You are not perfectly rational, and you never have perfect information, with which to make decisions.
Classical economics makes two flawed assumptions:
- We humans are perfectly rational.
- We have perfect information.
Neither is true, of course.
You and I are rational, but none of us is perfectly rational. Perfectly rational would be emotionless. Are you a Star Trek fan? If you are, you know that Vulcans are (almost) perfectly rational. And you know that their lack of emotion causes them a lot of trouble. Perfectly rational is not desirable.
We never have perfect information. Even if the information we have is perfectly accurate, it’s never complete. Former Secretary of Defense Donald Rumsfeld famously said, “There are known knowns; there are things we know we know. There are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns; the ones we don’t know we don’t know.”
In the 1970’s, two imperfect psychologists, Daniel Kahneman and Amos Tversky, with imperfect information, recognized these two flaws in economics and set out to make economics more useful by infusing it with psychology. The result was Behavioral Economics. Economics helps people make good decisions. Behavioral Economics makes it work in reality, not just in theory. (Kahneman won the Nobel Prize in Economics in 2002, and his collaborator Richard Thaler won it in 2017. Unfortunately, Tversky died young. The Nobel is not awarded posthumously).
You have a supercomputer in your skull. It’s so powerful and complex; we still don’t understand how it does what it does. But in 1990, we got closer to understanding. The invention of Functional Magnetic Resonance Imaging (FMRI) made it possible to map brain activity in real time. This led to insights regarding the relationship between how the brain works (neurology) and how we behave (psychology).
After physical needs, the next most important human need is for belonging. Your interactions with other people (sociology) effect everything. You tend to be like the people with whom you spend the most time. We each do.
You are trapped in a physical body. How it functions (physiology) effects everything.
So by adding together economics, psychology, neurology, sociology, and a little physiology, we get Behavioral Science. Behavioral Science gathers data, through rigorous research, on why we humans do what we do, and how we can do more of what we want to do. Not just theory, tools, techniques, and information you can immediately apply. In other words, how you can achieve more of what you want to achieve. And ultimately, how you can increase your satisfaction, fulfillment, and contentment.
Engaged Banker eXperience delivers many strategies, from behavioral science, to all of your bank’s employees, in bite-sized bits, in every learning style, using spaced repetition and synchronous communication. In other words, in a way every person can easily absorb and immediately apply, to their individual success and to the success of your bank.