Are you looking for an intriguing topic? You might find it in a report prepared by the staff of the Ontario Securities Commission. This detailed and elaborate study was conducted to better understand people’s behaviour when making decisions, primarily financial decisions. The report elaborates on Behavioural Insights gleaned from psychology, economic and other research and had this to reveal in its executive summary.
There are numerous factors that influence the decisions that people make. Behavioural insights (BI) recognizes this and, through a combination of psychology, economic and more recently other behavioural research, examines how people are often neither deliberate nor rational in their decisions in the way that traditional models, strategies and policies assume.
We need to ask ourselves these questions: “Are we like this? Are we really non-deliberate and irrational with our decisions?
Gaining a Better Understanding
The primary focus for this study was to offer consideration and clarity in the development of new government and regulators’ policies. When policy makers are able to better understand people’s actions, choices, and thinking, they are more apt to design effective guidelines to protect them.
This leads to another question: “Do we believe we always make the best decisions for ourselves?”
To gain a better understanding of our own actions, choices, and thinking, we could create a flowchart. This method, which offers explanations for our “Yes” and “No” answers, may look like this.
If the answer is “Yes”, I assume we may do the following to support our decisions.
- All the options would be weighed in favor of one direction or the other. The costs are calculated. The “what-if’s” are considered: “Can we afford to wait if we don’t do it now?” Most importantly, have we considered whether this is the right decision for our family? Is this a “gamble” or a “sure thing”? Here are some examples: moving to a different province, trading a less-than-a-year-old vehicle for a new one because of mechanical issues, or retiring now or waiting two more years to receive the full-retirement benefit.
If the answer is “No”, I assume we would understand the impact of our decisions. Perhaps we are not prepared to make the best decisions, when…
- We are uncertain and a decision needs to be made. We likely could make the wrong choice. We could also be forced to rely on someone’s expertise but we would need to trust their expertise.
- We are rushed and a decision needs to be made. We might feel backed into a corner and cave into gut instincts.
- We are pressured and a decision needs to be made. A deal might be on the line. Depending on our response the deal may be a “make” or “break” situation…a sale, a commitment, or a partnership agreement. We may be forced into a “deal” or “no deal”.
- We are people pleasers and a decision needs to be made. We are placed in the worst spot because we are inclined to avoid offending. For example, we could do the irrational thing and jeopardize our credit by co-signing a loan for a family member.
And of course, we can always stand on middle ground by being indecisive. This approach really doesn’t get us very far with our decisions. We may know someone who does this; and we would rather not act or react in the same way.
When we find ourselves making inappropriate decisions, then we may need to slow down and evaluate our reasons. If the government and regulators are concerned about people’s behaviour; and experts are digging for explanations to examine and explain how consumers make decisions, then we also need to take notice of how we make decisions. We need to evaluate…
How do we deliberately and rationally decide to buy a new vehicle or to retire?
How do we deliberately and rationally decide to change careers or build a new home?
How do we deliberately and rationally decide to ___________ (Fill in the blank with a decision you currently face.)
What affects our decisions today that were not present a year ago, a month ago, or even a day ago?