Understanding the Habit Loop: Cue, Routine, Reward

Personal finance in theory is simple. Earn more, spend less. We all know that. But what makes it hard is changing our behavior, and much of that behavior is controlled by habits that we can’t stop. A new book called The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg tries to explain the science and behavioral psychology of how habits work. You may have already seen some articles based on his work:

• How Companies Learn Your Secrets (NY Times) – Includes how Target figured out that a man’s teenage daughter was pregnant before he did.
• The Power of Habit (Slate) – An excerpt of the book explores the science of cravings and a habit that almost all of us have: brushing our teeth with toothpaste each morning.
• Book Review in Businessweek – About how a new CEO for Alcoa changed the company by changing their routines.

So how do we change our bad habits so that we are more productive, healthier, and wealthier? We have to understand the Habit Loop, which consists of a cue, the routine itself, and a reward. In the case of toothpaste, the cue is feeling a film over your teeth (or just waking up). The routine is brushing your teeth with toothpaste. The reward is the feeling of a clean mouth, but critically also the tingling feeling from the toothpaste. Even though it doesn’t actually help clean your teeth, without the ingredients that cause the tingling, people don’t feel like toothpaste does it’s job and won’t buy it. We crave the tingling.

Stopping a habit means stopping the habit loop. For example, Duhigg was gaining weight because every afternoon he would go down to the cafeteria and eat a cookie and socialize with friends. After some experimentation, he figured out that the socializing was the reward, and the cookie-eating had just been subconsciously linked. So he started a new habit where he would socialize away from cookies and the craving of snacks went away.

For other bad habits, you may need to avoid the cue, or replace the reward with something that doesn’t harm you as much. I believe this is how nicotine gum and electronic cigarettes work. You can get the nicotine buzz and/or the physical routine of holding a stick and sucking flavored “smoke” out of it.

Starting a new desired habit involves creating a positive reinforcing loop. An example given is to create a cue, like leaving your sneakers and workout clothes beside the bed before going to sleep. The routine is working out, but you need to actively anticipate the reward – a fresh fruit smoothie or maybe the feeling of looking at the scale each day and seeing your weight go down. Replacing bad habits not only requires learning replacement routine or rewards, but also practicing them over and over again.

Is it really that simple? I doubt it. Is this yet another book that distills a complex subject into a overly-simplified but convenient story? Maybe, but I like the questions that it asks. Now which of my many bad habits should I try to change…