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  So cognitive biases are the beating heart of behavioral economics and finance. But where do they come from? Are they innate or learned? Or are they epigenetic, some complex combination of the two where environmental factors trigger a gene for one or more of them? But there’s another possibility, namely that you catch them. Yep just like a cold, measles or Ebola. But in this case the method of transmission is social rather than bacterial or viral. Kind of like spreading a yawning fit. Did you know that if you spend a lot of time with obese people, you are likely to be obese yourself? And actually, it’s not just obesity but your weight so it applies but also to slenderness. And no, it’s not just that you all eat the same stuff together because you live in the same household. It is actually stronger with friends than with your roommates or significant other. So the researchers concluded that weight is socially contagious. Nor is just weight a major impact on the other party. The same thing occurs with healthy behaviors and exercise, as you might have guessed. Recently the same effect has been found in married people. If one exercises, the other is far more likely to exercise too. So there’s every reason to believe that cognitive biases can also be spread socially. In fact recent research into how behavior spreads socially focuses on Twitter If this is true it has some epic implications for us humans far beyond what has been considered so far. We know from recent research that if you are unemployed early in life (say because you had the misfortune to finish your education just as a recession hit), your lifetime income will be lower than otherwise. You will likely never recover from this hit. Similarly the implication from cognitive biases being socially contagious is that early exposure to particular cognitive biases could also impact the rest of your life adversely (or maybe positively too). Let’s take career planning as an example. Different companies will have preferred cognitive biases. If your first job is with a company with an adverse cognitive bias, say strong loss aversion, it could permanently impair your ability to do something entrepreneurial even if you are naturally entrepreneurial yourself. So your first job is even more important than you might have thought. A wise career planner would advise you to only choose companies with good cognitive biases and to avoid those with bad ones. Some companies with great names might have bad cognitive biases so your Harvard degree might get you into great-looking companies with bad cognitive biases that will impair your career and your lifetime chances of doing well (at least by your own lights). Speaking of Harvard, do different educational institutions also have different cognitive biases? Likely I would think. So instead of slavishly following the recommendations of US News and World report in choosing a school for your kids, you might want to choose them by their cognitive biases. Oh whoops, there’s no list for that. And maybe likely never will be. Just like a company is unlikely to publish one even if they knew what it was. But that doesn’t mean their cognitive biases are any less likely to impact your future career and life. But wait; there is a kind of way to find out the cognitive biases of schools and companies. Just look at the crowdsourced sites those rate teachers, company jobs and reputations to find out that’s going on there. They can give you valuable information and if you know enough about some cognitive biases, you can probably get some hint of what they are and the relative influence of the good and the bad ones. That’s better than nothing. You can see where this is going right? How about the cognitive biases of your business partner? What about the leaders of that acquisition you are contemplating? You potential lifelong love? Come to think about it, what about your parents? Sounds to me like there’s a product here. Rank colleges by cognitive biases to assess their likely impact on your future money-making behaviors. Rank companies by cognitive bias. Tinder for people who want to make money, not just find the perfect mate. We can make money out of this social contagion thing. Where do we start?!                                                                                                                                                                            Read More

I just read an article on astrology (Does Astrology Work? I’m Gonna Go With "No." in Bad Astronomy). I’ve never believed in horoscopes and all the other astrological claptrap. How could the positions of planets possibly influence your personality and behavior? But hold on here. I pride myself on being open-minded to different ideas and thoughts, even to ones that possibly sound ridiculous. And, hmmm, in the part I have been known to be wrong on certain other matters I then thought to be equally, if not even more ridiculous. So let’s give astrology the benefit of the doubt for the moment and consider what mechanism could possibly exist that would make it a real and, gasp, useful phenomenon. I’m going to talk gravitational waves for the moment. Bear with me, there’s a reason. Einstein’s general theory of relativity posits that there must be gravitational waves. Problem is, we’ve never found them although there have been numerous false sightings. But researchers haven’t given up. There have been several approaches ranging from hanging large weights and looking for tiny