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jerryking : behavioural_economics   13

Company led by Google veterans uses AI to ‘nudge’ workers toward happiness - The Globe and Mail
The startup, Humu, is based in Google’s hometown and it builds on some of the people-analytics programs pioneered by the internet giant, which has studied things including the traits that define great managers and how to foster better teamwork.

Humu wants to bring similar data-driven insights to other companies. It digs through employee surveys using artificial intelligence to identify one or two behavioural changes that are likely to make the biggest impact on elevating a work force’s happiness. Then it uses e-mails and text messages to “nudge” individual employees into small actions that advance the larger goal.

At a company where workers feel that the way decisions are made is opaque, Humu might nudge a manager before a meeting to ask the members of her team for input and to be prepared to change her mind. Humu might ask a different employee to come up with questions involving her team that she would like to have answered.

At the heart of Humu’s efforts is the company’s “nudge engine” (yes, it’s trademarked). It is based on economist Richard Thaler’s Nobel Prize-winning research into how people often make decisions because of what is easier rather than what is in their best interest, and how a well-timed nudge can prompt them to make better choices.

Google has used this approach to coax employees into the corporate equivalent of eating their vegetables, prodding them to save more for retirement, waste less food at the cafeteria and opt for healthier snacks.

Using machine learning, Humu will tailor the timing, content and techniques of the messages it delivers based on how employees respond.

“Often we want to be better people,” said Laszlo Bock, Humu’s chief executive and Google’s former leader of what the company calls people operations, or human resources
Asha_Isaacs  artificial_intelligence  Google  happiness  machine_learning  Richard_Thaler  nudge  behavioural_economics  Laszlo_Bock 
january 2019 by jerryking
As an Investor, Do You Suffer from ‘Narrow Framing’? - WSJ
By Shlomo Benartzi
June 11, 2017

Many of the financial mistakes people make are caused by a fundamental shortcoming: They can’t see the big picture.

In behavioral economics circles, this is known as “narrow framing”—a tendency to see investments without considering the context of the overall portfolio. Many people are vulnerable to it.
investors  behavioural_economics  narrow-framing  the_big_picture  portfolio_management 
june 2017 by jerryking
Meet the People’s Quant, an Ex-Marine Who Champions Value Investing - WSJ
By Chris Dieterich
June 2, 2017

Wesley Gray’s value-focused fund of overseas stocks is beating all its rivals over the past year. For him, it’s almost beside the point.

Mr. Gray, chief executive of asset manager Alpha Architect LP outside of Philadelphia, says watching short-term market moves doesn’t pay off. Instead, his firm focuses on the benefits of finding and buying a small number of very cheap stocks, and holding them through thick and thin.

Alpha Architect is an upstart active investment manager that tripled its assets last year, a noteworthy performance at a time when traditional stock pickers are struggling with lackluster performance and investor withdrawals. The firm, with $522 million in assets, is among a growing crop of money managers using academic financial and behavioral research, and algorithms, to identify stock bets likely to beat the market.

So-called quantitative investment strategies pulled from academic research have been around for years, popularized by the likes of Dimensional Fund Advisors and AQR Capital Management. Mr. Gray and Alpha Architect aim to deliver highly potent iterations to smaller investors.

Mr. Gray is a former captain in the U.S. Marine Corps who served a tour in Iraq, and later earned a Ph.D. in finance from the University of Chicago Booth School of Business. He says extreme discipline is a crucial component of his concentrated, algorithmic adaptations of classic value investing, popularized by Benjamin Graham and Warren Buffett.

Last year Mr. Gray put out a report, “Even God Would Get Fired as an Active Investor,” concluding that stock-picking foresight alone wouldn’t equip investors to conquer perhaps their most formidable foe: the fear-driven urge to cut losses.....the market is littered with winning strategies that lose their potency over time, and smart-sounding theories that fail outright when put into practice. Moreover, success in investing often leaves market-beating managers awash in fund inflows that quickly outstrip their capacity to generate ideas.

