Trump, Sanders & Brexit: A Fifty Bits Explanation

The Republicans said no to a wide range of presidential primary hopefuls, instead settling on Donald Trump. Hillary Clinton has all but won the Democratic nomination, but only after a significant challenge by self-described democratic socialist Bernie Sanders. And our stodgy cousins across the Atlantic voted to part ways with the European Union.

What the heck is going on?

As I note in an article for Fast Company, loss aversion plays a big role in each of these three political surprises. We work harder to avoid losses than we do to achieve gains. If the status quo is seen as a loss, people will strive to make a change

Trump, Sanders and Brexit Leavers all took advantage of the dissatisfaction that many, many people feel with the current state of affairs. They leveraged the deep human tendency to avoid losses to get voters comfortable with taking a chance on them.

But human behavior is pushed and pulled by multiple psychological forces; loss aversion is a big one, but it’s only one of many. Two other psychological forces are likely involved in the remarkably odd political year so far.

WE STRIVE TO FIT IN

Our sense of identity depends in part on the groups to which we belong. Research has demonstrated, for example, that conservation-minded consumers living in green-leaning communities prefer vehicles that are conspicuously hybrid… and will spend more for such cars.

Cooperation is a hallmark of human behavior. It reflects our ancestors’ strategy for survival: working together in smallish groups to achieve more together than is possible individually. With this reliance on cooperation comes an exceptional awareness of potential violations of fairness – critical because when left unpunished, cheating inevitably corrodes the benefit offered by teamwork.

Belonging to a group bestows many benefits, but the flip side of having a strong sense of “us” comes hand in hand with a strong sense of “them.” It seems that, at least psychologically, every in-group implies an out-group.

WE GRAB REWARDS NOW

Another powerful psychological force is our bias to the present. Roughly speaking, things that happen in the present carry twice the psychological weight of those that happen in the future.

Because of this steep discounting, humans generally tend to accelerate good things into the present (e.g., eating ice cream) and push less desirable things into the future (e.g., exercise). This works just fine… except that the future inevitably becomes the present.

WHAT ALL THIS MEANS IN POLITICS

People are subject to three powerful psychological forces:

  • Loss aversion: we work harder to avoid losses than we do to pursue gains
  • Fitting in: we work hard to be part of the group, we dislike cheaters, and we are skeptical of outsiders
  • Bias to the present: we prefer our rewards now and our costs later

Let’s take a look at how each of these forces played out with the Trump, Sanders and Brexit surprises.

Loss Aversion

As noted above, Trump, Sanders and Brexit all benefited from loss aversion. Voters who view the status quo as a loss are likely to break a sweat to change things, even to the point of risking making things worse.

Trump, check; Sanders, check; Brexit, check.

Fitting In

Trump and Brexit Leave place a heavy focus on immigration, highlighting the potential problems of letting more “outsiders” into the US and UK, respectively. This focus leverages the natural human tendency to focus on group membership, triggering the notion of in-group (“us”) versus out-group (“them”).

Raising concerns that terrorists would hijack a legitimate immigration process to cause harm at home amplifies the power of the us / them frame. (Sanders got close to using the same type of frame when he spoke passionately about income inequality, but Americans seem skittish about pitting one economic class against another.) The Leave campaign also used an “us / them” frame when it argued that the UK “sends the EU 350 million pounds per week” — money that would be better spent shoring up the National Health Service.

Trump, check; Brexit, check.

Bias to the Present

The Leave advocates for the Brexit vote seemed to have gotten more benefit from this psychological force than either the Trump or Sanders campaigns. Specifically, nearly all of the economic costs associated with the UK leaving the EU will occur in the future and are therefore steeply discounted psychologically. Although many of the benefits of leaving will also occur on the future, the good feeling (legitimate or not) of “taking back control” of the country from the EU occurred as soon as a voter cast a ballot.

Brexit (and Brexit alone), check.

table

 

The Upshot

Sanders went a lot further than most thought because most of us underestimated the power of loss aversion. As I write this, more than two-thirds of Americans believe the country is headed the wrong direction. Loss aversion tells suggests they’d be willing to embrace more risk than usual in hopes of avoiding more of the same old status quo.

Trump benefits from both loss aversion and the natural human desire to belong to a group. It seems as though he’s locked up the Republican nomination for president, and although he’s not leading Clinton in the polls, as of this writing the race is far closer than most would ever have imagined.

And of the three big political surprises, only Brexit Leave had the tailwinds of all three of the powerful psychological forces. By luck or by design, the Leave campaign was able to leverage the psychologically perfect storm: our aversion to losses, our need to belong, and our focus on the present. Check, check, check.

 

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