displacements to the recent apparently failed experiment to look for the tell-tale ripples that gravitational waves would leave on dark matter. Yep, it’s all beyond me too. But the general idea is that you have to make a detector that has extraordinary sensitivity which could sense waves that are unfathomably weak. Then you use some of the amazing instruments that are constantly emerging from high tech labs to measure the changes in the detector. Piece of cake right? Hmmm, now let me see. What do we humans have routinely lying around that is extraordinarily, and exquisitely sensitive whose operations could somehow be harnessed to identifying gravitational waves? Why, could one such be the human brain? Could it be that the brain is capable of sensing gravitational waves? Could the movements of planets and their juxtapositions be registered in our brain by some hitherto unsuspected mechanism? After all, brains have had several billion nears of evolution to build up the capability. As the summit of the art, has the human brain got the furthest way along to achieving this feat? But what mechanism could impart the absolutely extraordinary precision entailed in such a feat? Gravitational wave detectors are designed to measure down to the sub-molecular level. How could a human brain possibly achieve that? We’ve all heard about quantum physics right? The physics of ultra-small particles that is impossible for anyone but geniuses to understand? Well, here’s a turn up for the books. Recent research (over the last few years) has demonstrated that certain biological processes leverage quantum phenomena. For example it’s looking like human (animal?) vision relies on certain quantum effects in the retina to get the job done. Other similar findings are emerging. It’s being called quantum biology. In other words, it’s starting to appear that biological systems have evolved to leverage quantum mechanisms just as they have evolved to leverage other phenomena such as photosynthesis (which incidentally might also employ quantum effects). Is it possible that your brain uses quantum effects in its everyday functioning? Of course we know so little about the brain that at this stage anything is possible. So probably not impossible. And is it possible that the brain uses quantum mechanisms to achieve the sensitivity in detecting gravitational waves needed to sense the positions of the planets (not to mention other celestial bodies)? Ok so what if this is true? How would the brain being able to achieve all this actually impact our personality and behavior? Even before we are born? Well the bit about before you were born is pretty easy. We are well aware now that evens while you are in the womb, it can have a powerful impact on a baby through the maternal environment not to mention epigenetic effects. As to the impact on personality and behavior, we know so little about the brain in this area that any number of mechanisms can be imagined. But there clearly are mechanisms that exist that drive the development of your personality and behavior, even though generally we don’t understand what they are. But presumably they rely on the unbelievably complex configuration of brain components and their interrelationships. If gravitational waves are being detected by the brain with the help of quantum effects, it’s not too difficult to imagine some sort of mechanism that would involve these personality and behavioral drivers being somehow impacted. And, in that case, why not particular conjunctions of patterns of gravitational waves being somehow transmitted to the drivers of behavior? Every day we discover incredibly complex patterns involving the human brain that might have bene considered magic only a few short years ago. So is astrology true? Search me. But I am not prepared to say it isn’t because I can envisage a plausible mechanism that could make it true. It’s all that open-minded stuff you know. I’m not to blame. The gravitational waves did it to me. Or the quantum effects.             Read More

It has now become painfully obvious that all the climate science in the world isn’t going to do anything useful to change the climate. That’s because the problem is behavioral rather than primarily physical. In fact it’s probably the case that the more gloomy reports the climate scientists produce, the more people become inured to them and screen all this bade news out. After all, everything’s hunky dory now right? There are some organizations that get it such as the denizens of the UKs somewhat famous Nudge Unit but even at that august level, the boffins don’t actually know how to change minds en masse, like what’s needed in reality. The climate change scientists and supporters are great at analysis but fall tragically short on practical solutions. Nope, carbon emissions trading is not what I’m talking about thank you. How about something that common folks understand for starters? In the fashionable trade of behavioral economics it’s common to talk about the status quo bias; to us ignorati what that means is that the vast majority of people don’t like change and will do all they can to resist it. If the commoners don’t understand the issue or the boffinesque solutions to address it that’s a great way to turn them off doing anything. That’s where they are at right now. So the real issue for climate change is our behavior, not melting glaciers. And using logic to get us to change isn’t going to cut the mustard either. So what would work? Well for starters there's gotta be shock and awe, behavioral