3BI: DeepSeek's Labor Illusion, Taxi Drivers, and Gift Cards
Welcome to my 3BI newsletter, where I share three insights from the world of behavioral science on psychology, decision-making, and behavioral change.
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DeepSeek and the Labor Illusion
The AI world was upended this week by the release of a new model by Chinese company DeepSeek called R1 that seemed to outperform others in the market at a lower cost, resulting in a $1 trillion wipeout in the US stock market.
I’m still pretty novice with LLM’s and am not very technical, so I started reading and listening to better understand the hype, and this comment on the Hard Fork podcast caught my attention:
What's really interesting about the DeepSeek thing is that as it's answering your question, you're seeing how the computer understood your query. And so if you wanna ask a follow-up question, you now have a much better sense of how the computer understood you. And this actually does seem to be a sort of conceptual breakthrough in product design, You know, just as much as the underlying science.
Indeed, DeepSeek R1 shows its internal reasoning process, allowing users to see the AI's "stream of consciousness" as it formulates a response.
This differentiated user experience is an example of the Labor Illusion, where we perceive products or services as more valuable when we believe more effort or labor has been invested in their creation or delivery.
In digital interfaces like LLM’s, designers elicit the Labor Illusion by creating the perception of effort behind basic digital processes. Think of searching for a flight on Kayak or Google Flights - the results slowly populate as the website searches for matches and a loading bar displays its progress.
Researchers found that people strongly preferred websites that visibly displayed the process, even if it took longer, and they also trusted the results more.
Transparency pays off, even if we have to wait longer for it.
Manual Navigation Lowers the Risk of Alzheimers
Google Maps is convenient, but it may be good for our brains to turn it off and navigate manually once in a while.
According to a new study from the British Medical Journal, taxi drivers have lower rates of death from Alzheimer’s disease compared to those in other professions, likely because the job involves regular exercise for the parts of the brain that are responsible for navigation.
Notably, those in jobs that required navigation only on predetermined routes, like bus drivers or pilots, did not see lower rates.
This finding has big implications for neuroscience, as it suggests that certain mental tasks can keep our brain stronger and protect it against cognitive decline:
Researchers agreed that one end goal of this line of research is to find ways to mimic the stimulation of the brain that could help protect people from Alzheimer’s.
“Prevention is a really important thing when it comes to Alzheimer’s,” said Vishal Patel, a surgical resident at Brigham and Women’s Hospital who was a part of the new study, “just because treatments haven’t really worked.”
Modern technology makes our lives easier by doing a lot of “thinking” for us, but this also leads to worse mental fitness. I believe that methods for maintaining and improving mental fitness will be increasingly important going forward, just as dedicated physical exercise became necessary as life became more sedentary.
Remember to Use Your Gift Cards
I wrote in a post last summer about how companies profit off of our inattention and forgetfulness with subscriptions that we can’t seem to get around to canceling.
Gift cards are another big business relying on the same cognitive biases. According to Capital One, 43% of American adults have unused gift cards adding up to a total value of around $23 billion.
After a certain amount of time (typically, 6-24 months), the companies are legally permitted to turn those unused funds into what’s called breakage income with the assumption that it will never be redeemed.
That’s a lot of free money for companies.
According to Chipotle’s annual report, 4% of its gift cards are never redeemed, allowing them to pocket $1 out of every $25 gift card purchase at virtually no cost. Starbucks has made $1.2 billion over the last decade from unused balances on gift cards or their app, which means that their breakage income is growing at a faster pace than their actual sales!
However, federal law requires most gift cards to be valid for 5 years, and in many states, like California, they can never expire. That means you probably have free money lying around.
So, take this as a reminder to grab the gift cards you got over the holidays and put them to use, instead of stuffing shareholders pockets.
Or, if you’re more mischievous, you can follow Rory Sutherland’s advice and make use of gifts you’ve been given that are sitting idle.
Other Stuff
Tech analyst Ben Thompson has a great in-depth write-up on DeepSeek and its impact on the AI industry.
MJ Lenderman’s Tiny Desk concert is excellent.