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

Jun 28, 2019

Today is our last episode in the series on biases – and the last episode of the first year of the podcast! Can you believe it? A whole year of behavioral economics and business. A lot has happened over this year and I look forward to sharing that in next week’s anniversary episode.

Today’s episode closes out the series on biases by talking about our brains’ penchant for novelty and story. You probably know that people remember better when they hear stories, and that they pay more attention, but this will explain the concepts of our brain that make it the case for everyone - and how you can use it in your business to be more effective.

Show Notes:

  • [04:00] Our brains like things that stick out or are different. This is called the bizarreness effect because things that are bizarre are remembered better than more common stuff.
  • [05:13] We are also more likely to remember funny things compared to those that are not humorous due to the humor effect.
  • [06:32] Incorporating humor into messaging is not always easy. If it is not done right and feels staged it can be detrimental to any brand.
  • [07:32] Due to pareidolia our brains are primed to see faces in pretty much everything. No matter how vague or random the stimuli, it can be seen as significant when our brain gets a hold of it.
  • [08:14] Illusory correlation is an inaccurate memory about the relationship between two different things.
  • [09:17] Seeing faces on houses, trees, cracks in the sidewalk or whatever else (pareidolia) are deeply rooted in our love of story and of novelty.
  • [10:51] Our brains’ appreciation for stories impacts so much of everything we do. We often tell ourselves stories about other people because it helps us to understand them.
  • [11:07] Due to the empathy gap, we are likely to underestimate how much feelings will influence decisions and how strong they can be – this occurs both for ourselves and for other people.
  • [12:48] Due to the identifiable victim effect, people tend to have a lesser response to a large group of people than they do to a single person.
  • [13:58] Giving a specific story can help form a picture in their brain, which means they are more likely to remember you in the future.
  • [14:39] Survivorship bias is a way we can remember and focus on those who survived and ignoring everything else because it is less visible. 
  • [16:14] If you are not thinking about where survivorship bias could be impacting your analysis, you could be doing a huge disservice to your business.
  • [16:33] The just world hypothesis is where we want to believe the world around us is fundamentally just, and we will rationalize some injustice that is otherwise inexplicable as being deserved by the victim.
  • [17:20] Moral luck is the tendency for someone to use the outcome of an event to assign moral standing even when it is likely unrelated.
  • [18:07] Authority bias is where we are more likely to believe and be influenced by the opinion of someone in authority.
  • [20:35] The Ben Franklin effect shows that if we have done a favor for someone, we are more likely to do a second favor for them.
  • [22:03] Social desirability bias is where we want others to see us in the best possible light, so we will likely overreport our own socially desirable behaviors and characteristics, while we will under report them for everyone else.
  • [22:30] The courtesy bias is where we share opinions that are more socially acceptable than our true thoughts and feelings so we do not offend anyone.
  • [22:47] Because of omission bias we will judge actions (also known as commissions) more harshly than inactions (or omissions) even if they are more harmful than taking an action.
  • [24:18] The backfiring effect is when we have done something good, and are therefore more likely to allow ourselves to do something bad.
  • [25:33] The stories we tell ourselves are impacting the decisions we make all the time, and it doesn’t have to be as dramatic as these studies have made it out.
  • [25:56] Once you understand how these biases impact you and your life, think about how it impacts the opinions others have of you (and you have of others). Then think about how understanding them can help you to make better decisions.
  • 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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