Mr. Gray responds that the research upon which his strategies are based have proved their resilience for years, and that they can be explained by investor behavior. He admits that he has considered the implications of getting too big, a state that he says isn’t imminent but could force unhappy changes on his firm.
alpha  investors  quants  USMC  PhDs  value_investing/investors  asset_management  algorithms  behavioural_economics  quantitative  idea_generation  finance  active_investing  stock_picking  investment_strategies  beat_the_market 
june 2017 by jerryking
From Michael Lewis, a Portrait of the Men Who Shaped ‘Moneyball’ - The New York Times
By ALEXANDRA ALTERDEC. 3, 2016
Lewis decided to explore how it started.

The inquiry led him to the work of two Israeli psychologists, Amos Tversky and Daniel Kahneman, whose discoveries challenged long-held beliefs about human nature and the way the mind works.

Mr. Lewis chronicles their unusual partnership in his new book, “The Undoing Project,” a story about two unconventional thinkers who saw the world differently from everyone around them. Their peculiar area of research — how humans make decisions, often irrationally — has had profound implications for an array of fields, like professional sports, the military, medicine, politics, finance and public health.....Tversky and Kahneman's research demonstrating how people behave in fundamentally irrational ways when making decisions, relying on their gut rather than available data, gave rise to the field of behavioral economics. That discipline attracted Paul DePodesta, a Harvard student, who later went into sports management and helped upend professional baseball when he went to work for Mr. Beane.....Unlike many nonfiction writers, Mr. Lewis declines to take advances, which he calls “corrupting,” even though he could easily earn seven figures. Instead, he splits the profits from the books, as well as the advertising and production costs, with Norton. The setup spurs him to work harder and to make more money if the books are successful, he says.

“You should have the risk and you should enjoy the reward,” he said. “It’s not healthy for an author not to have the risk.”
Amos_Tversky  Michael_Lewis  Moneyball  books  book_reviews  unconventional_thinking  biases  cognitive_skills  unknowns  information_gaps  humility  pretense_of_knowledge  overconfidence  conventional_wisdom  overestimation  metacognition  behavioural_economics  irrationality  decision_making  nonfiction  writers  self-awareness  self-analysis  self-reflective  proclivities  Daniel_Kahneman  psychologists  delusions  self-delusions  skin_in_the_game  gut_feelings  risk-taking  partnerships 
december 2016 by jerryking
Lunch with the FT: Vikram Pandit - FT.com
July 11, 2014 | FT | By Tom Braithwaite.

“For a large group of people who grew up over the past two, three, four decades, they’ve been in a very different world – it was a world of predictable growth, it was a world of the ability to finance yourself, it was a world where you could really put one foot in front of the other. You find people grappling with what’s the new sustainable model for growth. And that is true of countries, it’s true of businesses.”
At the same time, Pandit proclaims that, largely thanks to technology, “It’s never been easier to start your own business.”
Our starters arrive. Beetroot and ricotta for Pandit while I get a plate decorated with delicious oily slivers of fish and vegetables offset by the occasional crunch from puffed rice and bite of horseradish.
“Bon appétit,” says Pandit, as he slices into a beetroot and continues to extol the virtues of something he calls the “SMAC stack”. I tell him this sounds awful but, he assures me, “it’s the vernacular for the ease for which you can get into business today,” and it stands for “Social media, Mobility, Applications and Cloud.
“Data is like . . . You’re too young, but there was a movie with the [line about] plastics.” When I assure him I’m familiar with The Graduate, he says: “Data is this generation’s plastics. I don’t see business models being truly successful until you get it.”...Pandit has a fondness for big concepts and management-speak and it can be difficult to bring him down to earth. I press him for examples. “You have large auto companies saying, ‘Where is the growth?’ and, on the other hand, you have a SMAC stack that’s created Uber. What’s interesting is that all those intangible abilities are inside the auto companies to make it happen.”
He has been investing in a steady stream of companies that he thinks embody innovative ideas that might make them the next Uber, the suddenly ubiquitous taxi-ordering app. At the same time, he is chairman of TGG Group, a consulting company set up by Steven Levitt, co-author of pop economics book Freakonomics – which aims to help corporations unlock their inner Ubers....Accordingly, while many of Pandit’s new investments are financial companies – Orchard, a platform for users to trade loans; CommonBond, a student lending platform; Fundbox, which lends money to small businesses against their invoices – only one, in India, has any aspirations to be a traditional bank.
With many of his new interests, Pandit says he is looking to remove “frictions”, which happen to be the way Citi and other banks make their money: for example, the middle men that sit between a big bond manager and retail investors and charge a fee. As he points out, the wealthiest individuals are not saddled with these costs to the same extent.
Vikram_Pandit  Citigroup  Wall_Street  career_paths  start_ups  financiers  financial_services  Sheila_Bair  fin-tech  Steven_Levitt  data  behavioural_economics  Second_Acts  reinvention  platforms  layer_mastery  data_driven  jargon  frictions  pain_points  large_companies  growth  Fortune_500  intangibles  SMAC_stack  automotive_industry 
july 2014 by jerryking
The Biology of Risk - NYTimes.com
By JOHN COATES JUNE 7, 2014

