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What Is A 'Reference Level'?

The key element of every Perceptual Control System is its Reference Level: a range of perceptions that indicate the system is "under control."

There are three kinds of Reference Levels:

  1. Setpoint. A minimum or maximum level. Business finances are handled this way:  as long as your revenue and expenses are over and below the respective limits, you're ok.
  2. Range. A spread of acceptable values. The difference with a set point is that there's an upper and a lower limit, and the perception must be in between those limits to be under control.
  3. Error. Set point defined as zero: anything that's not zero is out of control. The pain receptors in your skin, or customer service complaints are good examples of this.

To change behavior, you must either change the Reference Levels or the Environment. By changing the reference level or changing the available options, you can act in a different way and still be under control, even if the perceptions are the same.

Change the Reference Level and your behavior will change completely.

Josh Kaufman Explains 'Reference Levels'

At the heart of every Perceptual Control system is a Reference Level-a range of perceptions that indicate the system is "under control".

When a perception is within the system's reference level, nothing happens. When the perception violates the reference level by being too high or too low, the system will act to bring the perception back under control.

There are three kinds of reference levels: setpoints, ranges, and errors.

Setpoints

A setpoint is a minimum or maximum value.

The thermostat is an example of a setpoint-whenever the temperature falls below a certain value, the heater kicks on.

Your body's production of melatonin is another set point-once it reaches a particular threshold, you'll start falling asleep.

Business financial controls are managed as setpoints: as long as your revenue is above a certain setpoint and your expenses are below a certain setpoint, you're okay.

If you suddenly spend three times what you normally spend or your revenue falls below your point of Sufficiency, that triggers action-you want to find out why you overspent and how to bring your expenses back under control.

Ranges

A range is a spread of acceptable values.

The difference between a range and a setpoint is the existence of an upper and lower bound on the perception being controlled.

With a setpoint, the perception must be above or below a certain level to be under control; with a range, the perception must be between two setpoints to be under control.

For example, your body has a system for regulating the level of glucose in your blood, which it uses for energy. Too much or too little blood glucose can be life-threatening, so your body works to keep the level within an acceptable range by releasing insulin, which causes extra glucose to move into (or out of) the cells in your body.

As long as your blood glucose is within the acceptable range, nothing happens. When the reference range is violated, your body starts working to bring the situation back under control.

Errors

An error is a set point defined as zero-any perception that's not zero is out of control.

Think of the pain receptors in your skin. Most of the time, they do nothing, which means everything is under control.

If you cut or burn yourself, however, the receptors send a signal that something is wrong, and you'll act to remedy the situation.

Customer service complaints are a business example-if you don't receive any, everything is under control. If your inbox is filling with complaints, you know something needs to be fixed.

If you want to change a behavior, you must either change the system's reference level or change the Environment in which the system is operating.

Think back to the thermostat-if you want to turn the heater off, change the set point to a lower temperature.

If you're aware that your expenses will be three times what they were last month because you're launching a huge marketing campaign, your finances are no longer out of control.

If you're in the process of getting a tattoo, pain receptors firing is an acceptable situation.

The perceptions themselves haven't changed, but you'll no longer act to bring the perception under control because it already is under control.

Changing the reference level changes the behavior of the system.

Consciously defining and re-defining reference levels can help you change your behavior. If you're worried that your spending is out of control, you can create a budget that will give you information on what your Target Monthly Revenue needs to be in order to stay Sufficient.

If you're worried that your weight is too high or low, a visit to your doctor can help you calibrate your expectations and self-perception against medical data.

If you're consistently working 12 hour days and you decide that no more than 8 is acceptable, your work habits will change.

Change the Reference Level, and your behavior will change automatically.

Questions About 'Reference Levels'


"Action comes about if and only if we find a discrepancy between what we are experiencing and what we want to experience."

Philip J. Runkel, professor of psychology and education, University of Oregon


From Chapter 6:

The Human Mind


https://personalmba.com/reference-level/



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The Personal MBA

Master the Art of Business

A world-class business education in a single volume. Learn the universal principles behind every successful business, then use these ideas to make more money, get more done, and have more fun in your life and work.

Buy the book:


About Josh Kaufman

Josh Kaufman is an acclaimed business, learning, and skill acquisition expert. He is the author of two international bestsellers: The Personal MBA and The First 20 Hours. Josh's research and writing have helped millions of people worldwide learn the fundamentals of modern business.

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