From the moment you are bitten by the Behavioral Economics bug, you begin to see the world through very special lenses: those of someone who understands what triggers the behavior and decision-making of human beings.
In other words, you begin to understand how people actually behave — and not how they say or think they behave.
If we ask anyone, for example, if they would like to increase by any percentage the chance of being hit by a car to save 1 minute on their commute, the answer would probably be “no.” After all, rationally, the desire to be hit should always be 0%, regardless of the time to be saved. However, despite the existence of pedestrian overpasses scattered throughout critical points in cities, which in theory eliminate any chance of being run over, we observe that many people choose to cross in the middle of the street, looking at their cell phones, talking to friends, almost as if they were strolling on the beach, admiring the sea and the blue sky.
But can we be so sure that we won’t be run over? Is it possible to accurately calculate the speed of oncoming cars and motorcycles, cross-reference it with our own speed to cross the path, and at the same time consider whether the path has any potholes or if the shoelace is properly tied? The answer is NO. This proves that, in many situations, people say one thing and, in practice, when it comes down to it, they do another.
Situations like this, in which we should make a certain “rational” decision and end up making another “irrational” one, are repeated all the time and everywhere. We say we’d like to lead a healthier life, but we decide to go overboard with food between Friday at 6 pm and Sunday at 8 pm. Even worse: between Christmas and New Year’s. Or just “today,” because it’s our birthday. And what about our children’s birthdays? It seems we assume that on weekends—and on all these special dates—anything goes, as if our bodies understand the difference between them and the rest of the year (if there are any days left), possessing specific mechanisms to deal with excesses on these “special” occasions. #notreally
Or, to bring up a current and relevant topic: retirement. People say loudly and clearly that they would like to retire early and with a good standard of living, but they completely forget to plan how this will happen. When they realize it, time has already passed and the necessary sacrifice will be much greater. This type of behavior, in which we are more likely to give ourselves an immediate, tangible, and certain reward (like buying a new car today) instead of waiting for a future reward (like retiring comfortably), is ingrained in our brains and directly impacts our decisions.
As Dan Ariely wrote in his highly recommended bestseller, Dollars and Sense: for an individual to forgo buying something today and allocate that money to the future, they need to choose to make a sacrifice for the sake of another completely unknown individual. After all, what we perceive is the “present self”—the one who writes and reads the article, who wants to buy the new car—while the “future self” does not yet exist in our minds. It is another being with whom we have no relationship, and that is why it is so difficult to give up something in the present in favor of them.
In short, these are just a few examples studied and explored in this fascinating—and still little explored—field that is Behavioral Economics.
If you want to delve deeper into the subject, here’s a list of books I’ve read and recommend:
- Predictably Irrational — Dan Ariely
- Dollars and Sense — Dan Ariely
- Thinking, Fast and Slow — Daniel Kahneman
- Nudge — Richard Thaler
- Irrationality — Stuart Sutherland
And, more specifically for Marketing and Sales, which are among my favorites (since it’s my professional field):
- Decoded — Phil Barden
- Pitch Anything — Oren Klaff
- The Choice Factory — Richard Shotton (I just bought it and haven’t read it yet, but it’s highly recommended)
- Priceless: The Myth of Fair Value — William Poundstone
- The Science of Selling — David Hoffeld
- Hooked — Nir Eyal
And, for those who get bitten by the bug like me and want to become an expert in the field, I recommend the postgraduate course in Behavioral Economics and Decision Making at FIA, one of the pioneers in Brazil. It is now moving towards forming its fourth class. I’m a “guinea pig” for the course and I can say: it’s well worth it for anyone who wants to delve deeper!
