Nudging Towards Wealth / Ravi Dutta-Powell
In today’s show we’re covering
Behavioural economics and its applications in personal finance
There's always been a significant disconnect between academia and real-life – if you disagree with this comment, you’re an academic, and that’s okay, some of my best friends are academics. It’s important though, that this tension exists between real-life and acedemia because without a higher degree of thought and analysis of data, additional insights can’t be gained - which ultimately handicaps those in the field. On the other hand, without a good understanding of the issues found in the field, researchers can often make insightful discoveries in potentially redundant areas.
What I really like about behavioural economics, is that it provides potentially a better framework to understand how people make decisions and why – When it comes to making investment decisions from a wide range of choice, often everyday investors choose options that may not be the best – even the experienced investors out there – what’s interesting here though is that these investment decisions can be predictably irrational. This sounds bad but it’s not a put-down, it’s simply acknowledging reality. When it comes to making good financial decisions, just like with eating well and exercising, having choice and access to the right information is important, but I think there’s actually more value in understanding why people actually choose to do what they do.
To learn more about the work that Ravi does, please visit the team here: https://www.bi.team/
To watch Richard Thaler present to the Chicago School of Economics, then watch this.
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