2015 04 18 FSF Presentation How Brains Buy

HOW BRAINS BUY
Context Subconscious Non-rational
21 April 2015
London
© alangnewman@yahoo.com

NEWSFLASH 1
CONSUMERS DON’T NEED
TO BE TRAINED IN FINANCE
FINANCIAL SERVICES NEED
TO BE TRAINED IN CONSUMER
alangnewman@yahoo.com

NEWSFLASH 2
The ‘Gap’ isn’t between
knowing and
not knowing.
It is between
knowing and doing.

THREE BIG TRENDS
DIGITALISATION NEUROSCIENCE
(WRONG)

INSIGHTS FROM NEUROSCIENCE
1. MOST OF OUR DECISION MAKING
IS SUB-CONSCIOUS ( ‘SYSTEM 1’ )
2. WE ARE NON-RATIONAL (WE’RE
NOT IRRATIONAL)
3. BRAINS CONTEXTUALISE EVERYTHING
4. BRAINS DON’T DO MONEY

A LONG TIME AGO
Bottleneck about 150,000 years ago.
2,000 to 10,000 humans.
Fast decision making
Incomplete information

PATTERNS & ILLUSIONS

‘FUNCTIONAL LOCALISATION’

3 LEVELS OF ‘PROGRAMMING’
3 Personal. Unique
experiences.
2 Early programming.
Language; culture
1 Shared biology.
(‘Human nature’)

WHAT MAKES YOU, YOU ?
Your ADDICTION, your AGE, being an ALUMNUS of a particular school, your love of
all things APPLE, ARMED SERVICES experience, your AUTISM, your BANKRUPTCY,
having a BUCKET LIST, your activism for a CHARITY, your DIVORCE, DYSLEXIA, being
an ECONOMIST READER, being an ENTREPRENEUR, an EPIPHANY, being a FIRST-
BORN child, FSF membership, your GENDER, your HOBBY, your favourite HOLIDAY
DESTINATION, your INCOME, having LIVED LIFE OVERSEAS, your JOB, you’ve run
the LONDON MARATHON, your LONG TERM ILLNESS, your MARITAL STATUS, being
a MILLIONNAIRE, being a PARENT OF TWINS, your PhD, your PHOBIA, your PLACE
OF BIRTH, your POLITICAL BELIEFS, your POSTCODE, your PROFESSION, your
RELIGION, being SELF-EMPLOYED, your SEXUALITY, your SIZE, your SOCIOPATHIC
streak, your STAR SIGN, your love of VINTAGE CARS, your WEALTH, something else?

OCEAN (Big 5 Personality Test)
OPENNESS
CONSCIENTIOUSNESS
EXTRAVERSION
AGREEABLENESS
NEUROTICISM

BRAINS DO CONTEXT
At what price
does a bottle
of wine
become
expensive?
Is £500 a lot
of money?
Are you well
paid?
I didn’t know
what happiness
was until I got
married .
Are you
lucky?
Are you
happy?

BRAINS DON’T DO MONEY
Modern human brain
125,000 Years ± 25,000
Money is 2,500 to 10,000 Years Old
(Depending on your definition)
Greek arrowhead money 600 BC
Lydian coins 700 BC

HABITS & BIASES

BRAINS AND TIME
Hyperbolic
discounting
HOW LONG IS
LONG TERM?
“The future
is what we
make it”
“What will
be will be.”

THAT’S ALL VERY WELL, BUT . . .
 We are Non Rational
 System 1 > System 2
 Brains are pattern recognition and habit machines
 Knowing doesn’t make much difference
 Brains don’t do money
 Brains and time: important and complicated
• What’s the bottom line ?

THAT’S ALL VERY WELL, BUT . . .
 We are Non Rational
 System 1 > System 2
 Brains are pattern recognition and habit machines
 Knowing doesn’t make much difference
 Brains don’t do money
 Brains and time: important and complicated
• If we want to influence behaviour we change
the context and not the people.

MINDSPACE
It has helped to improve tax
collection.
It has helped reduce the
incidence of smoking.
It has helped increase the
uptake of home insulation.
(But there can be unintended
consequences)

CIALDINI - RASCCaL

WHO’S USING Ψ & BE TODAY ?
Amazon (Behavioural data → Algorithms; Norming)
Amigo loans (Time, Norms, Authority)
Crowd funding sites (Norms)
Facebook (Messenger; Norms; Salience)
Friendsurance (Messenger, Norms)
Orlov (Reciprocity)
Venmo (Norms; Salience)
Wonga (Incentives; Time)
Zopa (Reciprocity; Consistency; Scarcity; Time; Norms)

SO WHAT ?
THE FUTURE BELONGS
TO ORGANISATIONS . . .
THAT ARE DATA SAVVY
AND BEHAVIOUR SAVVY
IS YOURS ONE OF THEM ?

THANK YOU
HOW BRAINS BUY
21 April 2015
London

2015 04 18 FSF Presentation How Brains Buy

2015 04 18 FSF Presentation How Brains Buy

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