that is. As in you’ve got to really disgust or mentally terrorize people. Remember the smoking ads that showed the insides of a smoker’s lungs years ago? Or the pictures of the hearts of unborn fetuses beating inside their mother’s body? I think they provide us a template even though I still don’t think they are shocking enough. How about a fatwa for climate change from the Pope? An ISIS for climate change? Let’s think outside the box here. Time may be running out a lot faster than anyone think. I believe that the campaigns by the climate change campaigners are way too small and small-minded by half and reflect an abysmal level of understanding of how people actually think. Without some radical thinking in this direction them we have already lost the war. So far I don’t see any evidence that they’ve woken up yet. Another way of putting it is that the climate change people are suffering from the status quo bias as much, if not more, as the great unwashed that they so much criticize as being not willing to change. For an example of this look at the plans for terraforming and geoengineering that some of the extreme climate change people are promoting. A global umbrella to stop the sun’s rays? Seeding the ocean with iron filings? These aren’t visionary; they’re crazy. Why try such things when the problem is our behavior? If you change the PH of the oceans using trillions of dollars, will this change people’s behaviors any? Fat hope. It seems to me that the climate change campaigners need some really new thinking. They need to toss out the climate scientists and get some behaviorists who have their feet firmly planted but can still think outside the box. This might be difficult. The nasty little secret of climate change is that it has got to be its own industry with hordes of academics and consultants making billions off climate change fears and who’s going to give up their grants and revenues coming in even if the solution is actually receding in the rear-view mirror? For once, let’s get some big thinking in climate change, not the small stuff we’re getting now. Bring in a few shrinks from the new behavioral sciences and tell them to think really big. That’s what we need right now                      Read More

Behavioral economics is gradually winning over more converts. It’s now - justifiably - being applied to the most unlikely facets of human existence. So the natural (to me) question arises: should it be applied to animals too. I interpret animals broadly. Not just the warm-blooded ones we know and love like dogs, kittens, dolphins, elephants and other such cuddlies. I also mean to include the cold-blooded ones like snakes, insects, spiders, weevils, alligators. After all they’re all God’s creatures right? Here’s my thinking. The study of animal behavior became politically correct many moons ago. It’s now quite fashionable to study animal intelligence. The cutting edge in that area is now the emotional intelligence of animals and their sensitivity to each other and to us humans. So why not their level of business acumen? That might seem like a step too far. But animals clearly deal with scarcity. Business acumen can be boiled down to just two components; one is your propensity to use resources - not just money but things like how frugal you are with twigs and mud in making a nest. The other component is the animal propensity to add value, or to innovate. Right now that is a very hot topic of discussion amongst the animal ethology crowd. Being frugal and wise with resources obviously has a lot of use for any animal, humans included. And now that we know that even crows and chimps use tools, a whole new vista has been opened in the fevered debate about how to spur innovation (in humans). Such a discussion opens up the possibility, if not the inevitability that animals have social cultures, as indeed they obviously do, and by extension, economies. That means they do business. We might look down our snouts at animals’ lack of MBAs (not that they necessarily give humans any business sense, as has been strongly brought home to us in the serial financial crises of the last few years). But it looks awfully like animals have their own version of business thinking and models, even though we don’t understand them just yet. This might sounds a little outré. But let’s take another tack. Do animals consider and deal with risk? Yep, patently so. Do they have mental risk models? Yep again. Do they make provision for rainy days? Yes again. Hmm, this is starting to sound an awful lot like insurance in human society. Ok so maybe if we stretch we can make a case that animals have their own kind of economies, have mental risk models that work pretty well and make business decisions, just not using prices (just like we did when we used to use shells as mediums of exchange not so long ago). Does that butter any parsnips, as the ancient Brits used to say? In other words, can we make such knowledge useful to us truly? Well for starters, how similar are our risk and business models? Are we indeed the most evolved species in these areas? Or do they know something we don’t? Have they evolved in different directions? What do they know about risk that we don’t? How do they make decisions under uncertainty? What could all this tell us about how we are going to evolve in the future? Do animals’ business and risk models show us how to reconcile business risk with sustainability in ways that we could harness so we don’t pollute or nuke our way to extinction? How do they define and achieve higher economic returns for their prodigious efforts? Think the business intelligence of swarms (bees, termites, pigeons). Senior NASA boffins just pronounced that we would probably find alien life in the next 20 years. Could the study of behavioral economics in animals shed light on how other forms of life in the universe might have evolved from a risk, business and sustainability perspective? Is the business acumen of alien animals of interest to the alien life scientists at NASA? If not should it be? There’s a school of thought that says that consciousness is an emergent property of life, any life. Could business thinking also be an emergent property too since it deals with scarcity and innovation? If so, behavioral economics could yet become an even hotter topic                           Read More

