Big Think Interview With Cyril Shroff
Mr Cyril Shroff is a managing partner of Amarchand & Mangaldas & Suresh A Shroff & Co - India's largest and foremost law firm, with approximately 450 lawyers. Amarchand Mangaldas has offices at Mumbai, New Delhi, Bangalore, Kolkata and Hyderabad. With over 25 years of experience in a range of areas, including corporate laws, securities markets, banking, infrastructure and others, Mr Shroff is regarded and has been consistently rated as India's top corporate, banking and project finance lawyer by several international surveys including those conducted by International Financial Law Review (IFLR), Euromoney, Chambers Global, Asia Legal 500, Asia Law and others.
Mr Shroff has authored several publications on legal topics. He is a visiting lecturer of securities law at the Government Law College. He is a member of the advisory board of the Centre on Lawyers and the Professional Services Industry, established by the Harvard Law School, and a member of the advisory board of the National Institute of Securities Markets (NISM).
Mr Shroff is a member of the executive council of the legal practice division (LPD) of the International Bar Association (IBA) and the advisory board of the Asia-Pacific forum of the IBA. He is a member of the Media Legal Defence Initiative (MLDI) international advisory board. He is also a member of the primary markets advisory committee of the Securities and Exchange Board of India. Mr Shroff is also part of various committees of the Confederation of Indian Industry (CII) - the national council on corporate governance, the national committee on commodities markets, the subcommittee on financial investors, the national committee on regulatory affairs and the national committee on capital markets. He has also been a member of several governmental and other regulatory committees on law reform concerning the corporate and securities market, bankruptcy laws, commercialisation of infrastructure, etc.
Mr Shroff was admitted to the Bar in 1982 after receiving his BA and LLB degrees from the Government Law College in Mumbai. He has been a solicitor at the Bombay High Court since 1983.
Question: How is India approaching the financial crisis?
Cyril Shroff: India has not really had, a sort of severe impact for the financial crisis. The impact had been somewhat muted because of prudent financial management as well as some basic structure factor which have insulated it from the global financial crisis. And I could recite specific reasons for that, for some of them include the fact that our economy had been primarily domestic focus of the dependents on rest for demand as well as for capital has also been somewhat limited. Secondly, our financial system has always pursued the policy of more prudent management. Our banks are well-capitalized. We have not had exposure to toxic assets and these are some of the factors that have contributed to insulating us somewhat from global conditions.
Question: Is India similar to an E.U. country in its approach?
Cyril Shroff: If I would compare with European country I think it’s still much, much better off. Our financial institutions, not even one of them is broke. Even in the beginning, of this sub-prime crisis the only impact was the fact that there was actually increase liquidity into India as a result of Fed rate cuts in the US. So the regulatory response was really to try and sterilize the extra liquidity that was coming in. As far as the second major milestone event in the financial crisis, the Lehman bankruptcy even that didn’t have much of an impact because their little counterparty risk which Indian banks had to Lehman or events which flew out of that. So we’ve had a muted impact. That being said, the global conditions have had some impact as much as capital flows have been reduced and have been more subdued, our capital markets have, our stock markets have fallen quite significantly since the peak. They are reviving in more recent weeks but they had at one point of time come down quite sharply.
Question: What makes doing business in India different than doing it in the West?
Cyril Shroff: Well, a number of factors which highlight differences between doing business in India and doing that in the west. Firstly, in India, Indian entrepreneurs have historically had to even now have to struggle to a fair amount of bureaucracy and still make it, make it to the top. So they have two functions and there are more constraining policy conditions but nonetheless they have entrepreneurial energy and the familiarity with the landscape helps them to still walk through the system.
They are able to take advantage of a number of structural factors in India such as our demographics, the availability of skilled professionals and just to share energy of a very young country. Other differences include the ability to move quickly. In India’s growth has primarily private sector entrepreneur-driven. Unlike--I don’t want to bring in the China comparison too early--but China’s growth has been largely driven by public sector and governmental intervention but it’s probably the exactly the other way around as far as India is concerned. Businessman who would never have heard about 10 to 15 years ago, are amongst the top 10, 10 or 15 businessmen incorporates in India. So that’s one big difference.
The other cultural difference between doing business in India and doing business in the West is a fair amount of informality in terms of how structures work. There is a very high proportion of promoter and family-controlled businesses. Most of corporate India barring a few is promoter and family-controlled. So that brings with it, some special cultural dimensions to it as well, not necessarily in a bad sort of way but it allows this kind of businesses to act quickly in a more entrepreneurial format. So they are less institutional and more entrepreneurial.
