational decisions.

Here are two more examples of studies that illustrate that people act out of habit rather than logic.

In a study conducted at Princeton one group were told to imagine that they had pre-bought a ticket to go to the cinema. When they arrive at the cinema they discovered they had lost their ticket. Would they pay $10 to buy another ticket? 46% of the participants said they would buy another ticket.

A second group was asked to imagine that they were going to the cinema and hadn’t yet bought a ticket. When they arrive at the cinema they discover they have lost a $10 bill. Would they still pay $10 for a ticket? 88% said yes.

Again, this is the same scenario, the participants all lost something valued at $10 but because in one case the item was a specific ‘ticket’ as opposed to a $10 bill almost half the participants made a different decision.

In case you think this is limited to small amounts of money - a survey was done of wine collectors who had collected bottles for many years. I’ll summarize the results with a story about a friend of mine. This friend bought cases of wine at $100 a bottle. Today these bottles are worth in excess of $2,000. My friend could sell the bottles. However being a wine connoisseur my friend has decided to drink them. Yet my friend (who is quite wealthy) refuses to pay $2,000 for a bottle of wine. Again let me reframe that thought: someone who has money will consume $2,000 of product in a particular situation however they refuse to do so in a separate scenario where they would be getting the same enjoyment, benefit and utility at the same cost.

“Truthiness”

I will pass on one of the first messages, indeed some of the first feedback I ever received from someone I hypnotized - ‘Use your powers for good.’

Some of the techniques in this newsletter will give you the ability to play with ideas in other people’s minds. But ‘logic’ is different for the conscious and subconscious and as such a statement that may be interpreted as ‘true’ to one may be ‘false’ to the other. This does not give you the right to be dishonest.

Do not lie. Do not deceive. Often things sound better if we omit key facts - do not do this. These tools will make you exponentially more powerful, honestly.

Persuasion or Manipulation?

There is a fine and false line between persuasion and manipulation. Much like Xeno’s paradox where we know a pile of sand when we see one but can’t tell you how many grains of sand is required at a minimum to be a pile, we know blatant manipulation when we see it. We know elegant persuasion when we see it but where one becomes the other is a blur. This situation is more confused by a slew of special pleadings by various authors and trainers who claim that manipulation vs persuasion is based on (pick one or any combination of the following): intent of the persuader, benefit to the persuader, benefit to the subject, conscious intent on the part of the persuader, the subject’s knowledge of the intent or knowledge of the conscious intent on the part of the persuader, partial or full disclosure of methods of persuasion/manipulation being used by the persuader to the subject and a variety of others.

Having professional stationery is a form of persuasion. If you work primarily with employees of one large company you may choose to have the colours and style of your stationery be similar to the colours and styles of their employer. Persuasion or manipulation?

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You belong to an alumni association with a subject and both of you played on the same team (at different times) at University. Your affiliation and common experience create instant rapport and a framework for trust. Is it persuasion or manipulation to mention it?

Your field of expertise has nothing to do with your university studies or the sport you played in the above example. When discussing recommendations for products with this subject you use analogies from the sport you both played to clarify and emphasize key points. Persuasion or manipulation?

Whenever I speak to a doctor about their financial needs I will use medical analogies. I will talk about the ABC’s of First Aid and why they’re important and compare them to the various roles and functions of money in their life. Persuasion or manipulation?

I cannot tell you where exactly the line between persuasion and manipulation lies. I can tell you that if you are lying - you have crossed into dark territory and shouldn’t be there. Beyond that whether and how far you are comfortable about consciously identifying a subjects desires and appealing them or whether changing the language use to reduce resistant or the degree to which you use any of these ideas is a matter of decency, common sense and context.