Secrets of the Moneylab: How Behavioral Economics Can Improve Your Business
Kay-Yut Chen, Marina Krakovsky
Format: PDF / Kindle (mobi) / ePub
Taking the findings of behavioral economics from the cocktail party to the boardroom.
Experimental economist Kay-Yut Chen leads an economics lab at Hewlett- Packard-the first of its kind at any company. His groundbreaking research into human behavior has turned into tangible results for HP. He has saved the company millions of dollars, simply by explaining why people really do the things they do. MoneyLab offers practical lessons being put to use right now at HP and other leading companies. It explains, for instance, how to:
? Use incentives to influence employees, suppliers, and buyers
? Determine whom to trust, and how much
? Reduce the negative effects of irrational behavior by noticing patterns that don't seem logical
? Take advantage of the human tendency to game the system
In the spirit of Predictably Irrational, but with a more practical approach, Chen shows how to translate the findings of behavioral economics into concrete actions to achieve new levels of success.
(graduated and reciprocated initiatives in tension reduction), the essence of which is for one side in a conflict to make a small concession and ask the other side to do the same. (In most conflicts, in contrast, neither party typically wants to make a concession, with each expecting concessions from the other side first.) For more information, see Svenn Lindskold, “Trust Development, the GRIT Proposal, and the Effects of Conciliatory Acts on Conflict and Cooperation,” Psychological Bulletin,
calculators doing paying people to play these games? As a reporter, Marina carried a license to ask nosy questions. When she approached the man who’d run the experiment, he handed her his card: “Kay-Yut Chen, Principal Scientist, Decision Technology Dept.”2 Kay-Yut, it turned out, wasn’t just running that day’s experiment—he had started the whole lab, right after finishing his PhD in economics at Caltech. Not only that. HP’s lab was the first-ever experimental economics laboratory inside a
get a better deal somewhere else. Finally, knowing that emotions can be a powerful force for decision making, avoid situations where your emotions will reign. For example, give yourself time to deliberate on a deal; you’ll be less likely to decide based on anger and spite—and more likely to make a good decision. The Acid Test of Fairness: The Dictator Game Let’s make one point perfectly clear: the Ultimatum Game does not show that fairness trumps greed or even that people want to be fair
aversion allows. All these decisions wouldn’t optimize for expected value, but not because the person is irrational. After all, there can be good reasons for a person to be risk-averse. Here’s what would be irrational, though: choosing the very risky choice for Decision One, but switching to the safe choice in Decision Two. That’s because choosing Option A shows high risk-loving, whereas choosing Option C shows high risk aversion. No rational decision maker would do that. And yet, out of the
because it’s about intentions and motivation: whether an eBay seller will honor her promise of shipping the item in twenty-four hours, whether a business partner will adhere to the spirit of a contract (and not just the letter of it), or whether your celebrity spokesperson will maintain the image he had when he signed with you. All these people may have the ability to do these things, but whether they want to is another question. Why should you care? Because the two different types of reputation