What is it about risk taking that so eludes our understanding, and our control?

Part of the problem is that we tend to view financial risk taking as a purely intellectual activity. But this view is incomplete. Risk is more than an intellectual puzzle — it is a profoundly physical experience, and it involves your body...Risk by its very nature threatens to hurt you, so when confronted by it your body and brain, under the influence of the stress response, unite as a single functioning unit....The state of your body predicts your appetite for financial risk just as it predicts an athlete’s performance.

If we understand how a person’s body influences risk taking, we can learn how to better manage risk takers. We can also recognize that mistakes governments have made have contributed to excessive risk taking.

Consider the most important risk manager of them all — the Federal Reserve. ...Uncertainty over the timing of something unpleasant often causes a greater challenge response than the unpleasant thing itself. Sometimes it is more stressful not knowing when or if you are going to be fired than actually being fired. Why? Because the challenge response, like any good defense mechanism, anticipates; it is a metabolic preparation for the unknown....Most models in economics and finance assume that risk preferences are a stable trait, much like your height. But this assumption, as our studies suggest, is misleading. Humans are designed with shifting risk preferences. They are an integral part of our response to stress, or challenge.......[JCK from David Brooks -The Wisdom Your Body Knows scientists are now focusing on the thinking that happens not in your brain but in your gut. You have neurons spread through your innards, and there’s increasing attention on the vagus nerve, which emerges from the brain stem and wanders across the heart, lungs, kidney and gut. The vagus nerve is one of the pathways through which the body and brain talk to each other in an unconscious conversation. ].......One such opportunity is a brief spike in market volatility, for this presents a chance to make money. But if volatility rises for a long period, the prolonged uncertainty leads us to subconsciously conclude that we no longer understand what is happening and then cortisol scales back our risk taking. In this way our risk taking calibrates to the amount of uncertainty and threat in the environment.

Continue reading the main story
Under conditions of extreme volatility, such as a crisis, traders, investors and indeed whole companies can freeze up in risk aversion, and this helps push a bear market into a crash. Unfortunately, this risk aversion occurs at just the wrong time, for these crises are precisely when markets offer the most attractive opportunities, and when the economy most needs people to take risks. The real challenge for Wall Street, I now believe, is not so much fear and greed as it is these silent and large shifts in risk appetite....As uncertainty in fed funds declined, one of the most powerful brakes on excessive risk taking in stocks was released....There are times when the Fed does need to calm the markets. After the credit crisis, it did just that. But when the economy and market are strong, as they were during the dot-com and housing bubbles, what, pray tell, is the point of calming the markets? Of raising rates in a predictable fashion? If you think the markets are complacent, then unnerve them. Over the past 20 years the Fed may have perfected the art of reassuring the markets, but it has lost the power to scare. And that means stock markets more easily overshoot, and then collapse.

