Track b roller

  • 83 views
Uploaded on

 

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads

Views

Total Views
83
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
3
Comments
0
Likes
1

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Financial Decision Making 7 Reasons & 4 Truths Face of Finance 2013 Colleen Roller
  • 2. This presentation   7 reasons why financial decision making is difficult 4 truths about how people evaluate options and decide
  • 3. Areas of research  Behavioral decision theory   Cognitive psychology   The study of how people decide, and what affects the decision making process and decision outcomes The study of how people perceive, think, remember and learn Usability & UX Design  The science/art of creating successful design experiences
  • 4. Why financial decision making is difficult 7 REASONS
  • 5. 7 reasons: reason 1 AMBIGUITY
  • 6. The future is unknown      Health Financial situation or needs Cost of living Performance of investments/markets State of the world/economy
  • 7. It’s a gamble  No guarantee that what we save today will ever come back to us
  • 8. 7 reasons: reason 2 TEMPORAL DISTANCE
  • 9. The future    Ability to envision the future depends on how far away it is The distant future is abstract Hard to plan for the abstract
  • 10. 7 reasons: reason 3 NO DEADLINES
  • 11. Easy to procrastinate   No definitive deadlines Saving is easily postponed without immediate penalty
  • 12. 7 reasons: reason 4 INERTIA
  • 13. Inertia    Hard to get started Easy to maintain status quo Aversion to ‘work’ or effort
  • 14. Inertia
  • 15. 7 reasons: reason 5 THE REWARD SYSTEM
  • 16. Action / consequence   When I save, I incur pain today When I don’t save, I get rewarded today!
  • 17. 7 reasons: reason 6 CHOICES
  • 18. Choices   Limited financial domain knowledge Too many choices    Need to make the right choice Fear of making the wrong choice My needs are unique
  • 19. Paralysis  Paralysis leads to no choice
  • 20. 7 reasons: reason 7 OVERCONFIDENCE
  • 21. Above average  People are inherently confident and optimistic
  • 22. Bottom line  It’s really hard to make good financial decisions!
  • 23. How people evaluate options and decide 4 TRUTHS
  • 24. How people assess value COMPARISON
  • 25. Compelling comparison
  • 26. You need a loan…
  • 27. No comparison required
  • 28. Saving for retirement
  • 29. Designing for comparison
  • 30. Graphical comparison Toothpaste A Toothpaste B 0 5 10 15 20 25 30 35 Number (per 5000) suffering serious gum disease E.R. Stone et al. 2003
  • 31. Graphical comparison Toothpaste A 30 out of 5000 Toothpaste B 15 out of 5000 E.R. Stone et al. 2003
  • 32. Comparison and UX Design    Are you designing for comparison? What is the reference point? What is salient?
  • 33. Perception of GAIN V. LOSS
  • 34. Loss is painful
  • 35. ‘Painless’ saving
  • 36. The reference point
  • 37. Gain/Loss & UX Design   The reference point defines gain/loss Minimize the pain of loss
  • 38. How something is presented FRAMING
  • 39. Framing  Which would you prefer?   Meat that is 90% fat free Meat that is 10% fat
  • 40. Rates of return  Choose between two investment funds – stocks v. bonds   First group shown 1-yr rates of return Second group shown 30-yr rates of return Benartzi/Thaler, 2001
  • 41. Movie rental Example 1 Cost/month New movies/week Plan A $10 7 Plan B $12 9 Cost/month New movies/year Plan A $10 364 Plan B $12 468 Example 2 Burson, Larrick, Lynch 2009
  • 42. Framing & UX Design   Most things can be framed in various ways The frame itself affects perception and decision outcomes
  • 43. Important People do not reframe
  • 44. What captures attention SALIENCE
  • 45. Salience obvious Distinctive prominent
  • 46. Would you visit?
  • 47. Salience
  • 48. Graphical scale Two scholarships are available to you. You prefer to get a scholarship with less waiting time and more money. Of the two scholarships depicted, which one would you prefer? Sun, Li, Bonini 2010
  • 49. Ubiquitous financial info The non-stop flow of information makes people use their apps and tools more. Human brains are wired to process, evaluate and react to information, and the more data fed to your brain about your investments, the more likely you are to react, when just standing there would be better. Investors need to know that accessing their financial information all the time will break down their investment discipline and undermine their long-term plan.
  • 50. Salience & UX Design    Makes info concrete Drives attention/focus What is most salient in your design?
  • 51. 4 powerful truths Attention & focus Perception & meaning Decision outcomes
  • 52. The design matters There is no neutral design
  • 53. Equal length?
  • 54. Equal length?
  • 55. Context matters
  • 56. 7 reasons & 4 truths  Colleen Roller  UXmatters.com UX magazine (uxmag.com)  croller520@gmail.com 