The Flip-Side of Cultural Diversity?

A study conducted by Harvard political scientist Robert Putnam finds less civic activity in diverse communities.

The study is the largest ever on civic engagement in America, based on detailed interviews of nearly 30,000 people across America. Putnam surveyed residents in 41 US communities, sorting residents were into the four principal categories used by the US Census: black, white, Hispanic, and Asian. They were asked how much they trusted their neighbors and those of each racial category, and questioned their civic attitudes and practices, including their views on local government, their involvement in community projects, and their friendships.

The Findings: Lower “Social Capital”

The study found that the greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects. In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings. The study found that virtually all measures of civic health are lower in more diverse settings.

Putnam has studied the problem of declining civic activity for quite some time, finding that the US has experienced a pronounced decline in “social capital”  – which refers to the social networks — friendships, religious congregations, neighborhood associations and so on.  He states that when social capital is high, communities are better places to live, neighborhoods are safer, people are healthier, and more citizens vote.

Putnam writes that those in more diverse communities tend to:

distrust their neighbors, regardless of the color of their skin, to withdraw even from close friends, to expect the worst from their community and its leaders, to volunteer less, give less to charity and work on community projects less often, to register to vote less, to agitate for social reform more but have less faith that they can actually make a difference, and to huddle unhappily in front of the television…People living in ethnically diverse settings appear to ‘hunker down’ — that is, to pull in like a turtle.” 

These findings challenged the two dominant schools of thought on ethnic and racial diversity, the “contact” theory and the “conflict” theory. Under the contact theory, more time spent with those of other backgrounds leads to greater understanding and harmony between groups. Under the conflict theory, that proximity produces tension and discord. But Putnam’s findings reject both theories: In more diverse communities, there were neither great bonds formed across group lines nor heightened ethnic tensions, but a general civic malaise, with levels of trust lower even among members of the same group.

The “Diversity Paradox”

In a nation that is inexorably becoming increasingly diverse, how are we to interpret these findings?  

First, it is important to note that there are also some very positive recent findings about diversity, While ethnic diversity may, in the short run prove a liability for social connectedness, other research suggests it can be a big asset when it comes to driving productivity and innovation. In high-skill workplace settings. Scott Page, a University of Michigan political scientist and  author of “The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies”  finds that the different ways of thinking among people from different cultures can be a distinct advantage:

Because they see the world and think about the world differently than you, that’s challenging. But by hanging out with people different than you, you’re likely to get more insights. Diverse teams tend to be more productive.”

Page calls this the “diversity paradox.” He thinks the contrasting positive and negative effects of diversity can coexist in communities, but we must be wary of civic engagement falling off too far.

Putnam’s Take

When he published a detailed analysis in the journal Scandinavian Political Studies, Putnam argued that the negative effects of diversity can be remedied, and that history suggests that ethnic diversity may eventually fade as a sharp line of social demarcation.

In the final section of his paper, Putnam discusses how social identity can change over time, stating that experience shows that social divisions can eventually give way to “more encompassing identities” that create a “new, more capacious sense of ‘we.”

He also points out that increasing diversity in America is not only inevitable, but ultimately valuable and enriching. To help reduce divisions that hinder civic engagement, he suggests programs such as expanding support for English-language instruction and investing in community centers and other places to foster meaningful interaction. Putnam states: 

I think over the long run, as we get to know one another, and as we begin to see things that we have in common with people who don’t look like us, this allergy to diversity tends to diminish and to go away. So this is not something that I think as an argument against immigration. On the contrary, actually, I think in the long run we’ll all be better. But I don’t think that progressives and integrationists like me do our cause any service by hiding from ourselves the fact that it’s not easy.

Putting It Into Perspective

I believe it is important to remember that social diversity is a rather recent phenomenon, and the American consciousness is still evolving as is plainly demonstrated by the obvious dog whistle racism of the anti-Obama crowd.

What is also important to note is that Putnam does not extrapolate some universal principle that heterogeneous societies have any less potential for social cohesion than homogeneous ones -only that it takes time for people to look past their differences, and the American experience demonstrates that over time society can change.

For example, one of the remarkable aspects of the study is that it focuses on diverse communities. In fact, 50 odd years ago diverse neighborhoods were unheard of. I recall the changes in my old neighborhood, Bedford Stuyversant, Brooklyn. There was “white flight”following the construction of the subway line between Harlem and Bedford in 1936, as African Americans left overcrowded Harlem for more available housing in Bedford–Stuyvesant. But today, my daughter lives right near my old home in Clinton Hill, which is now a diverse neighborhood.

So it would not be fair to overgeneralize based on a study of diversity given such a short time frame.

Our Polarized Society

I believe that it would also be mistaken to lay off the problems of American polarization on attitudes about race on the part of the members of society themselves. To put this in perspective, bear in mind that even as America’s oligarchical structures have tightened over the  past few decades, society as a whole has nonetheless managed to trend toward a more diverse perspective.