CONTINUE READING THE MAIN STORY
120
COMMENTS
The Fed could dampen this cycle. It has, in interest rate policy, not one tool but two: the level of rates and the uncertainty of rates. Given the sensitivity of risk preferences to uncertainty, the Fed could use policy uncertainty and a higher volatility of funds to selectively target risk taking in the financial community....IT may seem counterintuitive to use uncertainty to quell volatility. But a small amount of uncertainty surrounding short-term interest rates may act much like a vaccine immunizing the stock market against bubbles. More generally, if we view humans as embodied brains instead of disembodied minds, we can see that the risk-taking pathologies found in traders also lead chief executives, trial lawyers, oil executives and others to swing from excessive and ill-conceived risks to petrified risk aversion. It will also teach us to manage these risk takers, much as sport physiologists manage athletes, to stabilize their risk taking and to lower stress.
Wall_Street  risks  risk-management  risk-taking  uncertainty  U.S._Federal_Reserve  bubbles  volatility  behavioural_economics  risk-preferences  risk-aversion  biology  psychology  interest_rates  emotions  human_experience  financial_risk  signaling  stress_response  market_crash  immobilize  paralyze  bear_markets  policy_tools  physiological_response  risk-appetite  unpredictability  physical_experiences  calibration  human_behavior  human_frailties  human_psyche  metabolic 
june 2014 by jerryking
Go Ahead, Vladimir, Make My Day - NYTimes.com
APRIL 12, 2014

Continue reading the main story
[Thomas L. Friedman]

check out Opower, which just went public. Opower works with utilities and consumers to lower electricity usage and bills using behavioral economics, explained Alex Laskey, the company’s co-founder, at their Arlington, Va., office. They do it by giving people personalized communications that display in simple, clear terms how their own energy usage compares with that of their neighbors. Once people understand where they are wasting energy — and how they compare with their neighbors — many start consuming less. And, as their consumption falls, utilities can meet their customers’ demand without having to build new power plants to handle peak loads a few days of the year. Everybody wins. Opower just signed up the Tokyo Electric Power Company and its 20 million homes.

Putting all its customers together since it was founded in 2007, said Laskey, Opower has already saved about “4 terawatt hours of energy” and expects to be soon saving that annually. The Hoover Dam produces about 4 terawatts hours of energy a year. So we just got a new Hoover Dam — for free — in Arlington, Va.

Thomas L. Friedman
Vladimir_Putin  natural_gas  climate_change  Ukraine  pipelines  Tom_Friedman  embargoes  behavioural_economics 
april 2014 by jerryking
Honesty That Benefits All
November 11, 2013 | NYT | By DOUG STEINER.

Headlines highlight the bad deeds of players in financial markets: insider trading scandals, traders colluding on interest rate manipulation, executives backdate options, etc....One tool of tackling problematic behavior is to rely on behavioral economics (i.e. traditional economics' assumption — that everyone acts rationally when making decisions — is wrong).

Behavioral economists combine the social psychology of human interactions with the thought processes involved in making economic decisions. They predict and explain how people use faulty logic in building a framework for making decisions. Then they figure out how to make people behave properly by inserting new triggers for better behavior..... people can justify lying if it’s “just a little bit.”(e.g. customers underreporting annual miles driven when filling out their car insurance audit forms, or their income when filling out tax returns). ...adding "morality reminders" (e.g. asking customers to sign forms attesting to the accuracy of their reports at the top of a page, instead of the bottom)....can change behavior, ... minor, even imperceptible changes to workflow can significantly affect honesty....human decisions can be influenced with small suggestions — say, a reminder that “over 99 percent of people truthfully answer these questions.” Or a group might be reminded of a collective cause-and-effect. (“You and your colleagues will not be eligible for bonuses if any of you engage in illegal behavior.”)

