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Rescooped by Terence R. Egan from Bounded Rationality and Beyond
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Can psychology explain our dumb financial decisions?

Can psychology explain our dumb financial decisions? | Behavior, People and Organizations | Scoop.it
 

 When it comes to financial decisions, we can often be tricked (or trick ourselves) into believing that we are making the right choice with our money because we often base those decisions on rosy projections, past performance, linked events or even mushy things like emotion and sentiment.  But that rarely leads to smart decisions or financial gains when it comes to investments.

 

These insights are particularly important for financial planners, who often become voices of reason when we are faced with challenging financial or economic choices. 

 

"People often confuse certainty and safety."   — Harold Evensky 

 


Via Alessandro Cerboni
Terence R. Egan's insight:
 [KEY POINTS] 

Harold Evensky spoke with BBC Capital about how he incorporates teachings from behavioural economics in his own work.

 

People are used to thinking that they don’t want to take risk. The reality is that most investors don’t want to take a risk to get rich, but they will take a risk not to get poor.

 

[Behavioural finance shows that] if you give someone a choice of, say, a 100% chance that they will get $800,000 or an 80% chance that they will get $1,000,000 and a 20% chance they get nothing, they take the sure thing. Turn that around, a 100% chance of losing $800,000 or an 80% chance that they lose $1,000,000 and a 20% chance of losing nothing, they gamble.  It’s exactly the same question, but it helps client’s understand the difference between being risk averse and loss averse.

 

If you have a chain of four events, each assigned a 90% probability of occurring, the actually likelihood of your expected outcome is actually 66%. Which number are you making your decision on — 90% or 66%?

People have significant challenges when it comes to mental math.

 

Similarly, losses hurt more than gains. A client came in after the tech bust — a retired surgeon, the classic curmudgeon. He said, “I don’t get it, I was up 80% last year, but down 60% this year and I’m under water. Shouldn’t I be up 20%?” Mental math prevents you from realizing that the gain from one year and loss from the next are not on the same basis.

 

BBC Capital: How do you respond to a client who brings you a hot tip or investment idea?

 

[I say]  “I don’t know anything about that, tell me about it.” Then we hear all of the great things that could happen to their money … [then I explain] If it works, you can take an annual cruise around the world. If it doesn’t work, you have to work three more years. This gives them completely different [perspectives].

 

People often confuse certainty and safety. If they tell me “I don’t want to take risk,” I say “Go bury [your cash] in the backyard, but let’s look at the consequences to your life style.” Don’t trust social security? Then keep working. There are consequences to conservative decisions that might make them anything but conservative [choices].

 

 

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Behavior, People and Organizations
ARTICLES AND DISCUSSIONS ON MANAGING AND DEVELOPING PEOPLE AND ORGANIZATIONS ............ Summaries and Key Points are provided to assist followers to quickly grasp essential points.
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Ace the Group Interview

Ace the Group Interview | Behavior, People and Organizations | Scoop.it
You need a different approach when you're being interrogated by a team.
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Why Managers and HR Don’t Get Along

Why Managers and HR Don’t Get Along | Behavior, People and Organizations | Scoop.it
And what both can do to fix it.
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The Business Of Behavioral Economics

The Business Of Behavioral Economics | Behavior, People and Organizations | Scoop.it
Two Harvard professors explain how behavioral economics can help people overcome bad habits and change for the better.
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Rescooped by Terence R. Egan from Doing Business in China
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The Chinese Military's Awkward New Recruitment Video

The Chinese Military's Awkward New Recruitment Video | Behavior, People and Organizations | Scoop.it
It's a sign of the apocalypse -- or just trouble finding recruits. On July 27, China's Ministry of Defense promoted on its homepag...
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The troubling flaws in how we select experts

The troubling flaws in how we select experts | Behavior, People and Organizations | Scoop.it
Sadly, it's human nature to overlook the talent nearest you and think an outsider can save the day.
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Millennials Don't Want to Climb the Traditional Ladder

Millennials Don't Want to Climb the Traditional Ladder | Behavior, People and Organizations | Scoop.it
SPONSORED CONTENT: The sequence of a career used to be so simple.
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How to Overcome The 6 Most Toxic Employee Behaviors

How to Overcome The 6 Most Toxic Employee Behaviors | Behavior, People and Organizations | Scoop.it
Identify, prevent, and get rid of the most toxic of workplace behaviors forever.
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What It Will Take to Fix HR

What It Will Take to Fix HR | Behavior, People and Organizations | Scoop.it
The CHRO role is where the CFO role was 30 years ago.
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Ace the Group Interview

Ace the Group Interview | Behavior, People and Organizations | Scoop.it
You need a different approach when you're being interrogated by a team.
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Why Swedish men take so much paternity leave

Why Swedish men take so much paternity leave | Behavior, People and Organizations | Scoop.it
ALONG with its Nordic neighbours, Sweden features near the top of most gender-equality rankings. The World Economic Forum rates it as having one of the narrowest...
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Hobby Lobby and Employment Discrimination

Hobby Lobby and Employment Discrimination | Behavior, People and Organizations | Scoop.it
In the image above, President Obama signs executive orders July 21, 2014 meant to protect homosexual employees from federal workplace discrimination. (Photo Credit: AP). The Washington Post reported July 8 that the ...
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Rescooped by Terence R. Egan from 21st Century Learning and Teaching
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A Comprehensive Checklist of The 21st Century Learning and Work Skills

A Comprehensive Checklist of The 21st Century Learning and Work Skills | Behavior, People and Organizations | Scoop.it

A Comprehensive Checklist of The 21st Century Learning and Work Skills.

