Flying the (Un)Friendly Skies

One of the worst things about traveling is...traveling.  Specifically, air travel. This once-glamorous mode of transportation has now become a stressful, hassle-laden, uncomfortable, and often degrading experience.  My wife and I visit other other places for fun and enrichment, which usually makes up for some of the negatives of getting to our destination.  We have great sympathy for business travelers who endure flying for their jobs and don't have this compensation.

My wife and I fly quite a lot, often to places that are far from home (see my blogs on Bhutan and on the Middle East).  We can't afford Business Class or First Class, so these journeys are in "steerage" unless by some increasingly rare miracle we get a free upgrade. It isn't unusual for the total flying time on these trips to be 15-20 hours, usually but not always broken into two or more segments of 5-10 hours each.  Once we suffer through the cattle-pen atmosphere of checking in, the indignities of going through security, the elbow-fest of getting our share of overhead bin space, and finally shoe-horning ourselves into our seats, the rest of the trip is primarily a matter trying to cope with excruciating boredom and physical discomfort.

At this point I should acknowledge that we have it incredibly easy compared to the days before air travel, and we forget that commercial aviation is a very recent technological marvel.  Someone from the late 1800's would find our complaints trivial in light of the wondrous feat of traveling half-way around the world in a day or two.

But human nature leads us to use a more restrictive basis of comparison, namely how things have changed in the recent past.  Geopolitical events, like 9/11, have led to tightening of airport security. Financial pressures on airlines have led to a host of cost-cutting measures, including reducing the number of flights, cramming more seats in each aircraft, charging for luggage, meals, and on some airlines even for the privilege of reserving a specific seat in advance.  In short, it seems like the situation is getting worse and worse.

The latest round of decline for us involves the recent merger of United Airlines and Continental Airlines.  For years we have been members of United's frequent flyer program primarily because United has offered the best mainland and international connections.  Of course, actually cashing in our award miles has always been a little difficult because we live in Hawai'i -- a popular destination for people to use their miles to visit, making competition for available award seats fierce.  Still, we've managed to take advantage of the program often enough that it has balanced some of the negatives of air travel.

One of the best features of United's program was that if your paid travel in a year totaled 25,000 miles or more you were rewarded with some extra perks (please note -- these must be miles flown, not earned in other ways, like with a credit card):  You could reserve seats in economy with more leg room, check two bags free, and board the plane earlier (thus avoiding some of the slug-fest for overhead storage).  On our marathon journeys these things have made a big difference, particularly having more comfortable seats, and have kept us loyal to United's program.  And given the amount of money required for us to achieve 25,000 miles in a year, these perks seemed a fitting gesture of appreciation from United for our business.

The merger has changed all that -- for the worse, naturally.

A few weeks ago we received notice from United about the new "wonderful" and "exciting" features of the merger, including the merged frequent flyer programs.  Cutting through all the breathless corporate hype revealed new policies that represent a dramatic downgrade of benefits for customers like us at the 25,000 mile level.  The most irksome change is that now reserving seats with more leg room requires 50,000 miles in a year -- double the earlier number and certainly out of reach of the ordinary traveler.  Even many business travelers might have trouble meeting that requirement.  You can, however, pay extra for those seats -- an additional $150-250 per person for trips of the length we usually take.  There is one shred of this perk left -- 24 hours before the flight we can vie for the unsold premium seats with all the other 25k-milers.  Of course, this means that we may not find seats together, or that the available seats will be in those wonderful "middle of the middle" locations.  Spending 15-20 hours in one of those seats is decidedly unappealing, something you might wish only on the CEO who masterminded this new policy.

For us these changes no longer give United an edge compared to other airline frequent flyer programs. The new policies convey that our loyalty and considerable level of spending don't count for as much as they did.  So be it, and we wish United a profitable future. Their profit probably won't be coming as much from us, however, because we will be much more likely to consider alternative carriers.

Decision Making in Geezerhood

The waitress returned for the third time, order pad in hand.  "How we doin' here folks?  Are you guys ready to order or would you like another few minutes?"  There was a tone of sweet condescension in her voice, likely the result of her reaction to our grey hair.  I imagine she was thinking: come on geezers, make up your minds!

One of the stereotypes of older people is that they have difficulty making decisions and the decisions they finally come up with are often flawed.  Like most stereotypes, this one has a kernel of truth but also distorts the real picture, and is flat-out wrong in certain cases.  For instance, my wife and I have always taken a long time to order in a restaurant because we share each dish and we are both particular -- so it takes some time to select things we both will like.  Being geezers is irrelevant.