Question: How did India come to dominate outsourcing?
Cyril Shroff: We have benefited tremendously from the outsourcing opportunity and initially it began as a cost arbitrage because the cost of hiring skilled professionals in India was significantly lower than in the West. But more recently we moved up the value chain quite a bit. So today, we’re not just outsourcing low end jobs like call centers but have moved up the value chain in terms of research and development facilities and more complicated functions, financial, and other functions which are being outsourced to India. A number of global financial institutions for instance have their back offices in India handling very complex financial models, handling some of the global accounting practices, so it’s. . . . We’ve just tapped the tip of the iceberg at this point, and there is much more to come. The problem today in India is that despite our large population there are still not enough skilled professionals which can allow us to truly exploit this opportunity.
Question: How did you build your law firm?
Cyril Shroff: Well, I think the history of from goes back a long time, we are more than 90 years in existence and right till the early 90s, we are essentially a boutique shop we specialize in a few areas including financial services. We are very well reputed but and more punching way above our weight but we were small in terms of the size of the operation.
The main growth has occurred in the last 15 years. That’s been driven primarily by I think three factors. First and foremost the market group. The Indian economy really started globalizing and getting more liberal from the early 90s after the policies that the government pursued so that gave us firstly that large amount of transactional work on the basis of which you could build a large corporate firm. So the market opened up.
The second important factor was the availability of high quality employable law graduates from universities that were being set up using a slightly different model. The national law schools, which you have sort of based on management institutions, they changed the format in terms of legal education, so the availability of high quality law graduates allowed us to recruit and fuel this expansion
And the third factor, which is sort of more personal to us was a more entrepreneurial, more western oriented management culture. Our law firm is structured very similar to many western organizations. We have formal career tracks, practice groups, and we’ve tried to use best practice in terms of structuring our organization more institutionally.
Question: What kind of leader are you?
Cyril Shroff: I think I inspire trust and a lot of the young generation has believe in the vision that I have spelled out for them. I have been very open in terms of communicating what my vision for the firm as well as the vision for the Indian legal industry has been, a firm believer that India’s independent law firm sector has got enormous potential and there are a lot who believe in that vision and follow me.
Question: What challenges do global law firms face?
Cyril Shroff: I see basically two models of law firms in the world. One of the global law firm they go by the name of one-stop shops, which will open an office, everybody see and opportunity and will also practice the local law of that jurisdiction.
That’s a successful model as well but that’s not the only model. And the other model is those of independent law firms, national champions like ourselves which have some unique strengths as well and I think both have their strengths and weaknesses. For practicing a cutting edge work in a jurisdiction I think the latter model is infinitely superior because you have the best lawyers and the best expertise that is available.
We are seeing also the impact of the financial crisis for instance on the former model. The former model is driven largely by following financial sector clientele across the world and when the financial sector itself, the leading global banks, and investment banks they themselves come under pressure. The natural impact on this law firms is also where they feel the pain with them as well and like the banks themselves are shrinking so are the law firms. Whereas firms like ours and in different other jurisdictions they somewhat more insulated.
Question: Should foreign investors worry about intellectual property rights in India?
Cyril Shroff: There will always be some amount of nervousness not because we do not substantially recognize those rights but enforcement can be somewhat slow and patchy but for a diligent American corporation which is willing to pursue its intellectual property rights and protect them, India will still deliver the end product and a number of corporations have experienced that, for instance companies like some of the leading technology players in the world--I don’t want to name them--or even drug manufacturers, they’ve had eventually, they have been able to achieve justice.
Question: How does the caste system affect Indian society?
Cyril Shroff: You know, I always love saying this, there are really at least two India’s, there is an India or a shining India the one which the west seas usually through urbanize and there is an India outside some of the big metro policies and in even the tier two cities and in rural India which is completely different. It goes by the name of Bahar which is a traditional name for India.
And it’s there that this sort of these differences of a shop that India has not moved into the 21st century as about India has, but both coexist. In that part of India factors which are based on regional considerations, caste being one of them is very significant and whether it’s who do you like to partner within business, who will you employ, who will you get your daughter married to, who will you vote for: a lot of that gets driven by caste factors. And this is there since time in memorial. India is a civilization which goes back more than 2000 years and some of these have just passed on from generation to generation because there’s the complex cultural history of this country.
