SCPA, a student-organization at NYU which I lead, is hosting Professor Griskevicius. Please click here for more information.
Most people’s beliefs are shaped not by arguments but by the beliefs of others they trust. Counterintuitive as it may seem to scientists, most people believe in conclusions before they accept arguments. So stories and source credibility are at least as important as the quality of arguments. ~ Daniel Kahneman
What is the perhaps the single most effective way to predict short-term stock prices after an initial public offering? One might guess that savvy Wall Street types keep secret success formulas stenciled on the backs their silken pocket squares. Algorithms can beat Gary Kasparov at chess, so surely they must be able to use the available relevant information to predict IPO winners and losers, right?
Well it turns out, algorithms don’t perform much better than monkeys playing darts. But there is a simpler way to pick the winners. In fact, it’s quite easy.
In a recent conversation I had with Hal Hershfield, Assistant Professor of Marketing at the NYU Stern School of Business who researches the effects time perspectives have on decision making, I was struck by something he came to rather casually. The more I study time, he said, the more I come to think of time and age as the same concept.
In my last post, I discussed the three biggest factors affecting judgment & decision making. Today I want to take an in depth look at the first idea on the list: Relativity.
You’re a marketer. What if you knew the secret cognitive formula to make your brand more appealing and better positioned than the competition? Imagine if you had the tools to help mentally nudge the consumer into making a purchase, expressly at the right moment. These are exactly the two applications most exciting about research into judgment and decision making: prediction and persuasion. However, to get at the “secret formula,” one must first understand the underlying mechanisms by which we all make decisions; we must first identify the true causes for behavior. I believe there are three areas which show the most promise in yielding the secrets. Namely, I want to describe the three biggest influences in decision making: relativity, time, and cognitive ease. This is the introductory post to a series where I’ll look at the three in more depth.
In my last post, I cited a study which provides evidence that men alter their decision-making preferences when given mating primes. In a nutshell, this means that men take more risks when in the presence of women (or even photos of them). If you view purchasing a product as taking a risk, the implication for marketing is obvious and age-old: sex sells.
In the risks people take, Kahneman and Tversky’s Prospect Theory (1979) laid out certain instances where humans flip their behavioral script and start behaving opposite. Normally, people are risk averse; they prefer deals with lower payoffs with less uncertainty. This avoidance of risk is proximally caused by loss aversion, the tendency to psychologically value gains less than losses. However, in the face of large losses with long odds, people seek risk.
Today mustard brand Grey Pupon unveiled a new Facebook page available only to those whom its algorithm deems worthy. The page features an “application” which launches an app to scan a prospective fan’s profile for interests, photos, education, and grammar (presumedly). Successful applicants are shown their percentile and offered membership in the “Society of Good Taste.” But is such a promotion in good taste?
A new type of vending machine was released recently in Japan. According to the Telegraph, the machine identifies any person who approaches based on age and gender. It then recommends a beverage to that person based on the demographics, the time of day, and the local temperature. According to the company’s spokesman, sales increased by 300% compared to regular machines, though he qualified that a direct comparison is difficult make.