Employing similar behavioral psychology in financial transactions can discourage bad actions. Some examples:

■ Getting legal advice: .... Showing lawyers the profound influence they have on trading action might dissuade them from endorsing or seeming to endorse questionable decisions.
■ Making the costs clear to clients: Modern technology allows firms to automatically trade against clients who are unaware of the practice or oblivious to it. Clients generally lose money on these trades. Such actions are legal, even if they’re unseemly. This type of behavior has to be defined as immoral within the industry, or it won’t be long before it is made illegal
■ Setting the right tone:

...the financial crisis of 2008 showed that risk perception and reality differed widely. Efforts to use social psychology to change behavior are resulting in two changes at the same time.

The first is a change in the general perception of business risk, and how much risk a firm should assume to make returns to shareholders. The second is more important and more controllable. It involves personal perceptions of how much risk they should take when, say, trading securities, to impress their bosses and presumably get a larger bonus.
behavioral_change  behavioural_economics  Doug_Steiner  financial_markets  financial_services  honesty  nudge  personal_risk  psychology  risk-assessment  risk-perception 
january 2014 by jerryking
A Bayesian Take on Julian Assange - NYTimes.com
December 15, 2010, 12:55 am
A Bayesian Take on Julian Assange
By NATE SILVER
Psychologists and behavioral economists have conducted a lot of
experiments along these lines, testing our ability to think through
problems that involve what statisticians call Bayesian inference: those
that require to us to infer the likelihood of various possibilities
based on a combination of prior, underlying conditions (we are in Japan:
most people we encounter here will be of Japanese ancestry) and new
information (but based on this woman’s appearance, it is hard to tell
whether she is Caucasian or Japanese!) They’ve found that, in general,
we do pretty badly with them: we tend to get lost in the most immediate
details and we forget the underlying context.
Julian_Assange  WikiLeaks  statistics  psychologists  economists  behavioural_economics  probabilities 
december 2010 by jerryking
The Protocol Society
Dec. 22, 2009 | NYT | By DAVID BROOKS. A protocol economy has
very different properties than a physical stuff economy. The success
of an economy depends on its ability to invent and embrace new
protocols, its' “adaptive efficiency,” -- how quickly a society can be
infected by new ideas. Protocols are intangible, so the traits needed to
invent and absorb them are intangible, too. First, a nation has to have
a good operating system: laws, regulations and property rights. Second,
a nation has to have a good economic culture: attitudes toward
uncertainty, the willingness to exert leadership, the willingness to
follow orders. A strong economy needs daring consumers (China lacks
this) and young researchers with money to play with (N.I.H. grants used
to go to 35-year-olds but now they go to 50-year-olds). See “From
Poverty to Prosperity,” by Arnold Kling and Nick Schulz and Richard
Ogle’s 2007 book, “Smart World,” When the economy is about ideas,
economics comes to resemble psychology.
David_Brooks  innovation  books  culture  adaptability  ideaviruses  risk-taking  R&D  N.I.H.  property_rights  regulations  rule_of_law  institutional_integrity  services  digital_economy  rules-based  intellectual_property  demand-driven  psychology  customer-driven  intangibles  behavioural_economics  protocols  poverty  prosperity 
december 2009 by jerryking
Predictably Irrational: The Hidden Forces that Shape Our Decisions
Dwight R Lee. Freeman. Irvington-on-Hudson: Jun 2009. Vol. 59,
Iss. 5; pg. 43, 2 pgs

Predictably Irrational: The Hidden Forces that Shape Our Decisions by
Dan Ariely HarperCollins * 2008 * 304 pages * $25.95 hardcover; $34.95
audiobook (cd); $19.94 e-book

809 documents found for: (business w/2 experiment*) AND
PDN(>1/1/2006) AND NOT (Business Wire or PR Newswire)
book_reviews  behavioural_economics  irrationality  decision_making  hidden 
august 2009 by jerryking

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