Question: Will the caste system fade as India modernizes?
Cyril Shroff: I think firstly in urban India, these factors are somewhat more muted. I won’t say that they completely absent but they are far more subdued. Education and exposure to the West have mitigated a lot of these differences.
So people like myself or my colleagues, we don’t even think about this. My own law firm for instance is extraordinarily diverse. We have probably someone from every caste and community in India. Our firm is diverse in terms of gender as where we got nearly 50 percent women. So firms like ours, our organizations and we are different in as much as these factors don’t make any difference to us.
However, even within city like Mumbai or Delhi, there could be a tier of organizations where these factors do matter. They could be organizations which are for instance known as a Gujarati firms or Marwari firms or south Indian firms, so these factors do make a difference. And a lot of it is driven by economic differences, not just the caste system.
Question: How is the gap between rich and poor hurting the country?
Cyril Shroff: The fact that our democracy, our ownership, our belief in private ownership and lack of adequate social security nets has only helped in widening the differences between the super, super rich and the poorest of poor.
In India you would find people who belong to the 10 richest people in the entire world, and you would find people whose poverty levels are sub-Saharan in fact practically: people who would probably make less than a dollar a day or would only have enough for one meal.
Now, to have these kinds of contrasts coexist, is something which boggles my mind. We have a country that is making great economic progress, a country that is making his presence felt all over the world, but at the same time, it is unable to deal with some of these fundamental contradictions in our economic evolution.
For good or for bad, India has rejected a more totalitarian approach to how it will deal with its social problems. We would starve but we would not give up our democracy and our love for our freedoms and to deal with these problems in an atmosphere of democracy and the rule of law without necessarily going, sort of resorting to civil disobedience or any kind of violent revolution. It’s extraordinarily difficult for any government of the day to deal with this problems. So I have no answer to that, all that I know is that it varies me as I’m sure as it varies a lot of other people like myself.
Question: How did the Mumbai attacks change India’s attitude toward terrorism?
Cyril Shroff: It’s a landmark event in our psyche. We were always worried about terrorism which was mainly cross-border. In the initial years we thought of it essentially as a problem that was effectively centered around Kashmir and there were sporadic incidence across the country.
But I think 26/11 changed a lot of that because it made us all realize how vulnerable we are and how soft the target we are. Mumbai which is such a prominent commercial city and how easy it was for a bunch of 10 to 15 young boys effectively to come and hold a city to ransom for nearly four days and occupy the attention of the whole world just showed how weak we are. And I’m sure Mumbai is not the only city which can if they decided to do it, in any other European city as well, I’m sure they will find a way because they are determined and have belief that really have nothing to loose.
How do I view the security situation? I say with a lot of trepidation because everyday we open the newspapers and we see the situation on our western border deteriorating and our heart sink lower and lower everyday. We don’t know where that is going to end but we are really relying upon Washington to help us resolve this.
Look at the way India reacted. Did it post-26/11 take a bunch of fighter aircraft and bombed these camps out of existence. They could have done that I’m sure but I think the outcome of that would have been far worse. This is probably what those behind the attacks were looking for, and I’m glad that our government was mature enough not to fall into that trap.
Question: What action are you taking to reform security?
Cyril Shroff: So a bunch of like-minded citizens like myself be filed a public interest litigation in our high court in Mumbai seeking mandatory judicial reliefs for police reform, because we thought one of the factors that would be essential for preventing in recurrence of this in the future would be a stronger security set up, a more empowered police and this case is pending in our high court. Our judiciary has got quite interested.
The reason why I did this was that India and particularly people in urban cities have over a period of time have got anesthetizes to some of these incidents that were happening everyday. 26/11 of course was different but it was perhaps too careless to assume that the Mumbai spirit of tolerance will take us through even such incidents and we had to do something about it. So we wanted to have a positive action in a more civilized way which was not backward-looking but was meant towards finding a solution and this initiative that was taken by me and a few others received a lot of support and I do hope that this case goes through and eventually something comes out of it. But people are at the superficial level, they’re back to business as usual but 26/11 I think has left a deep scar on people’s minds.
Question: How have the attacks affected business in India?
