Aug 29, 2024
In this episode of The Brainy Business podcast, Melina Palmer welcomes Alex Edmans, author of May Contain Lies, to discuss the fascinating intersection of finance, behavioral economics, and misinformation. Alex, a professor of finance at London Business School with a Ph.D. from MIT, delves into the impact of emotions on the stock market, using intriguing examples from his research, including the emotional effects of international sports results on stock market behavior.
Throughout the conversation, Alex and Melina explore the broader implications of emotional influences on decision-making in both personal finance and business contexts. They discuss the dangers of confirmation bias and black-and-white thinking, and Alex offers practical steps to overcome these biases. He also introduces his concept of the "ladder of misinference," illustrating how statements, facts, data, and evidence can be misinterpreted or misrepresented, leading to misleading conclusions.
In this episode:
00:00:00 - Introduction
Melina introduces Alex Edmans, author of May Contain
Lies, and outlines the episode's focus on emotions,
decision-making, and misinformation.
00:01:45 - Alex's Background
Alex shares his background in finance and behavioral economics,
emphasizing his passion for conveying academic insights to a
general audience.
00:06:10 - Dissertation Research
Alex discusses his dissertation on the impact of emotions,
particularly sports results, on the stock market, highlighting the
significant emotional effects on trading behavior.
00:12:55 - Broader Implications
Melina and Alex explore the broader implications of emotional
influences on decision-making in personal finance and business,
emphasizing the importance of acknowledging and managing
emotions.
00:19:15 - Confirmation Bias
Alex explains confirmation bias and its impact on how people
respond to evidence and data, using examples from sustainable
investing and other fields.
00:26:30 - Black-and-White Thinking
Alex introduces black-and-white thinking as a twin bias to
confirmation bias, illustrating how extreme viewpoints can
overshadow nuanced understanding.
00:34:45 - Ladder of Misinference
Alex outlines the "ladder of misinference," explaining how
statements, facts, data, and evidence can be misinterpreted,
leading to misleading conclusions.
00:43:10 - Practical Tips for Individuals
Alex offers practical tips for individuals to overcome biases,
including imagining the opposite result to challenge confirmation
bias.
00:46:00 - Conclusion
What stuck with you while listening to the episode? What are you
going to try? Come share it with Melina on social media -- you'll
find her as @thebrainybiz everywhere and as Melina Palmer on
LinkedIn.
Thanks for listening. Don’t forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show.
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