This has occurred despite increased political polarization. When there is a demonstrative and concerted effort by the wealthiest class – including the media and politicians it controls- to manipulate people’s thought processes such that they devolve into a divisive, polarized mental framework, we should avoid the temptation to simply cite racial attitudes. While this is a contributing factor, alienation has much deeper roots, and It takes a great deal in such a divisive environment to take the bull by the horns and overcome the mental conditioning that is damaging the cohesiveness of American society,

I observe that change is inspired by trauma and shock. And given the increasing disparity in wealth distribution, mistrust of our leaders, expanding unemployment and the decline of the American middle class, we have a very interesting opportunity as a society today to evolve – together.

The key is to see past our differences, and Putnam agrees with me here. The only thing holding us back is that we submit to the mechanisms of control.



Not Feeling the Love?

Time Business and Money, the same folks who brought you “Wine  Drinkers Will Pay More for Bottles with Hard-to-Pronounce Names,” proclaims Valentine’s Day “a  pale, pink shadow of its former self.”  Instead of passion, it’s more likely these days to bring on a sense of obligation, dread or just plain apathy.

How can this be, when the National Retail Federation‘s annual survey paints a rosey picture:

  • 60% of  Americans plan to celebrate the holiday
  • 91% of those in relationships will celebrate
  • They will spend on average $131  on gifts for spouses, significant others, friends, children, parents,  classmates, teachers, pets and co-wothers.
  • Average spending is expected to increase $4 from last year.

Underground Survey says…

But  has done his own survey. And according to Kit, most of the dozens of consumers he interviewed weren’t really enthusiastic, and few said that they thought of Valentine’s Day as a romantic event.  The three most common responses he heard:

  •  “I don’t care.”
  • “I feel obligated.”
  • “I  feel left out.”

It’s a Man’s Job

According to the NRF survey, men spend more than twice as much as  women – an average $108 compared to $53 for women.

And while many men gripe that that they do it to say out of trouble, many women also say it doesn’t really mean that much to them either:

Caroline, 36, is one of many who refer to Valentine’s Day “a Hallmark  holiday.” “It’s a made-up marketing thing,” she says. She expects her husband  will give her “some gummy hearts and a bouquet of flowers like last year,” which  she says is nice, but not necessary. “I tell him he doesn’t have to get me  anything but he wants to. It’s sweet. He’s great. But is it romantic? I don’t  really look at it that way.”

Many singles aren’t feeling the love either, and many say they feel even worse to see their co-workers and friends receiving flowers, while they don’t.

What’s Marketing to Do?

Considering this ambivilence,  there’s been such a push to expand  Valentine’s Day beyond romance. Spending on sweethearts  is projected to decrease while overall spending goes up as more is spent on dogs, cats, friends, co-workers, parents, teachers  and kids. TRF report predicts:

  • We’ll spend $815 million this year just on our  pets.
  • This includes dog cookies decorated like a box of chocolates for pets
  • Heart-shaped pencil cups for office friends.

Either marketers are getting desperate  or consumers simply aren’t feeling the love.


Please Hold For Prompt Service…

 shared this on Time Business & Money.

A new poll commissioned by text-message service TalkTo shows that 53% of American consumers say that they spend 10 to 20 minutes on hold each and every week. How much does that add up to each year?

“This adds up to…13 hours annually spent waiting for a company that swears via automated message “we care about your business” to answer the darn phone.

Other findings of the survey:

  • 86% of consumers report being put on hold every time they call a business.
  • 48% believe the customer service representatives who answer phone calls are not helpful.

Lessons Learned? None

The data corroborates and amplifies the findings of previous polls cited by Tuttle. For  instance:

So, you’d think American customer service would work to clean up it’s act, and call for improved customer help lines, shortening wait times and providing more meaningful assistance, right?

Well, you’d be wrong.

The survey indicates instead that the solutions companies are considering are even worse than the original problem. Instead of listening to what customers really want, many companies are just buying into the more convenient notion that texting makes more sense than communicating with a real human being.  Stuart Levinson, CEO of TalkTo, an app for service request texting, is a case in point. He writes:

“This research shows how poorly the phone performs as a customer-service channel. Everyone’s calling less and texting more. It’s time for businesses to catch up with how customers want to interact with them.”

Really?  Tuttle cites data that demonstrates just the opposite:

Amazing. So customer service is not about the customer at all; it’s about lowering their expectations and insulating yourself from the voice of the customer.  As long as we all collude in lowering the bar for customer service, we can all cost cut our way to prosperity – on the backs of the customer.

In the land of the blind, the one-eyed man is king. I’d say this provides a tremendous opportunity for a real thought leader to differentiate itself in the market.