Cyril Shroff: One thing it certainly has done is I think every businessman in India or somebody doing business with India recognizing terrorist risk as now an important business consideration. I think the cost of business, doing business in India has gone up. It fundamentally hasn’t affected people’s views on India as yet because people believe that this is something which is a global phenomenon. Terrorism is not confined in it’s, in its damaging impact only doing the defects on number of other countries as well.
So while at one level has been taken in stride it has increased a cost of doing business. No one in the world is saying, we’re not going to do business in India, because it is a high risk target. On the contrary. In fact the West went out of its way to demonstrate solidarity with us. As lawyers there was an important delegation of the American Bar Association which we hosted in on the Mumbai leg they came to India in early January. Post 26/11 have given them the option to cancel the trip and said, we’re not going to do that. We are going to be in Mumbai because this is exactly what the terrorist wants us to do and we’re not going to do that. So the West has shown extraordinary support.
Question: How has the West changed its view of India?
Cyril Shroff: If one looks at the history of India after independence in 1947, for the first 30 to 40 years I think we were effectively given up as a basket case because we made various attempts through socialism to effectively alleviate poverty and keep growing but that model didn't work.
So even when the pre-90s when we spoke to foreign corporation of foreign businessmen who wanted to do business with us, we were always a land of opportunity but an opportunity whose time have not yet come. The attitude I think really changed from the early 90s when the liberalization or our second economic freedom really began and this picked up momentum I would say into the latter half of the period between 91 till now.
Currently, I think India is looked at with a lot of respect across a number of dimensions. Let me enumerate a few. It’s looked at as a safe environment in which, thanks to the rule of law, one can do business and no one really has lost a lot of money in India. On the contrary, people have made enormous profits. The fact that we are built upon private sector concepts is also a great comfort.
The second dimension I think is the India people are regarded as very intelligent, skilled in maths and science, very comfortable with things ranging from philosophy to music to the arts and that’s something which fascinates the world as well.
India is developing a lot of soft power, and it’s not just about us providing outsourcing and call centers to the world. We are providing a lot of thought and a way of life. I think we’re also respected for fundamentally a non-violent belief thanks to our religious roots whether it’s Hinduism, Jainism, Buddhism, we contributed more religions to the world than any part of the world and that’s something which does find its way into how the world looks at it.
At some point of time everybody has a spiritual need and somewhere or the other you find that Indian connection. So our culture is making a big difference and, whether it’s our curries or movies like "Slumdog Millionaire" or whether it’s just the Bollywood numbers to which a lot of the world is rocking, I think India's soft power is going up. And we are contributing a lot of entrepreneurs to the world as well whether it’s people like Lakshmi Mittal or Indra Nooyi or thinkers like Amalti Singh. This is all happening because of there’s something fundamentally right and thoughtful about Indian society. That’s how I see it. I may be wrong, but that’s how I see it.
Recorded on: April 29, 2009
A conversation with the Managing Partner of Amarchand and Mangaldas.
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A socially minded franchise model makes money while improving society.
- A social enterprise in California makes their franchises affordable with low interest loans and guaranteed salaries.
- The loans are backed by charitable foundations.
- If scaled up, the model could support tens of thousands of entrepreneurs who are currently financially incapable of entering franchise agreements.
The underdog challenging McDonald’s & Wall Street | Hard Reset by Freethink www.youtube.com
Social responsibility is becoming a major focus of many businesses. While turning a profit is always the ultimate goal — nobody can eat good intentions, after all — having a positive impact on society is becoming an equally important goal.
A restaurant chain in California, already focused on providing healthy food at a competitive cost, is testing a new way to create more entrepreneurs. Specifically, it is working with charitable foundations to provide business opportunities to those who normally would not have access.
When a company wants to expand without paying all of the upfront costs itself or taking on the entire risk of operating in a new market, it can enter into a franchise agreement with an entrepreneur. In exchange for a share of the profits (as well as some fees and adherence to certain quality standards), the entrepreneur — now a franchisee — can open their own branch of a larger brand. The entrepreneur enjoys the benefits of owning a business, while the brand owner can cash in on intellectual property.
This model is wildly successful. There is a reason you can find fast food joints like McDonald's everywhere from Times Square to Prague (next to the Museum of Communism, no less). According to the International Franchise Association, there were more than 733,000 franchised business establishments in the United States in 2018, accounting for nearly 3 percent of GDP.