Well I’m sure that this post will get me flamed but here’s going anyhow. Emotional intelligence is hot. It’s supposed to make you a better leader. How so? By making you more sensitive to your fellow man, it’s supposed to make your followers more engaged, more loyal to you and so on. The same with customers. In this model high engagement and high loyalty follows inexorably to higher sales and profits. I’m thinking of several people. Steve Jobs, Leona Helmsley, Martha Stewart, Frank Sinatra. Common denominator is that they were all regarded as unpleasant people to deal with. But all of them were ultra-successful in business terms, as well as rich. Is this just a coincidence? Let’s look at this a bit more. Try Steve Jobs for starters. Even his biographer Walter Isaacson acknowledges freely he wasn't a nice person. Not to mention the legions of people who have written about his abusive ways at work with his employees and colleagues, his business partners and competitors. OK I guess that in one of a zillion universes you could be a tough, unfeeling abusive jerk and still have a high EQ. I don’t think we’re in that one though. So I think we could justly say that Steve Jobs wouldn’t have topped anyone’s list for high EQ. And all of the Hall of Fame people I just mentioned above were similar, or even worse. Read Kitty Kelly’s biography of Frank Sinatra if you want to get the flavor. And I’m not even close to covering this pantheon of antiheroes. Bill Gates when younger, Elon Musk now, the list goes on. Why would it be that someone who is this nasty can be so rich? Pretty obvious right? Utra-focused, drives through any obstacles including wussies amongst his own employees, visionary above all else, takes no prisoners. So that’s the flip side of these people. Each of them immensely successful and of course, rich to boot. But none of them made it by being nice, or having anything remotely close to a high EQ. Each of them would appear to be the living embodiment of a rule that says that if you want to be really rich, don’t have a high EQ. Now I’m not here to argue that if you have a low EQ you will get to be rich, or that if you have a high EQ you can’t be rich. Not that there’s not some powerful evidence of the latter. Try Ben and Jerry of their eponymous firm to look at people who were nice and messed up the business acumen part. Bill Norris of Control Data, Ken Olsen of Digital Equipment. In fact in our own research into behavioral finance we see lots of evidence that altruistic people tend not to make money. There are powerful reasons for that. And yes I know about Mitt Romney and tithing; the argument there is that once it’s institutionalized and essentially compulsory it doesn’t count, albeit it is nice and social. And no I’m not arguing that you shouldn’t try to have a high EQ or do things to improve it if you want to make money. Nor am I arguing that you should be nasty in order to get rich off others’ peoples’ backs. All I’m pointing out is that the fashionable EQ hypothesis doesn’t hold up in multiple really famous and important cases. So that one of the landmark leadership theories of our time, that having higher emotional intelligence makes you a better leader, doesn’t necessarily hold up when you examine it more closely. If that’s right, there are an awful lot of leadership books and writing that have got it wrong or at least don’t have it right. If that’s correct I’m not saying that they should suddenly recant their thesis. What I would advocate is that they still push for higher EQ but acknowledge it won’t necessarily make you a better or more successful leader at least not if you measure it by raw financial outcomes. I would think it would make more sense to acknowledge the holes in the theory and state that getting a higher EQ is good for mankind and your colleagues albeit it might have some drawbacks that you have to guard against. Wouldn’t that make the framework more honest? I suspect that deep down the debate about EQ has some ideological baggage that no-one wants to own up too. EQ is particularly something that you might want in your employees if you are a public company with plenty of moolah and a fairly relaxed lifestyle, corporately speaking. As a stakeholder you probably don’t care. In fact, as a shareholder you might be deeply worried if the employees in that company you invested in care too much about anyone except your own investment. Otherwise they might help others, including your competitors and that might not be bullish for your position. If that’s the case then, EQ is for public company officers, for employees and for the people who train them including from the HR and the EQ industries. Business acumen is for owners and stockholders, the (rapacious?) financial and business types and the wealth management industry or so it would seem. If you like EQ does that make put you on the left of the political spectrum? If you don’t, then you’re on the right? Could that be the reason for the eulogizing - or the demonizing - of EQ?                  Read More