Now that government spending increases are trending down, it’s an opportune time to tackle healthcare costs

Where There’s a Will There’s A Way

Now that President Obama has bent the spending curve, reversing the spending increases of the former administration, the time has come to address healthcare spending, without making unnecessary cuts to Medicare and other social program beneficiaries. Serious economists have pointed out that there is actually no need for such benefit cuts, and the core  U.S. economic issue isn’t spending, at all, but income inequality.

Now, a study by the  nonpartisan Commonwealth Fund, titled Confronting Costs: Stabilizing U.S. Health Spending While Moving Toward a High Performance Health Care System, finds that the $2.8 trillion U.S. healthcare system can be held to an annual spending target without spending cuts to Medicare, Medicaid, and other government programs by implementing measures to encourage providers to accelerate adoption of more cost-effective care.

The results would be that families, employers and government budgets would receive  relief from their growing financial healthcare burdens.

Commonwealth Fund President Dr. David Blumenthal believes the approach could win bipartisan support in upcoming deficit talks as a more politically acceptable alternative to cutting popular entitlement programs including Medicare.

There is an urgent need for such measures:

  • The United States has the world’s most expensive healthcare system.
  • Government forecasters say it will cost more than $9,200 this year person.
  • Costs continue to outpace inflation and restrain overall economic growth.
  • Americans die earlier and experience higher rates of disease than people in other countries.

Efficiency, Not Benefit Cuts

Although deficit hawks are attempting to turn the discussion to entitlement program cuts, the Commonwealth Fund study finds that benefit cuts are neither necessary nor inevitable. Instead, the study calls for the federal government to set gross domestic product per capita as a target for overall healthcare spending growth. According to the U.S. Centers for Medicare and Medicaid Services.In 2007, before the current slump in growth, healthcare spending rose 7.6% vs. GDP per capita growth of only 4.1 percent.

It’s Not Brain Surgery

‘The Commonwealth Fund study notes that changes that are already taking place could be accelerated, including financial rewards for physicians and hospitals that participate in coordinated team-based treatment strategies. The benefits for It Medicare’s 50 million beneficiaries would include:

  • Better protections against catastrophic illness.
  •  Incentives aimed at better outcomes for lower costs than under the current fee-for-service structure.
  • Freeing up resources for physicians and hospitals by reducing administrative costs.
  • Permanent elimination of a Medicare pay cut for physicians that Congress has repeatedly delayed.
  • And, of course, healthcare savings.

The report estimates that its recommendations could save $1 trillion on healthcare spending over 10 years. Savings would include:

  •  $242 billion savings for state and local governments.
  • $189 billion fom employers.
  • $537 billion for consumers.

Inevitable Change

In other words, not only isn’t it brain science, it’s a no-brainer. Of course, recommendations of this kind were originally included in the Affordable Care Act (ACA, or “Obamacare”) , but politicized as “death panels.”  There is certainly no doubt that cost reforms are needed, and now that the health care reform barrier has been breached and the ACA has created a platform for reform,  progress is inevitable.


Saving to Keep Up With the Joneses

In the Wall Street Journal, Carolyn T. Geer highlights recent surveys of investors by entities including T. Rowe Price and ING.

The Question: Does the knowledge that your friends and neighbors are saving more than you cause you to boost your savings?

The Answer: It works, but the effectiveness varies very much with the approach.

The “Lake Wobegon Effect”

People have a natural desire to avoid being average and ordinary. This phenomenon is known as the “Lake Wobegon Effect,” named after a fictional town created by writer and radio host Garrison Keillor, where:

All the women are strong, all the men are good looking, and all the children are above average.

The question is for financial consumers is: Will consumers be more inclined to maximize their 401(k) contributions or increase their insurance coverage amounts if provided peer comparisons?

What the Studies Show

Matt Fellowes, founder and chief executive of HelloWallet, which works with employers to provide financial guidance to their employees via the Web and mobile devices, confirms that peer comparison is one way that economists and others are attempting to modify financial behavior. He believes that cluing investors in on their peers’ financial decisions can influence the decisions they make about their own money, if you show them convincingly that what they’re doing doesn’t meet the norm, but “it doesn’t work for everyone. It’s not a silver bullet.”

According to an ING study of U.S. consumers:

  • More than half of respondents say they would be motivated to save more for retirement if their sagings didn’t measure up to those of their peers.
  • Yet one-third say they would not be motivated to save morel.

Why the mixed results? Apparently, the approach can be quite effective if done right, but the wrong approach can also be demotivating. Stanford University economist John Beshears and colleagues say that when some employees are told of their co-workers’ higher savings rates, they are actually less driven to save. But the companies that have studied the effect also say that the approach can be fine-tuned to avoid demotivation, which I will explain below.