The franchise model — in which a local agent keeps some earnings while handing over a portion to a central authority — isn't new. Indeed, variations have been around since the Middle Ages, though it only took off after WWII. Franchising is now a recognized system in many countries and is used in all manner of industries, including restaurants, pet supply stores, automotive repair shops, hotels, and even senior care.
The Catch-22: you have to spend money to make money
The biggest problem with franchising is the high cost of becoming a franchisee.
While the costs vary, opening a restaurant as a franchisee can easily cost $500,000. A franchise car repair shop can require $250,000, and opening a hotel under a franchise's banner can set a person back millions. In some cases, the franchiser also will set a minimum net worth requirement or insist that the money that pays their fees not be borrowed. Even if a person can find a way around that, most new businesses do not turn a profit for quite some time after opening. These limitations essentially rule out all but the wealthy from becoming a franchisee.
As a result, there are some social enterprises that are looking to make franchising more accessible to the less affluent.
As a business that hopes to rapidly expand, they looked to franchising. However, the idea of seeking out a bunch of rich people to support a business like theirs struck CEO Sam Polk as out of step with its vision. So, the company came up with a better idea.
Their Social Equity Franchise Program helps tenured Everytable employees open their own franchise locations through free training and assistance in securing low interest loans to finance the store. To help the entrepreneurs survive the difficult early years, participants in the program are assured an income of $40,000 in their first three years of operations. Repayments on the loans do not begin until after the business is turning a profit.
The capital for all these low interest loans comes from a number of foundations such as the California Wellness Foundation (Cal Wellness). Foundations like these are required to give away a small portion of their endowments every year on causes aligned with their missions. However, most of the rest of it is simply invested in the stock market to assure the endowment continues to exist.
People like Cal Wellness CEO Judy Belk have begun to invest that money elsewhere, like in loans to provide the money needed to open an Everytable franchise. As she explained to FreeThink:
"Cal Wellness and many other foundations are saying, 'I think we can do a little better with that [money]. Why not use that capital to invest in the communities that we're supposed to serve?'"
In the end, Everytable gets a new restaurant that expands the brand, foundations get returns on their investment, and the franchisee gets an opportunity that they likely never would have had without the program.
Expanding the Everytable model
If even a small share of the $2 trillion foundations in the U.S. have are invested into this sort of social cause, tens of thousands of loans could be given to those less affluent people who are looking to start a business. While this model likely would lower returns to institutional investors like charities, they could enjoy more tangible results in the communities they exist to serve. According to a report published by the Federal Reserve Bank of Atlanta, local entrepreneurship increases income and employment and decreases poverty.
At the individual level, this would help a lot of people who otherwise never would be able to seriously consider going into business for themselves. By a number of measures, business owners make more than wage workers and can also claim ownership of the assets that comprise the business. Beyond that, many small business owners enjoy the non-financial benefits of their position as well, including the independence and autonomy that often come with business ownership.
When working optimally, good business is good for society.
Fintech companies are using elements of video games to make personal finance more fun. But does it work, and what are the risks?
- Gamification is the process of incorporating elements of video games into a business, organization, or system, with the goal of boosting engagement or performance.
- Gamified personal finance apps aim to help people make better financial decisions, often by redirecting destructive financial behaviors (like playing the lottery) toward positive outcomes.
- Still, gamification has its risks, and scientists are still working to understand how gamification affects our financial behavior.
- YouTube www.youtube.com
The human brain is a pretty lazy organ. Although it's capable of remarkable ingenuity, it's also responsible for nudging us into bad behavioral patterns, such as being impulsive or avoiding difficult but important decisions. These kinds of short-sighted behaviors can hurt our finances.
However, they don't hurt the video game industry. In 2020, video games generated more than $179 billion in revenue, making the industry more valuable than sports and movies combined. A 2021 report from Limelight Network found that gamers worldwide spend an average of 8 hours and 27 minutes per week playing video games.
Good at gaming, bad at saving
It's not necessarily bad that Americans spend millions of dollars and hours on video games. But consider another set of statistics: 25 percent of Americans have no retirement savings at all, while roughly half are either living "on the edge" or "paycheck to paycheck," according to a recent report on the Financial Resilience of Americans from the FINRA Education Foundation. Meanwhile, experts predict that Social Security funds could dry up by 2035.
So, why don't people save more? After all, the benefits of compounding interest aren't exactly a secret: Investing a few hundred bucks every month would make most people millionaires by retirement if they start in their twenties. However, the recent FINRA report found that many Americans have alarmingly low levels of financial literacy, a topic that's not taught in most public schools.
