Behavioural Economics can predict irrational human behaviour
There are 8 prevalent behavioural biases identified by BE which resonate with my previous article on Meta Dilemmas:
- Endowment Effect: tendency to place more value on expected losses than expected gains (also known as Risk Aversion)
- Status Quo Bias: tendency to stick with current state of affairs even though we can see clearly better alternatives
- Framing Bias: tendency to draw conclusions according to the way something seems as opposed to reality
- Availability Bias: tendency to rely on easily available information rather than seeking out harder to obtain but more accurate/relevant info
- Confirmation Bias: tendency to prioritise evidence which accords with our pre-existing beliefs
- Choice Overload: where we have so many options we don't make any decision
- Overconfidence: tendency to rate ourselves more knowledgeable and skilful than we actually are
- Money Illusion: tendency to judge prices and interest rates at nominal rates rather than taking into account inflation
The article explains how the current global financial crisis could be analysed behaviourally as a large number of players in the market all succumbing to 3 main BE biases - overconfidence, confirmation bias and availability bias.
About Ken ThompsonKen Thompson delivers keynote conference speeches, workshop facilitation and in-house consultancy in four key business areas:
- Creating High Performing Teams in enterprises including Virtual and Mobile Teams (based on the Bioteams Book)
- Establishing effective Collaborative Business Networks enabling companies to co-operate effectively in areas such as sales and product development (based on the book - The Networked Enterprise)
- How to use the latest social media technologies including blogging and online communities to promote enterprises, brand, organisation or event
- Development of graphical on-line interactive Business Games, Dashboards and What-if Simulators for organisations to support Performance Improvement, Strategy Development and Executive Team Development.
Bioteams Books Reviews
Humans and animals do not need complete information to act; they can operate on various clues provided there is a sufficient context. Organizational teams can also use this thin slicing technique in conjunction with short messaging to enhance their performance. Malcolm Gladwell’s introspective book Blink digs deep into the abyss of human cognition to illustrate the human ability to think at a subconscious level. The idea of thin slicing is used where one is introduced to only a few snippets of information which lead to a series of conclusions based on moments of rapid cognition – an ability claimed to be intrinsically dormant in most humans. By bioteams guest author Max Bhanabhai.