Did you see that Microsoft has developed software and a website that can guess your age just by looking at a photo? No more lying about our age I guess. And I suppose you have seen the numerous reports about how researchers can now identify your emotions based on brainwaves seen from MRI scans? So now we’re cutting off yet another avenue for creative obfuscation. But now you don’t even need a connection to MRI to ready your thoughts. That’s because there are now brain-computer interfaces that don’t need such a connection because they can use radio communication interfaces from your brain. That has already resulted in mind-controlled prostheses such as for arms, in one case, two arms simultaneously. It’s pretty clear that within a couple of years at most, brain-computer interfaces using radio communications will be routine in many areas. See for example advertisements on the web to help you build your own brain-controlled helicopter drone using off-the-shelf components. So now we have to worry about protecting our brains from others who would like to use it for their own nefarious purposes. At first some of these uses might appear to be (relatively) harmless such as checking your emotions to see if you are a terrorist. For example a security device that checks your emotional stout as you go through security at work, or maybe when you go through TSA inspection at the airport. But once you can start checking someones brains for stuff like this, where does it end? Does my girlfriend really like me? What are my kids thinking? Is my boss going to fire me? You can see where this doesn’t end. But even that doesn’t start to highlight what could really happen. If I can do these things by radio, maybe I can hack into your brain to make it think things that will result in something bad happening. Maybe I hack you to get your brain to stop your pacemaker. Or maybe to get your prostheses to do something you wouldn’t like them to do, like striking someone, or worse? Could I get hack a pilot to crash an airport deliberately using my iPad from the plane seat in the back of a plane? Or get the US President to press the Big Red Button? Is it possible that brain hackers could get into a leader’s brain and hijack his leadership strategies so that they now meet their objectives instead of the leader’s? Could this be the ultimate way of winning a war; by taking over the brains of the leadership instead of trying to kill them all? We are moving into an era of brain phishing. So if my brain is being hacked, how do I know it? If I get a sudden urge to smack someone, it is me or a hacker? Will psychosis now be con-mingled with the claim that the sufferer has been hacked? How do we distinguish between self-will and outside influence? Between social influences that are benign from "benign" or "legitimate" brain hacking? Between benign and malignant penetration of our thoughts? And what do you do about it? Are there certain techniques to identify if your brain is being phished? Certain behaviors that can prevent or reduce it? Will meditation help? Mindfulness training? Or are these techniques still to be developed? Who is going to do that? Not the NSA we hope. What are the ethics of getting psychiatrists involved? So cybersecurity is not just how to protect a computer from viruses. Not even about shielding my iPhone from hackers trying to get my passwords. Pretty soon it’s going to be about how to protect my brain from prying eyes and how to stop bad people using my brain to do bad things that I wouldn’t want to happen. And in particular cybersecurity will have to protect the brains of leaders from being hacked. That might be even more important than protecting conventional assets such as computers, grids and networks. How would you achieve this? I can’t even think where to start. How about building a helmet to wear at all times that will repel invaders? Hmm, a permanent bad hair day. Or how about I wear permanently something on my wrist that emits a protective force field to achieve the same ends? Sort of like an iWatch on steroids. Maybe I could make one that will make an exception for me to look at what my girlfriend is thinking? And if we get to this state of mind, what happens to our behavior? As individuals and as a species? Will our behavior start to change under the constant assault of potential hackers, just like we are all learning what emails not to click in case they are phishing devices? Will we start to develop anti-phishing behaviors from birth, developed epigenetically or even genetically? In three generations time will we need to have a measure of someones AHIQ (anti-hacking IQ)? Will these developments lead to changes in our brain structure as well as behavior over a couple of generations or so since we now know that epigenetic changes can occur very rapidly? It’s becoming obvious that events on the ground are outpacing our capacity to address them. Cybersecurity will soon be only to a minor extent a matter of making computers secure. The theater of operations is rapidly moving to a new terra incognita, our own brains and particularly to the most valuable, those of our leaders. What happens to leadership strategy then I wonder?                Read More