Behavioral Economics2020-05-24T06:40:43-06:00

Behavioral Economics

No Power, No Water, No Heat, No Severance – My Snapshot of Houston’s Freeze

It is 8:30 am on Wednesday, day 3 of a 6-day cold spell across Texas.  We lost power around 2 am Monday and have been relying on our fireplace, camping gear, and friends for warmth.  I once laughed at the fact, 90% of homes in Houston had fireplaces.  Thank goodness we bought one of those homes, as the fireplace is keeping our living room a toasty 48 deg F! The Damage In addition to losing power, our water has stopped flowing, and the technique of dripping faucets is no longer available to prevent frozen pipes.  As a result, we shut [...]

By |February 18th, 2021|Behavioral Economics|4 Comments

Implicit Bias, 10 Actions to Take at Work

My sister shared the following riddle based on implicit bias with me last week.  If you are free from bias, good luck 🙂 The Riddle A man and his son are in a terrible car accident and the father dies.  The boy is rushed to the hospital and in need of surgery.  Once in the operating room the doctor comes in, looks at the boy, and says “I can’t operate on him; he is my son!”. How can that be?  Who is the surgeon? Was the answer quick and natural?  (The surgeon is the boy’s mother).  I wish this was [...]

By |September 9th, 2020|Behavioral Economics|2 Comments

315 Cognitive and Behavioral Biases

Do you think you are a better driver than your friends? Is common sense ingrained in our veins? It appears not. Since the 1970’s psychologists have been proving we repeatedly make irrational judgements and decisions in similar circumstances.  In fact, 93% of Americans surveyed thought they were a better driver than the median.  That is not our common sense shining through, but one of many behavioral biases, and in this case illusory superiority. I was able to convince my son I was a better driver than he was. Uncertainty We each suffer from behavioral and cognitive biases and [...]

By |May 24th, 2020|Behavioral Economics|0 Comments

Hurricane Harvey Mental Model Case Study With Regards to Purchases

When I first wrote about the mental model for purchases I did not imagine that my own personal case study would follow.  But then again, who would have thought Hurricane Harvey was going to bring more than 60 inches of rainfall.  That volume of rain shattered the previous record by more than 12 inches! It has now been almost 600 days since thirteen of those inches found their way into our home and our entire first floor was destroyed.  Since being rescued on August 30th, 2017, we have demolished, dried, rebuilt, and since moved back into our home.  The experience [...]

By |March 25th, 2019|Behavioral Economics|1 Comment

How The Illusion of Control Bias Impacts Investing

The illusion of control bias is the tendency for people to think that they have more control than apparent over events. It’s like wearing a rabbit’s foot to an exam or believing you’re safer driving than being a passenger. Neither can influence the outcome of events – good or bad – but the belief can cause real-world harm. In reality, chance plays a bigger role than we give it credit for, and in the case of investing, this can hurt your finances. Whether you’re investing in the wrong things or investing too much, the illusion of control could hinder your [...]

By |October 2nd, 2018|Behavioral Economics|0 Comments

Sitting on an Island within Hurricane Harvey

As the kids go down for a nap and the waters begin to stabilize I gather some of our thoughts over the last couple days, and the days to come. I learned of what was soon to become Hurricane Harvey from a co-worker last Tuesday, 7 days ago.  This consisted of nothing more than an awareness of a storm that was over the Yucatan.  I came home from work that day and told my wife over dinner.  Neither of us thought much of it as it didn’t come up again until we did 30 seconds of research on our phones [...]

By |August 29th, 2017|Behavioral Economics|4 Comments