“Henry, the investor, wasn’t keen on accepting a stockbroker’s invitation to share a taxi – a sales pitch for a whole mile, he thought. He was wrong. The stockbroker neither mentioned his firm nor any stock. He merely unknotted his tie and stuffed it in his jacket pocket. “It’s not my favourite,” he said, “but my son chose it for my birthday, so, I have to wear it.” He continued: “My boy’s ten. That’s about the age when sons suddenly realise their fathers are not superhuman after all. Mine thinks I’m a loser.” One mile later, Henry had decided that he quite liked this stockbroker.” – The Trust Mandate: The behavioural science behind how asset managers REALLY win and keep clients. Brodie & Harnack, 2018)
“Can you explain behavioural finance to my 14-year-old daughter?”
As the girl’s father was a finance professor, I had the impression that he might already have tried it unsuccessfully himself. Undeterred, though, I turned to the unenthusiastic teen and asked her to imagine a prize draw with a £100 reward for the lucky person whose ticket number is randomly drawn from a basket.
There are only 100 tickets,” I explained, “so, arguably, each entry ticket is ‘worth’ £1.” She nodded in agreement. “Now suppose I offer you the chance to buy one of those tickets for 90p. Would you take it?” She nodded again, smiling. Was this going to be easier than she thought? Continue reading
Despite being an Englishman, former soccer player and manager, Jack Charlton, is immensely popular in the Republic of Ireland. As manager of the national team, he led the soccer-mad nation to its first World Cup competition in 1990. He has been awarded one of the Republic’s highest honours, an honorary Irish citizenship. Cork airport even has a life-sized statue of him indulging his passion for fishing. When he goes on fishing trips to the Republic, he has been known to pay his expenses by cheque. The payees, so delighted to have the autograph of their sporting hero, sometimes never bank them. The value and, therefore, the demand for this asset can be greater than suggested by the face-value because of the signature on it. Continue reading
I had the honour of attending a university graduation ceremony recently. It was a grand affair, full of pomp and tradition. But I have to admit it was little boring. Each one of almost 300 graduates was invited to go up on stage to receive their degree and to shake hands with the Chancellor and other senior members of the teaching staff. Yet, I was only interested in seeing one degree awarded. To pass the time, I decided to play a game of First-Class-Honours Bingo. Continue reading
“Someday, we’ll look back at this and laugh.”
This expression is reserved for people who, because they are suffering some awful physical or social pain, can find no reason to laugh right now. They have either blundered into made a costly mistake, collided with an avoidable obstacle, or stumbled into a social faux-pas. Yet, they are convinced that in a foreseeable future, their recollection of the moment will allow them a comic interlude. Continue reading
The Lakeview Resort is one of Kerala’s loftiest hotels, not only because it is situated some three thousand metres above sea level, but because it is one of the few resorts to have qualified for the coveted five-star rating. The residence is situated in the middle of endless acres of manicured Indian tea plantations and overlooks a picturesque valley and the famous lake that inspired its name. Since the days of English colonisation, when the station was established, visitors have flocked there simply to be able to gaze eastwards at dawn as the sun rises between the hill peaks that separate Kerala from the neighbouring state of Tamil Nadu. The dawn mist acts as a prism, throwing the blaze of colours progressively from the sky, down onto the lush carpet of tea bushes and finally scintillating across the cool waters of the lake. The Lakeview is also a hotbed of behavioural economics. Continue reading
In their 90’s hedonic anthem, Digital Underground invited party revellers to ‘doowutchyalike’. Yeah. Doing just what we like is probably the purest form of satisfaction. So, if our goal is to maximise the collective satisfaction of a population, we ought to distribute the limited resources so that as many as people as possible get as much of the things they like as possible.
The problem is that it is difficult to discover what people like without asking them individually. What people want, in contrast, is immediately revealed in their purchases. Continue reading
First you would think about whether its memory holds any sensitive data, and wonder what the stranger might do with it. Once you’re satisfied there are no ill intentions, you would decide whether you believe the stranger has the ability to repair smartphones. Given the success of the entire transaction depends on the latter, it seems counter-intuitive that this judgment be made only as a second step, yet this precisely what we all do. Read more on TCAM’s website
A friend of mine contacted me to share news of what he considered to be a remarkable coincidence. In an e-mail (liberally dotted with exclamation marks) he informed me that his wife goes to church with the sister of the UBS rogue trader, Kweku Adoboli. Crikey.
He was flabbergasted to discover that he was linked to the until recently jailed trader by a chain involving just three links. It is quite surprising but, in reality, not that improbable. In fact, as Microsoft uncovered when it investigated the flow of some 30 billion e-mail messages, everyone on the planet is probably linked to everyone else by just six steps. Indeed, I have just discovered that I am just four introductions away from the fraudster myself.
Although we are all rather closely connected to the famous and the infamous, we are usually unaware these connections exist. Even when we know they are there, we still do not know which of our friends, relatives or co-workers is the first crucial link. The person on your left could be signposted Adele; the one on yourright, Donald Trump.
 To be exact, 6.8 steps.
In a recent ‘behavioural’ review of the biblical tale, the Prodigal Son, I was finally able assuage my usual annoyance with the counter-intuitive reaction of the title character’s father to the boy’s return. I understood the wisdom of the father’s action for his own personal well-being, but the parable still irritated a little. This is because, as a father, I struggled to imagine myself being able suppress the urge to scold the child for having squandered half of the family wealth. The expression “I told you so” would probably have rolled more easily off the tongue than “kill the fattened calf for a feast.” It was only after reviewing the episode for a second time that I realised my hasty conclusion was mostly due to the way the story was told.