Even for the financially literate, saving money is psychologically difficult
But what if we could infuse the instant gratification of video games into our long-term financial habits? In other words, what if finance looked less like an Excel spreadsheet and more like your favorite video game?
A growing number of finance applications are making that a reality. By using the same strategies video game designers have been optimizing for decades, gamifying personal finance could be one of the most efficient ways to help people save for the future while reaping instant psychological rewards. But it doesn't come without risks.
What is gamification?
In simple terms, gamification takes the motivating power of video games and applies it to other areas of life. The global research company Gartner offers a slightly more technical definition of gamification: "the use of game mechanics and experience design to digitally engage and motivate people to achieve their goals."
The odds are you have encountered gamification already. It's utilized by many popular apps, websites, and devices. For example, LinkedIn displays progress bars representing how much profile information you have filled out. The Apple Watch has a "Close Your Rings" feature that shows how many steps you need to walk to meet your daily goal.
Brands have used gamification to boost customer engagement for decades. For example, McDonald's launched its Monopoly game in 1987, which essentially attached lottery tickets to menu items, while M&M's gained consumer attention with Eye-Spy Pretzel, an online scavenger hunt game that went viral in 2010.
In addition to marketing, gamification is used in social media, fitness, education, crowdfunding, military recruitment, and employee training, just to name a few applications. The Chinese government has even gamified aspects of its Social Credit System, in which citizens perform or refrain from various activities to earn points that represent trustworthiness.
Finance is arguably one of the best-suited fields for gamification. One reason is that financial data can be easily measured and graphed. Perhaps more importantly, financial decisions occur in the background of almost everything we do in modern life, from deciding what we eat for lunch to where we are going to spend our lives.
Gamification doesn't just make boring stuff fun; it's also an effective way to change our behavior. Used properly, it can also disrupt our habits.
The nature of habits
It's tempting to think that we make our way through life by thoughtfully considering the information before us and making sensible choices. That's not really the case. Research suggests that about 40 percent of our daily activities are performed out of habit, a term the American Journal of Psychology defines as a "more or less fixed way of thinking, willing, or feeling acquired through previous repetition of a mental experience."
In other words, we spend much of our lives on autopilot. From an evolutionary perspective, it makes sense that we rely on habits: our brains require a lot of energy, especially when we're faced with tough decisions and complex problems, like financial planning. It's relatively easy to rely on learned behavioral patterns that provide a quick, reliable solution. However, those patterns don't always serve our long-term interests.
Saving money is a good example. Imagine you have $500 with which to do whatever you want. You could invest it. Or you could go on a shopping spree. Unfortunately, the brain doesn't process these two options the same way; in fact, it actually processes the investing option as something like a pain stimulus.
Why gamification works
Saving is painful. But can't people simply choose to be more financially responsible? In short: Yes, but it takes a lot of effort. After all, when it comes to changing behavior, willpower is only part of the equation.
Some psychologists think willpower is a finite resource, or that it's like an emotion whose motivational power ebbs and flows based on what's happening around us. For example, you might establish a monthly budget and stick to it for a couple weeks. But then you get stressed. The next time you're out shopping, you might find it harder to resist making an impulsive purchase in your stressed-out state.
Pixel Art Lootvlasdv via Adobe Stock
"A growing body of research shows that resisting repeated temptations takes a mental toll," the American Psychological Association writes. "Some experts liken willpower to a muscle that can get fatigued from overuse." In the terminology of psychology, this is called ego depletion.
Gamification offers a way to outsource your willpower. That's because games offer psychological rewards that can motivate us to perform certain actions that might otherwise have seemed too boring, taxing, or emotionally draining. What's more, gamifying parts of your life is less of a change of mind and more of a change of environment.
A 2017 study published in Computers in Human Behavior noted that "enriching the environment with game design elements, as gamification does by definition, directly modifies that environment, thereby potentially affecting motivational and psychological user experiences."
The study argued that games are most motivational when they address three key psychological needs: competence, autonomy, and social relatedness. It's easy to imagine how games can tap into these categories. For competence, games can feature badges and performance graphs. For autonomy, games can offer customizable avatars. And for social relatedness, games can feature compelling storylines and multiplayer gameplay.
Gamification and the brain
Games can motivate us by satisfying our psychological needs and giving us a sense of reward. From a neurological perspective, this occurs through the release of "feel-good" neurotransmitters, namely dopamine and oxytocin.