However, there is ample evidence from research on aging that the average performance of older people on many types of decisions is both slower and less optimal than younger people.  This is particularly true when the decision involves remembering, evaluating, and comparing many pieces of information that vary in relevance to making an optimal choice.  The cognitive declines in memory, analytic reasoning, and executive functioning that are common in older adults make these kinds of decisions more difficult and results in sub-optimal choices (Henninger, Madden, and Huettel, 2010).

Financial decision-making is one realm in which the consequences of poor choices can be very important. The cognitive deficits associated with aging have been found to be particularly problematic in this context. For example, a Brookings Institute study comparing age groups on a variety of financial products found that older people wind up paying higher fees, penalties, and interest rates across a wide range of credit transactions, including credit cards, mortgages, and car loans (Agarwal et al., 2007).  Interestingly, the relationship between decision quality appears to be U-shaped, with the most optimal decisions made by those around 50.  One explanation of this curvilinear function is that young people, though they have high cognitive abilities lack experience and background knowledge, whereas older people have a great deal of experience and knowledge but have difficulty applying this because of cognitive deficits.  In middle age there is an optimal trade-off of experience and cognitive functioning.

Another important aspect of financial decision-making involves making choices that require an assessment of risk of loss versus probability of reward.  For example, maintaining an investment portfolio of 100% bonds entails very little risk but provides limited rewards, whereas a portfolio of 100% equities entails much more risk but also may provide significantly greater returns over time.  And of course there is considerable variation in the risk levels of individual stocks and bonds that requires evaluation and comparison of complex information in order to make an optimal choice.

Unfortunately, research evidence concerning the quality of decisions involving risk indicates that geezers tend to make poorer decisions than young people.  Henninger et al.(2010) recently summarized the data succinctly:

...older adults’ real-world decisions involving risk are often of objectively worse quality than those of younger adults, both in laboratory and real-world settings, with an abrupt decrease in decision-making skill observed in individuals over 70 years of age (Korniotis & Kumar, in press). As examples, older adults within that age range earn 3%–5% lower risk-adjusted annual returns (Korniotis & Kumar, in press) and obtain systematically worse outcomes on a wide variety of financial instruments (Agarwal, Driscoll, Gabaix, & Laibson, 2007), even when controlling for confounding factors like income, investment horizon, and desired rate of return... In short, substantial evidence demonstrates that older adults are more likely to make poor-quality financial decisions, often leading to significant negative personal consequences.

In line with the "conservative geezer" stereotype, one source of these sub-optimal decisions might seem to be a general tendency toward risk aversion even when some degree of risk is adaptive. However, the evidence indicates a more complex picture. Though older people do exhibit detrimental risk aversion in some circumstances (Mather, 2006), they also may show the same or even more risk preference as young people in other situations.  For example, if the benefits of an alternative with more risk are emphasized, older adults may weigh them more heavily than young people.  This stems from the general tendency of older people to be more optimistic and positive than younger people, a phenomenon I explored in an earlier blog.  In the financial arena this tendency may lead to poorer choices and susceptibility to scammers (Ross, 2010).

So far the picture looks pretty bleak, but fortunately I can end on a couple of positive notes.  First, recognizing the challenges of geezer decision-making allows the development of ways of presenting information modifying the context of decision making to compensate for declines in cognitive functioning, for example by reducing the memory load in decision tasks and by presenting information in ways that can be more readily related to older adults' greater past experience (Henninger et al., 2010) and that may more clearly balance the positive and negative aspects of risk alternatives (Ross, 2010).

Second, it is clear that there is considerable variability in the quality of decision-making by geezers, to the degree that some older people outperform younger adults.  This variability has been shown to be tied to differences among older people in the degree of cognitive decline -- an important fact because it means that it isn't age per se that leads to poorer decisions but rather it is the degree of specific types of neurological deficit.  And there is abundant evidence that the rate and amount of cognitive decline can be altered by life style choices, with the most dramatic effects coming from continuing physical exercise throughout middle and old age (see my blog Jogging the Memory of a Geezer for a review of this research).

Yet another reason to lace up those walking shoes -- it might keep you solvent!

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Agarwal, S., Driscoll, J., Gabaix, X., & Laibson, D. (2009). The age of reason:  Financial decisions over the life-cycle and implications for regulation.  Brookings Papers on Economic Activity, 2, 51-117.

Henninger, D.E., Madden, D., & Huettel, S.A., (2010). Processing Speed and Memory Mediate Age-Related Differences in Decision Making. Psychology and Aging, 25, No. 2, 262–270.

Mather, M. (2006). A review of decision-making processes: Weighing the risks and benefits of aging. In L. L. Carstensen & C. R. Hartel (Eds.), When I’m 64 (pp. 145–173). Washington, DC: National Academies
Press.