I just attended the best conference ever. And I’ve been to a lot of them. The ideas42 Behavioral Summit 2016 was billed as offering “…an inside look at the latest developments from the field of behavioral science and how these insights drive innovation in the private sector.” Indeed it went beyond that, touching on politics, … Read more
Let’s do something completely different this week. How about a photo-essay? When I began my study of decision-making, I assumed that the coldly rational, quantitatively financial-economic approach was the best. How else can you avoid making the systematic errors that our cognitive biases can cause? I’ve since learned that emotion, intuition, empathy and even unconscious … Read more
Our decisions, and the actions they lead to, make us who we are. In that sense, decisions are fundamental to our identities, our humanity and even the future of our planet. But what is a good decision and how do we get great at making them? I want to share with you my answers to … Read more
When we make decisions, we often take the way they are presented to us at face value. Maybe a sales person offers you a menu of investment options or maybe a single recommendation; either way, you can bet a lot of thought went into the architecture of the choice presented to you. Amos Tversky and Daniel … Read more
Here’s a question that just about everyone approaching (and passing) middle age will feel ambivalent about: how does getting older affect our ability to make rational decisions? On the one hand, it’s common knowledge that our cognitive abilities begin to decline in our fifties. On the other, as I’ve written before, the accumulation of experience … Read more
Decision-making is hard because there is a fundamental and unavoidable ignorance about the future. We are especially uncomfortable about outcomes produced by processes that we don’t understand well. We’re much more comfortable with risks that we can quantify, model and forecast. This is called “ambiguity aversion“. We are so uncomfortable with the former (uncertainties) that … Read more
I took my annual look at my investments this week, and boy did I get it wrong. A few years ago, I determined I should have about 70% of my investments in equities. Instead, as of yesterday, I had less than 60%. Most of the excess was in cash, earning essentially nothing and missing out on … Read more
How is it that, eight years after the financial crisis, there are 549,000 homes currently in some stage of foreclosure? A recent study found that 20 percent of American households should have refinanced in 2010, but did not. Potential loss: $45,000 over the lifetime of the loan. Another study found that 25 percent had interest rates more … Read more
Many of the most important decisions we make involve trade-offs between the present and future. How much of my income should I save today for my retirement? What costs should governments incur today to reduce the risk of catastrophic climate change in the (hopefully) distant future? How should businesses allocate investments that pay off in … Read more
Can we design decision tools to offset or even leverage the hurdles that our brains put in front the most important decisions that we face? Take planning and saving for a comfortable retirement. How much and in what one invests are two of the most important decisions any adult needs to make and take responsibility for. “Do your … Read more