"Two core things have to happen in the brain to influence your decision-making," Paul Zak, a neuroscientist and professor of economic sciences at Claremont Graduate University, told Big Think. "The first is you have to attend to that information. That's driven by the brain's production of dopamine. The second thing, you've got to get my lazy brain to care about the outcomes. And that caring is driven by emotional resonance. And that's associated with the brain's production of oxytocin."
Cheerful Father And Son Competing In Video Games At HomeProstock-studio via Adobe Stock
When released simultaneously, these neurotransmitters can put us into a state that Zak calls "neurologic immersion." In this state, our everyday habits have less control over our behavior, and we're better able to take deliberate action. It's an idea Zak and his colleagues developed over two decades of using brain-imaging technology to study the nature of extraordinary experiences.
As he wrote in an article published by the World Experience Organization, neurologic immersion can occur when experiences, including video games, are unexpected, emotionally charged, narrowing one's focus to the experience itself, easy to remember, and provoking actions.
"The components of the extraordinary come as a package, not in isolation from each other," Zak wrote. "It's the 'action' part that is key to finding immersion. Extraordinary experiences cause people to take an action, whether it's donating to charity, buying a product, posting on social media, or returning to enjoy an experience again."
Games can invoke these types of immersive experiences.. But how exactly are financial organizations using gamification to help people "level up" their financial futures?
Gamifying personal finance
Banks and financial companies have been using gamification for years. What started with simple concepts, like PNC Bank's "Punch the Pig" savings feature, has evolved into a diverse field of games that are helping people stick to budgets, save money, and pay off debt.
What's surprising about the gamification of personal finance is that some of the most successful apps are redirecting destructive financial behaviors, like buying lottery tickets, toward positive outcomes. One example is an app called Long Game, which uses an approach called "lottery savings."
"People actually really love the lottery," Lindsay Holden, co-founder and CEO of Long Game, told Big Think. "The lottery today is a $70-billion-dollar industry in the U.S., and the people that are buying lotto tickets are the people that least should be buying lotto tickets. And so how can we redirect that spend into something that's helping them in their lives?"
Long Game's answer is to encourage users to make automatic or one-time investments into a prize-linked savings account. As users make investments, they earn coins that can be used to play games, some of which offer cash prizes. But unlike the real lottery, the prize money comes from banks that are partnered with Long Game, meaning users can't lose their principal investment.
Blast is a savings app aimed at traditional gamers. The platform lets users connect a savings account to their video game accounts. Users then set performance goals in the video games, such as killing a certain number of enemies. Accomplishing these goals triggers a pre-selected investment into the savings accounts. In addition to earning interest, users can also win prize money by accomplishing certain missions or placing high on public leaderboards.
"Gamers tell us they feel better with the time they spend gaming when they know they are micro-saving or micro-earning in the background," Blast co-founder and CEO Walter Cruttenden said in a statement.
Young gamer playing a video game wearing headphones.sezer66 via Adobe Stock
Fortune City takes a different approach to gamified finance. The app encourages users to track their spending habits, which are represented by visually appealing graphs. As users log expenses, they're able to build buildings in their own virtual city. The expense categories match the types of buildings users can construct; for example, buying food lets users construct a restaurant. It's like "SimCity" meets certified public accountant.
The risks of gamification
Gamifying your finances might help you save money, but it doesn't come without risks. After all, receiving extrinsic rewards when we perform a behavior can affect our intrinsic motivation to repeat that behavior both positively and negatively. It's a phenomenon called the overjustification effect.
In addition, gamified finance apps can also be addictive and encourage risky financial behavior. Robinhood, for example, uses visually appealing performance metrics and lottery-like game elements to incentivize the trading of stocks and cryptocurrencies. But while investing in these assets might be a good financial decision for some people, Robinhood arguably encourages its users to be "players" in the difficult world of trading, not necessarily rational investors.
What's more, gamification doesn't seem to work for everyone.
"From social psychology and behavioural economics, we know that the most likely [result of] gamification [is that you] will motivate some people, will demotivate other people, and for a third group there'll be no effect at all," noted a 2017 study on gamification and mobile banking published in Internet Research.
But given that 14.1 million Americans are unbanked, and millions more struggle with financial literacy, it's reasonable to think that gamified finance apps could help many people work toward financial independence.
