Behavioural Economics by Deanna Manfredi #QRCA #MRX

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Welcome to this series of live blogs from the QRCA conference in Montreal. Any errors, omissions, or silly side comments are my own.

Applying Behavioral Economics Theory to Uncover the Truth: Why You Can’t Simply Ask “Why”
Presenter: Deanna Manfredi

  • Any average mind can spot a bad answer but only the swift minds can spot a bad question
  • What is BE? The irrational consumer, you can’t expect to ask a rational question and get a rational answer. How do consumers make decisions under situations of uncertainty.
    • System 1 is effortless and automatic, can be irrational and emotional. When this runs into trouble, it looks to system 2 for help. Subject to systematic errors.

  • System 2 requires mental effort, you can see physical changes in people when they move to this system, energy is easily depleted, has evolved to be lazy and you need to wake it up. This is what we feel is running the show.
  • You can see these working – e.g., the Muller Lyer illusion.
  • Why do more intelligent people marry less intelligent people? System 1 jumps to tell a good story about love and needs and self-esteem and jump to conclusions. System 2 considers the data and performs calculations such as a simple regression to the mean – there aren’t as many higher intelligent people available.
  • System 1 is the Lady Macbeth Effect – People who had lied verbally chose a bottle of mouthwash whereas people who had lied in an written letter chose handsoap. We find a way to convince ourselves that we ran out of soap or mouthwash, not that we needed to clean the area that did something bad.
  • Familiarity breeds content…. not contempt.
  • Preferences need no inferences. Affect preceeds and dictates cognition.
  • “I decided to choose X” often really just mean “I like X.” We often decide without extensive cognitive processing.
  • It’s problematic to dive deep and get at the underlying reasoning.  We assume the information is recoverable even if is repressed or suppressed. Unfortunately, much information is inaccessible.

  • People construct a new attitude at least temporarily which conforms for the situation. It can prompt a confabulated response so we must avoid soliciting fictitious responses.
  • We don’t TRULY know why we don’t like things so stop asking. Stop asking why why why because why doesn’t really matter. If people don’t like it, they don’t like it.
  • Maslow’s hierarchy is only a theory and does not apply in real life. People are different and have passion for different things at different times in their life. Maslow wasn’t concerned with data and validity but just theory.
  • Are we storytellers or scientists? Be able to distinguish theories from facts.
  • People are less confident about something when they hear many arguments about it. Asking for 1 to 3 examples is easy and will support the argument. 4 to 6 is harder and will start to raise doubts. 7 to 10 is hard and makes people shake their faith in a decision. You can create a negative opinion by probing on the negatives.
  • Entrepreneurs feel the chance of success in their industry is about 60% when in fact it is about 35%. We have much more positive predictions for ourselves, we are overconfident in our beliefs.
  • 90% of drivers belief they are better than average. [do the math people :) ]  This is the same within professional occupations. Overconfidence is a sin of system 1.
  • Premortem – How to overcome group think. Ask people to think about all the ways something will fail a year from now.
  • Brainstorming doesn’t work for this reason. People are more productive when they work in groups focused on being critical. Give people permission to disagree.
  • We are risk averse to losses and risk seeking to gains.
  • bad information is processed more thoroughly has has more effect than good. People hate negative campaigns but they keep getting used because they work
  • [I still really think that Behavioural Economics is just a fancy way of saying psychology. Nothing is new here. It's just a new fad and a new word and new interest.]
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