This past week, I had the unique opportunity to attend and hear Daniel Kahneman discuss his best-selling book, Thinking, Fast and Slow, during a speaking engagement that took place at a Barnes and Noble Bookstore in New York City. Many of you may be familiar with the Nobel Prize-winning psychologist and his ground-breaking work with Prospect Theory and behavioral economics. His most recent book addresses two modes of human thought: the quick, emotional kind and the pondering, logical type. In the book, Kahneman shares his views around several heuristics and biases from anchoring to framing to, of course, loss aversion. But during his discussion at this New York City event, it wasn’t what was written in the book that captured my attention as more the learning lessons he conveyed from his own life experiences.
While there were several fascinating anecdotes Daniel shared with the audience that night, there are two points I found of particular interest and unexpected. One is what he believes captured the attention of the public in his early studies of psychology and second is what he feels is an error in our society with the pursuit of measuring happiness.
How do you challenge rationality in the face of hardline economists?
The moderator asked Mr. Kahneman about the early impact of his work and why others experienced such a profound curiosity in his field. Kahneman attributes the interest in his research and behavioral economics as a direct result of HOW the study was published in Science magazine many years ago and perhaps not as much on the content.
The way we presented on the theory was by having questions in the body of the text…which means the reader can appreciate their own reaction to the question as they [experience] making the errors something that they experience [too]…it’s the fact that they are prone to make errors and they come to recognize it. It is a personal experience and a personal response. This [written] work had more impact than most other psychological work at the time because there is hardly any other psychology studies [published] that will generate from the reader of your paper a personal experience that validates what you are conveying.
We thought we were writing in a fun way to write, but it turned out to be the key to the impact of the theory.
Unbeknownst to Kahneman was the profound concept of “framing” in the way he conveyed his own research—the simplicity of introducing a study in terms of dialogue. Is this not where we find the field of marketing today? We once categorized marketing as either a push or pull strategy, but it has been replaced by the conversation age, which has proven to be far more impactful when it comes to building relationships with customers (or in Daniel’s case, interest in his readers). Think about marketing today and your own personal experiences; it’s all about dialogue. Tell me one company in one industry that does not have a social media plan in place seeking to engage consumers in a conversation.
Stop Focusing on Happiness
The second revelation during Kahneman’s discussion was his view on using measures of happiness as an alternative to economic measures on societal progress. He sees a fundamental issue with regard to how we spend a great deal of time, energy and money on the pursuit of happiness.
I think the focus on happiness is misguided and I think the focus on happiness in part is an accident of language. We measure length and not shortness, we measure depth and not shallowness, and we only see in dimensions that are marked on the one side we are thinking of. We should be measuring suffering. And we should act as a society to reduce suffering… I am much less concerned about happiness and [in favor of] reducing human suffering.
Based on the round of applause he received in response, I think the general audience would tend to agree. Kahneman expressed these thoughts on the coattails of how society would reap greater benefits if we put more effort toward such an endeavor. I cannot help but put on my own behavioral finance spin on these sentiments. I believe that many people exclaim that they are in the pursuit of wealth (which they may equate with happiness and what money can buy), but maybe all they really want is not to be poor (and avoid financial suffering and the inability to acquire essential needs)?
Of course this is a leading question, but hey, the idea is to be engaging, enrich the conversation, and hopefully have others share their personal views.
Joel L. Franks is a Behavioral Finance and Financial Marketing Professional. His background in behavioral economics and his extensive experience in banking, brokerage and insurance has enabled him to combine both the science and the art of creating innovative marketing strategy, create positive customer experiences and the ability to sell more product, to more people, more often.