Behavior, People and Organizations
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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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Framework for Critical Thinking

Framework for Critical Thinking | Behavior, People and Organizations | Scoop.it
Clear thinking is about asking yourself the right questions. This list of questions is a good starting point for developing ideas and solutions for most problems or issues.
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100 Questions That Help Trainees Think About Thinking

100 Questions That Help Trainees Think About Thinking | Behavior, People and Organizations | Scoop.it

The original title of this article was "100 Questions That Help Students Think About Thinking" by Terry Heick.


This is just as useful to employees and worthy of sharing.


Thanks Terry.

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How To Design Your Time Rather Than Manage It

How To Design Your Time Rather Than Manage It | Behavior, People and Organizations | Scoop.it
Breaking all your tasks into quadrants can help you become more strategic about how you work.
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How To Help Fix Your Employee's Time Management Problem

How To Help Fix Your Employee's Time Management Problem | Behavior, People and Organizations | Scoop.it
You shouldn't have to teach someone to be on time and meet deadlines. But if it's hurting business, then you need to step up to the plate.
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Finding the career you were meant to do

Finding the career you were meant to do | Behavior, People and Organizations | Scoop.it
You don’t “find your calling,” you fight for it — and other lessons from people who found their passion (sometimes late in life). Whether it was during a career aptitude test or in a heart-to-heart…
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How to avoid the risk of group think

How to avoid the risk of group think | Behavior, People and Organizations | Scoop.it
This column is part of Globe Careers’ Leadership Lab series, where executives and experts share their views and advice about leadership and management. Follow us at @Globe_Careers Find all Leadership Lab stories at tgam.ca/leadershiplab.
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12 Recruiting Stats That Will Change The Way You Hire

12 Recruiting Stats That Will Change The Way You Hire | Behavior, People and Organizations | Scoop.it
Hiring can be a difficult and time-consuming process. It can cost a lot of money, and also be extremely successful - for the recruiter and the candidate. H
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The Business Case For Diversity In The Workplace

The Business Case For Diversity In The Workplace | Behavior, People and Organizations | Scoop.it
Did you know that diverse companies outperform non-diverse companies by 35%?1 Besides the many financial benefits, isn’t hiring a diverse workforce the right thing to do? It’s amazing that in 201…
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Dirty dormitories where Apple's iPhone workers lived 'like animals'

Dirty dormitories where Apple's iPhone workers lived 'like animals' | Behavior, People and Organizations | Scoop.it
MailOnline gained exclusive access to the four blocks, which housed migrant workers employed by Apple contractor Pegatron until they were hurriedly abandoned just weeks ago.
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Effective Onboarding to Drive Employee Retention Rates

Effective Onboarding to Drive Employee Retention Rates | Behavior, People and Organizations | Scoop.it
The Power of Effective Onboarding to Drive Amazing Employee Retention Rates https://t.co/ZjvYzuKTcY
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Not All Practice Makes Perfect

Not All Practice Makes Perfect | Behavior, People and Organizations | Scoop.it
In just our fourth session together, Steve was already beginning to sound discouraged. It was Thursday of the first week of an experiment…
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Hiring for Cultural Fit Can Thwart Your Diversity Efforts

Hiring for Cultural Fit Can Thwart Your Diversity Efforts | Behavior, People and Organizations | Scoop.it
Beware the personality silo.
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60 Ways To Help Employees Think For Themselves

60 Ways To Help Employees Think For Themselves | Behavior, People and Organizations | Scoop.it

This article was original published with the title: "60 Ways To Help Students Think For Themselves".


It is also very useful for the workplace and worthy of sharing here.


Thanks to author Terry Heick.

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Why Emotional Intelligence Is a Fast-Growing Job Skill

Why Emotional Intelligence Is a Fast-Growing Job Skill | Behavior, People and Organizations | Scoop.it
Here's why hiring managers say they often value emotional intelligence more highly than IQ.
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Employees’ First Week Critical to Retention

Employees’ First Week Critical to Retention | Behavior, People and Organizations | Scoop.it
More than 40 of turnover happens within the first month, which means it's more important than ever to engage them from day one.
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Problems with Performance Based Pay

Problems with Performance Based Pay | Behavior, People and Organizations | Scoop.it
It was interesting hearing the speaker from AXA yesterday suggesting we need to do away with bonuses. I tend to agree.
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Why Chinese Companies in Africa Are Improving Their Behavior

Why Chinese Companies in Africa Are Improving Their Behavior | Behavior, People and Organizations | Scoop.it
Chinese companies around the world, particularly in Africa, have a well-earned reputation for being bad corporate citizens. There are countless stories of labor rights violations, disregard of environmental policies, and lack of engagement with local communities, among many other allegations. While all of these examples highlight a serious problem in China’s overseas corporate governance, it doesn’t tell the whole story.
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China’s First Transgender-Discrimination Case

China’s First Transgender-Discrimination Case | Behavior, People and Organizations | Scoop.it
An arbitration panel ruled against a transgender man who said he was fired unfairly by his former employer.
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New Kinds of Lenders, Same Old Biases

New Kinds of Lenders, Same Old Biases | Behavior, People and Organizations | Scoop.it
Can alternative financing options create a more equitable system or are they doomed to repeat the same types of discrimination?
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How Do You Survive Office Competition?

How Do You Survive Office Competition? | Behavior, People and Organizations | Scoop.it
Hypercompetitors spark strong reactions in colleagues, from fighting back to shutting down. Are you a worrier or a warrior?
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The Future of Human Resource Management

The Future of Human Resource Management | Behavior, People and Organizations | Scoop.it
News and Opinion from the Fastest Growing HR Network & Conference in the World
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What Are the Top Companies to Work for in 2016? - Indeed Blog

What Are the Top Companies to Work for in 2016? - Indeed Blog | Behavior, People and Organizations | Scoop.it
What are the top companies to work for in America? Indeed analyzes review data on what's keeping employees happy.
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BBC Advertises 'Black, Asian, Or Minority'-Only Positions

BBC Advertises 'Black, Asian, Or Minority'-Only Positions | Behavior, People and Organizations | Scoop.it
A range of British Broadcasting Corporation (BBC) television departments, programmes, and radio stations are currently offering highly desirable, paid internships, but white people are prohibited from applying...
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