Transaction Cost


 Professional athletes often have full time mental coaches or sport psychologists to assist them with their mental game. Amateur athletes typically do not have this luxury. A cost effective way for them to acquire the necessary mental knowledge and skills is to attend training workshops, such as that offered by Making Sense.  A last mile problem often arises, however. Even well motivated athletes who know how to improve their mental game, often procrastinate.  To start an action, technically called initiating behaviour, is an important function of the prefrontal cortex (the uniquely human part of your brain). Getting started is often the most difficult part of a new venture and this post addresses that.

People who attend workshops and lectures typically do not retain much of what was taught and apply even less. The main reason for this is simply that life moves on. Other things just become more salient, they don’t apply their mind to the material taught and simply forget. To address this, it is important for presenters of workshops to follow up and keep nudging their students.

Let me now introduce the concept of transaction cost, which I believe may help you to manage your environment so to assist you to actually apply yourself to the mental game. Transaction cost, as applied here, derives from choice architecture or nudging, a sub-discipline within behavioural economics. So …, how does it apply to you? (Read about choice architecture in Nudge, by Thaler & Sunstein).

Consider an analogy from physics, Newton’s First Law of Motion. This states that an object will remain at rest or in uniform motion in a straight line, unless acted upon by an external force. One such a ‘force’ is friction, which will tend to resist an object getting into motion, or will retard an object already in motion. Now; you are that object and the motion you desire is starting and keeping on with your training programme and your mental game. The friction is factors in yourself and in your environment that is preventing you from accomplishing that. The manipulation of these factors through increasing or decreasing transaction cost will increase the probability of you starting and continuing your physical and mental training programme.

An example of manipulating transaction cost is where a school tuck shop makes it difficult to access sweets and cold drinks by storing it out of sight, requiring kids to specifically queue for it at a single counter and to specifically ask for it (increasing transaction cost). The more healthy equivalents are displayed prominently and easy to access at a broad service counter (decreasing transaction cost). Believe it or not, it works; consumption of the unhealthy stuff goes down and of the healthy stuff goes up.  OK, it’s not quite that simple, you also have to prevent the kids bringing unhealthy stuff from home and face angry parents who believe it’s their children’s basic human right to be eat whatever they want to and to be obese and unhealthy.

So in your physical and mental training programmes, decrease the transaction cost by knowing exactly what has to be done and writing it down in checklists. Further decrease the transaction cost by specifically scheduling your training activities and ensuring that all equipment is immediately at hand and that the training environment is ready.

On the other hand, increase the transaction cost of activities that will draw your attention away from your training. Lock the TV room and leave the laptop at work (or lock it away). Use TV and the internet as rewards for after good training sessions. You will know which other activities interfere with your training, find ways to increase the transaction cost on these.

The concept of manipulating transaction costs applies to many domains. So, whether you are an athlete, a businessman, a school principal or a parent, look in your environment where you can adjust the transaction cost of activities to get more of what you want and less of what you don’t want. There are some ethical issues here that we’ll look at in future posts.



About Dr Leon Stander

Dr. Leon Stander is a sport and performance psychology consultant who specialises in psychological skills training (PST) with sportsmen and women, business executives and individuals who wish to benefit by such training. He presents group workshops, as well as individual mentoring and counselling. Current fields of interest and study are behavioural economics, sport psychology and Stoicism. Veteran sportsman, participates mainly in action shooting sports.
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