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

Behavioral Economics

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. In the 1970’s psychologists started 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 during [...]

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

The Death of Procrastination

We all put off unpleasant tasks.  In surveys 95% of all people admit to procrastinating, with about a quarter of them saying it is a chronic, defining characteristic.  Our innate human behavior is to put off less appeasing tasks regardless of importance.  I struggle at times to get out of bed, to tackle mundane tasks, or to get my workout in.  I even had an urge to delay writing the article you’re reading today. It’s unfortunate the consequences or benefits of procrastination are many times unknown.  Fortunately, in the investing world, the numbers paint a clear picture.  For instance, if [...]

By |June 12th, 2017|Behavioral Economics|19 Comments