"One of the most interesting things we've found is that people want help when it comes to making difficult decisions," Zak told Big Think. "In my view, any app that helps you be a more effective saver is probably a good app. But I think we have to do a lot more work to really understand the underlying neuroscience of gamification. And so we need to continue to design games that teach you more about how to 'level up in life,' not just level up in the game."
"You dream about these kinds of moments when you're a kid," said lead paleontologist David Schmidt.
- The triceratops skull was first discovered in 2019, but was excavated over the summer of 2020.
- It was discovered in the South Dakota Badlands, an area where the Triceratops roamed some 66 million years ago.
- Studying dinosaurs helps scientists better understand the evolution of all life on Earth.
David Schmidt, a geology professor at Westminster College, had just arrived in the South Dakota Badlands in summer 2019 with a group of students for a fossil dig when he received a call from the National Forest Service. A nearby rancher had discovered a strange object poking out of the ground. They wanted Schmidt to take a look.
"One of the very first bones that we saw in the rock was this long cylindrical bone," Schmidt told St. Louis Public Radio. "The first thing that came out of our mouths was, 'That kind of looks like the horn of a triceratops.'"
After authorities gave the go-ahead, Schmidt and a small group of students returned this summer and spent nearly every day of June and July excavating the skull.
Credit: David Schmidt / Westminster College
"We had to be really careful," Schmidt told St. Louis Public Radio. "We couldn't disturb anything at all, because at that point, it was under law enforcement investigation. They were telling us, 'Don't even make footprints,' and I was thinking, 'How are we supposed to do that?'"
Another difficulty was the mammoth size of the skull: about 7 feet long and more than 3,000 pounds. (For context, the largest triceratops skull ever unearthed was about 8.2 feet long.) The skull of Schmidt's dinosaur was likely a Triceratops prorsus, one of two species of triceratops that roamed what's now North America about 66 million years ago.
Credit: David Schmidt / Westminster College
The triceratops was an herbivore, but it was also a favorite meal of the Tyrannosaurus rex. That probably explains why the Dakotas contain many scattered triceratops bone fragments, and, less commonly, complete bones and skulls. In summer 2019, for example, a separate team on a dig in North Dakota made headlines after unearthing a complete triceratops skull that measured five feet in length.
Michael Kjelland, a biology professor who participated in that excavation, said digging up the dinosaur was like completing a "multi-piece, 3-D jigsaw puzzle" that required "engineering that rivaled SpaceX," he jokingly told the New York Times.
Morrison Formation in Colorado
James St. John via Flickr
The Badlands aren't the only spot in North America where paleontologists have found dinosaurs. In the 1870s, Colorado and Wyoming became the first sites of dinosaur discoveries in the U.S., ushering in an era of public fascination with the prehistoric creatures — and a competitive rush to unearth them.
Since, dinosaur bones have been found in 35 states. One of the most fruitful locations for paleontologists has been the Morrison formation, a sequence of Upper Jurassic sedimentary rock that stretches under the Western part of the country. Discovered here were species like Camarasaurus, Diplodocus, Apatosaurus, Stegosaurus, and Allosaurus, to name a few.
|Credit: Nobu Tamura/Wikimedia Commons|
As for "Shady" (the nickname of the South Dakota triceratops), Schmidt and his team have safely transported it to the Westminster campus. They hope to raise funds for restoration, and to return to South Dakota in search of more bones that once belonged to the triceratops.
Studying dinosaurs helps scientists gain a more complete understanding of our evolution, illuminating a through-line that extends from "deep time" to present day. For scientists like Schmidt, there's also the simple joy of coming to face-to-face with a lost world.
"You dream about these kinds of moments when you're a kid," Schmidt told St. Louis Public Radio. "You don't ever think that these things will ever happen."
Playing video games could help you make better decisions about money.
- The word is out on gaming—it's not just something that children do for fun anymore. Games are tools that can be used to teach new skills, reduce stress, and even change behaviors by triggering chemical reactions in the brain.
- These benefits and more have provided scientists and developers with a promising path forward. "Games reduce the stress of making decisions," says neuroscientist and professor Paul Zak. "App designers have now used game structures to help people learn new information, make new decisions; and one of the most exciting applications is in financial decision making."
- But simply turning something into a game isn't enough to see meaningful changes in habits. Developers of gamified apps like Long Game have found ways to combine the engaging and fun experience we expect from video games, with something that has traditionally not been very fun: saving money.