 

Learn more:

 

http://gustmees.wordpress.com/2014/07/10/education-collaboration-and-coaching-the-future/

 

http://gustmees.wordpress.com/2013/05/25/so-whats-the-change-for-teachers-in-21st-century-education/

 


Via Gust MEES
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Alfredo Corell's curator insight, July 18, 1:57 AM

The University of Toledo have developed this exhaustive checklist about skills of our century (some importants like digital citizienship are also missing)


Have a look and also in this link and also finde some explanations about 9 selected skills

Javier Antonio Bellina's curator insight, July 19, 6:14 AM

¿Le habrán echado una mirada en el MED (MINEDU) a ésto ...? Si no, es el momento.

Philippe-Didier Gauthier's curator insight, July 19, 9:55 PM

#Compétences pour le XXIe siècle.  Très exhaustif, mais peu contestable. Le nouveau référentiel sur les compétences de base est toute même plus simple et facile à appréhender. Sans doute faudra -t il passer un jour des compétences à des concepts plus évolués de  "conscience" ...

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France Upholds Ban on Burqas

France Upholds Ban on Burqas | Behavior, People and Organizations | Scoop.it
Read through Sara Lone’s analysis below and then take our poll – do you agree with the ban? On July 1, France declared victory when the European Court of Human Rights upheld a ban on wearing full-face veils in public. The ban was introduced in 2010 and weaved its way through the French Parliament with […]
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Should Employers Ban Email After Work Hours?

Should Employers Ban Email After Work Hours? | Behavior, People and Organizations | Scoop.it
Only if they're clueless about engagement.
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What Does HR Look For in HR?

When interviewing potential new hires, HR professionals assess candidates against a list of key skills and personal characteristics needed for the job to be done efficiently. However, what skills
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The lies people tell on a resume

The lies people tell on a resume | Behavior, People and Organizations | Scoop.it
We all know the story of the little boy whose nose would grow every time he told a lie. But Pinocchio is harmless right? But if he wasn’t a little boy – what if he was a candidate applying for a role
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Why Did Someone Else Get YOUR Promotion?

Why Did Someone Else Get YOUR Promotion? | Behavior, People and Organizations | Scoop.it
Early in my career I witnessed what I deemed to be travesties of justice as my colleagues were promoted ahead of me. So focused on how seemingly unfair these outcomes were, never once did I consider
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Hedge Funds Run by Women Outperform Those Run by Men

Hedge Funds Run by Women Outperform Those Run by Men | Behavior, People and Organizations | Scoop.it
Is it because women are more averse to risk?
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One Reason Women Fare Worse in Negotiations? People Lie to Them.

One Reason Women Fare Worse in Negotiations? People Lie to Them. | Behavior, People and Organizations | Scoop.it
When my 1998 Volvo finally broke down last year, my first worry was not about being carless, but about my impending trip to a car repair shop. It’s a common stereotype that women don’t know much about cars, and while there are plenty of car-savvy women, I’m not one of...
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Don't Try to Read Your Employees' Minds

Don't Try to Read Your Employees' Minds | Behavior, People and Organizations | Scoop.it
Your emotional intelligence might not be as good as you think.
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Win Over an Opponent by Asking for Advice

Win Over an Opponent by Asking for Advice | Behavior, People and Organizations | Scoop.it
Asking for help can be a form of conversational judo.
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Star Fujian student denied admission to university because she's disabled

Star Fujian student denied admission to university because she's disabled | Behavior, People and Organizations | Scoop.it
A handicapped girl from Zhangzhou city, Fujiang province who scored 549
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Yahoo Exec Accused Of Sexual Harassment

Yahoo Exec Accused Of Sexual Harassment | Behavior, People and Organizations | Scoop.it
Prominent Yahoo executive Maria Zhang filed a defamation complaint Wednesday against a former female employee who sued her for sexual harassment and subsequent wrongful termination. In her filing, Zhang called Nan ...
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In China, Coca-Cola Offers Extra Pay for Pollution

In China, Coca-Cola Offers Extra Pay for Pollution | Behavior, People and Organizations | Scoop.it
Coca-Cola Co. now offers environmental hardship pay for employees in smog-afflicted China.
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Overtly Religious Work Environments.

Overtly Religious Work Environments. | Behavior, People and Organizations | Scoop.it
Experiencing an ethical dilemma? Need advice from a humanist perspective? Send your questions to The Ethical Dilemma at dilemma@thehumanist.com (subject line: Ethical Dilemma). All inquiries are kept confidential. Resigned to Faithlessness: I have separated from an employer due to differing religious opinions. My employer found out from a co-worker that I was not a believer […]
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