Marketing Applications

Web-Based Tools: ING has created a free, Web-based tool that lets investors measure themselves against others on a range of saving, spending and personal-finance matters called Deb Dupont, director of the ING Retirement Research Institute, conducted a test market of the concept with employees of several of its retirement-plan customers, that yielded the following results, which were promising enough to launch the tool:
  • 21% increased their contributions or joined a plan.
  • HelloWallet members showed similar results, according to Matt Fellowes.

The Right Approach: Two Important Variables

The right approach needs to take into consideration two important variables:
1. Don’t Demotivate: Fellowes explains that you must be careful not to use “shock and awe” tactics that demotivate consumers:

We’ve tried: ‘You are $5 million behind on your retirement savings! What is your problem?’ But emotionally what happens is people shut down and move on.

2. Don’t Set The Bar Too Low: One problem with peer comparisons that reference  average workers is that it can set the bar too low.

To strike the perfect balance, “HelloWallet has reframed the issue for consumers as follows:

You are making $5,000 a month now. In retirement, you’re only going to be making $2,000 a month, based on your current savings rate. On average your peers will be making $4,000, but the very best savers among them will be making $7,000.

This highlights what the best, most financially healthy people in a peer group are doing and provides a more realistic target, while piggybacking on the natural desire to avoid being ordinary.

Assisting Complex Financial Product Decisions

Having applied this approach in product comparisons, I have found that the approach can be a valuable aid in helping consumers make complex financial products. In particular, I find that when presenting consumers with their choices, it is even more helpful to include not only a comparison to average consumers but a “best practice” comparison. For example, employers considering an employee benefit program can be shown what kinds of benefit plans their most successful competitors are adopting. Individual consumers considering a plan of insurance can be shown what kinds of options successful peers have chosen.

Choice Architecture: Marketers and sales professionals can improve the effectiveness of their approaches by making use of an effect known in behavioral economics as “choice architecture.”

Marketers and sales professional should be aware of certain behavioral tendencies that tend to impede decision making involving complex insurance and other financial products.  Consumers are reluctant to make a switch to a different insurance carrier or among different plans when the choices are complex – something known as status quo bias. Inertia, or the tendency not to change, is especially significant when choices are complex.

Other studies show that by reframing the choices for the consumer, you can help guide decision making for consumers facing complex decisions in selecting better plan options.

Implications For Financial Marketers

The implications for companies in crowded markets such as insurance and investment products and services are great. It can mean steering consumer toward decisions that will ultimately save them and the company money and improve consumer outcomes.

Companies like Progressive Insurance, for instance, use comparison shopping tools to differentiate themselves in a crowded field as a more consumer-oriented and trustworthy choice. Their “name your own price” message conveys that the consumer can save time comparison shopping through the use of their online tools. Their perky spokesman, Flo, and her price gun personify consumer values such as friendly, good spirited personal service and a personal touch. This is all intended to break down consumer resistance to switching companies, and has generated incredible recognition.

The response to these advertisements demonstrates that the message can generate strong brand associations with core consumer values that can be illustrated in sensory terms.  But an important question remains – how to turn brand recognition and leads into conversions?

In other words, once the consumer reaches out to their local agency or makes an online query, how can the sales professional better parlay this into a consistent consumer experience that results in conversions to more profitable product lines and cross selling opportunities/share of wallet.

This is where choice architecture can be vital. In providing comparisons with other carriers, the sales professional has invaluable opportunities to more effectively clue in consumers on their peers’ financial decisions and influence their buying decisions.

Related Articles:

For more information about how behavioral economics can help guide consumers’ buying decisions, with research results from Sibson Consulting, reference my related articles below.

Kevin Allen in Ragan’s PR Daily explains that he takes the time to look at a baby animal every day, even though he’s a baby animal enthusiast. It’s just that he spends so much time on the Internet.Fortunately, Japanese researchers (who else?) have shown that this increases productivity. The Atlantic Wire highlights a study at Hiroshima University:

“A team led by Hiroshi Nittono had 48 male and female students perform a visual task where they were asked to look for double digits in a series of random matrices with numbers. The students were asked to give as many accurate responses as possible in three minutes. Then, the students looked at pictures before doing the task again. One group looked at cute baby animals, another at less cute adult animals, and a third at pleasant-looking food.”

Results: the group that looked at the baby animals was the most productive.

I’m curious whether marketers can use the effect to stimulate people to buy more.

The Washington Post’s Wonkblog reports that a new poll from Public Policy Polling found:

  • 39% of Americans have an opinion about the Simpson-Bowles deficit reduction plan.
  • 25% also have an opinion on the Panetta-Burns plan.

Of course, there is no “Panetta-Burns” Plan.  But that didn’t stop people from expressing opinions about it. The survey results:

Panetta-Burns’ nonexistent policy proposals were supported by 8% and opposed by 17% of the voters surveyed.

Simpson-Bowles’ real policy proposals had stronger favorables, with 23% support and 16% opposition.