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The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics

May 31, 2019

This has been an amazing month as I spoke at eight different events across the country on 6 different topics, from pricing to change management, why consumers are weird and how behavioral economics is the future of branding. I love speaking at events like this and want to welcome all of you who are joining the podcast after hearing me speak at one of those events. I had so much fun getting to know and interact with many of you, and want to thank you for listening. Welcome to The Brainy Business Family!

What do I mean when I talk about “selective attention” biases? If you have been listening to the series so far, you know we have talked about how our brains are biased toward ourselves, the way we think about others, our memories, and past versus future. Today, we are going to dig into all those biases that have to do with how we focus our attention and how that can color our impression of the world around us.


Show Notes:

  • [00:04:25] We are going to dig into all those biases that have to do with how we focus our attention and how that can color our impression of the world around us.
  • [00:05:34] I have broken selective attention into three categories: where we focus our attention, how that impacts the decisions we make, and how it colors our perception when looking back.
  • [00:05:54] The most common concept and one I am guessing you are very familiar with even if you don’t know the name of it, is called the frequency illusion, selection bias or the Baader-Meinhof effect. This is where after something comes to our attention it seems to be everywhere.
  • [00:07:30] The recency illusion which would be if I thought the phenomenon of the word “panacea” being everywhere is because it is a brand new word everyone has just started using (instead of a word that was recently introduced to me).
  • [00:08:30] This is similar to availability, which was the focus of episode 15. We humans put more weight and importance on things we can recall easiest.
  • [00:09:43] This can lead to the availability cascade, which is a self-reinforcing process where hearing and seeing something more and more makes it feel more and more true or real.
  • [00:10:14] Once we become familiar with things or concepts, we are much more likely to like or believe them because of the mere exposure effect.
  • [00:10:53] Selective perception is when our expectations impact the way we perceive things. For example, if you expect a sales call to go badly, it probably will.
  • [00:11:53] This is very similar to attentional bias, which is when our perceptions are impacted by recurring thoughts and the focusing effect, which is when we place too much importance on one aspect of an event.
  • [00:14:12] The Von Restorff effect, is where something that sticks out is more likely to be remembered than everything else.
  • [00:16:09] Due to the rhyme as reason effect, we believe statements that rhyme to be more truthful than those that don’t.
  • [00:16:45] Due to the belief bias, we also base the logical strength of an entire argument on the believability of the conclusion.
  • [00:17:26] We also tend to focus on specifics and think they are more likely to happen than general conditions because of conjunction fallacy.
  • [00:18:39] Base rate fallacy or base rate neglect, where we tend to ignore generic or general information (also known as base rate information) to focus on more specific information that only pertains to a certain case.
  • [00:20:13] Exaggerated expectation is where people tend to predict and expect more extreme outcomes than what actually happen.
  • [00:20:46] DECISIONS MADE: Our brains get what they expect. Because of the Semmelweis reflex, people tend to reject new evidence that contradicts their perspective, paradigm, or expectation.
  • [00:21:27] Experimenters or expectation bias is the tendency for someone to believe, certify, and publish data that aligns with what they expected to see.
  • [00:22:46] Illusory correlation is when someone will inaccurately perceive a relationship between two unrelated events.
  • [00:23:40] Subjective validation ​is where someone sees something as being true if their previous beliefs demand it to be true.
  • [00:24:09] Biases can lead to the backfire effect or the continued influence effect, which is when someone will disconfirm evidence that is presented by strengthening their previous beliefs. We also suffer from confirmation bias, which is when we search for, interpret, remember or focus on information that confirms our preconceptions.
  • [00:25:16] The size of the space being searched can cause the researcher to observe something statistically significant that actually wouldn’t be if the parameters had been set correctly because of the look elsewhere effect. This is similar to congruencies bias, where someone will directly test their hypotheses instead of testing possible alternatives.
  • [00:27:25] Information bias is when we keep seeking more and more information even when it can’t affect our actions. Distinction bias is when you are comparing two things at once you are more likely to see what is different about them (than if you evaluate each on its own).
  • [00:28:51] Due to hindsight bias or the “I knew it all along effect” we tend to see past events as being more predictable than they actually were.
  • [00:29:22] Outcome bias is when we judge a decision based on the outcome instead of the quality of the decision.
  • [00:29:57] The misinformation effect is where memories are less accurate because of information that comes about after the event is over.
  • [00:30:20] Consistency bias is where you remember your past attitudes and behavior as in alignment with the way you think and feel now (even if you didn’t feel that way at the time).

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