John Howe, How to Make Better Decisions Despite Our Biases – InnovaBuzz 334
John Howe, The Foolish Corner
In this episode, I’m really excited to have as my guest, John Howe who is Professor of Finance and Missouri Bankers Chair at the University of Missouri – Columbia (MU). He has been a visiting scholar at the University of Cambridge (U.K.) and Queensland University of Technology (Australia), and has taught courses for the banking group UBS (Switzerland).
John’s research interests including behavioral economics, corporate governance, and banking. He has published extensively in the major journals in finance and accounting, and his book The Foolish Corner: Avoiding Mindtraps in Personal Financial Decisions, deals with behavioral economics which can have applications in all areas of our professional and personal lives.
In our discussion, John and I talked about:
- Survivorship bias and confirmation bias and how biases can get in the way of objective assessments in marketing
- The idea of a pre-mortem assessment of ideas, to increase the likelihood of success
- How to re-frame situations and the way we look at them to make better decisions despite our biases
Scott Christianson in episode 279 introduced us to John.
Listen to the podcast to find out more.
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Show Notes from this episode with John Howe, author of The Foolish Corner
Key points and takeaways from this episode include:
- Behavioural Economics is the intersection between economics and psychology.
- There’s a lot less predictability in the world than anyone would admit to.
- To be biased means to be descriptive.
- Survivorship bias is how we look out into the world for survivors or successful people and try to do what they did to become successful in hopes that we will be successful too. However, things that have worked in the past, do not really tell us a lot.
- It is difficult to predict something, especially about the future.
- The key to good decision making is to be consciously focused on things.
- Biases tend to be subliminal. They tend to be more subconscious. The key to better decision making is to first be aware that biases exist.
- One way to think about getting a different view or a more balanced view is to look at a new source that makes you feel uncomfortable that does not jive with your worldview. Step outside of your beliefs and get a little uncomfortable.
- Confirmation bias is one of the most well-established biases that exists. We are all wired to be articulately attuned to news or information that is comforting to us and supports our worldview.
- Framing is all about how information is presented to people. Make it a point to frame things in a positive way.
- Part of confirmation bias is when we consciously and unconsciously frame information to ourselves as we think about the world.
- Framing is a very important part of marketing.
- Pre-mortem is a thought experiment where before launching an idea, a product, or a marketing campaign, we think and ask ourselves what could go wrong with it, which of these things are under your control and which ones are not.
- Every new project has some risks. It’s all about mitigating the risks we can control and deciding whether we should move ahead or not.
- Pre-mortem is a valuable tool that can be used for launching almost any kind of endeavor.
- Our decision making is not as good when we are under stress.
- Entrepreneurs are optimists by nature and tend to be very confident by nature. Spread your risks a little bit.
The Buzz – Our Innovation Round
Here are John’s answers to the questions of our innovation round. Listen to the conversation to get the full scoop.
- #1 thing to be more innovative – Have an improv mentality. Think free. Don’t take no for an answer. Set aside time to be bored and see where your mind takes you.
- Best thing for new ideas – Set aside some bored time. Read things outside of your field.
- Favourite tool for innovation – My colleagues and BBC.
- Keep project/client on track – Figure out the goal and break things down into doable steps with accountable deadlines.
- Differentiate – Think about your messaging and target audience. Be creative with some of your outreach but test first. Don’t assume that just because it’s unusual or bizarre, it is going to catch on.
To Be a Leader
Be open minded. Seek out additional information or alternative views. It’s easy to say but difficult to do because seeking out an alternative view sometimes requires admitting that we might be wrong. It’s uncomfortable, however, you are going to make more progress if you are uncomfortable at least some of the time.
You can reach out and thank John through his email.
- The Foolish Corner: Avoiding Mind Traps in Personal Financial Decisions
- Factfulness: Ten Reasons We’re Wrong About the World–and Why Things Are Better Than You Think by Hans Rosling
Cool Things About John
- He has won numerous teaching awards, including the William T. Kemper Fellow for Excellence in Teaching.
- He has taught at all levels including the executive MBA.
- He has published extensively in the major journals in finance and accounting, and has more than 70 publications in peer-reviewed journals.