Feb 2, 2022
When confronted with significant decisions, our thoughts frequently stand in the way of rational decision-making. Today's episode of Grow Money Business features John Howe, a finance professor at the University of Missouri. He is an award-winning educator and researcher with expertise in investments, behavioral economics, household finance, corporate finance, and corporate governance. He is also the author of the book The Foolish Corner: Avoiding Mind Traps in Personal Financial Decisions. Throughout this episode, he shares his expertise and wisdom on behavioral economics, focusing specifically on the behavioral biases we all have regarding investing.
[03:36] Behavioral Economics – Prof. Howe discusses his background, career, and current activities.
[07:23] Kahneman's Nobel Price - Behavioral economics is a field of study that lies at the nexus of economics and psychology. Prof. Howe discusses how the Nobel laureate's teaching of behavioral economics impacts his teachings.
[10:53] Diversified Portfolios – Prof. Howe highlights the importance of diversifying one's investments.
[15:00] Confirmation Bias – Confirmation bias is a term that refers to our natural predisposition to be receptive to new information that confirms our existing beliefs. Prof. Howe explains how confirmation bias affects the decisions we make on a day to day basis.
[20:19] Transitions – Individuals frequently undergo transitions, such as selling a business they have built over the years or acquiring another. Prof. Howe shares his insights on what should be considered during such a transition.
[26:43] More on Biases – Prof. Howe explains the reason behind biases by presenting examples from evolutionary psychology.
[30:00] Reproducibility – One of the trademarks of the scientific method is the ability to replicate an experiment and obtain the same results. Prof. Howe broadly discusses the reproducibility issue in psychological research.
[40:49] Better Decisions - Prof. Howe explains how being well informed on biases can help us making better decisions in the future.
[49:31] The Future - Prof. Howe discusses the current research going in the field, as well as the future of behavioral economics.
[57:59] Research - Prof. Howe shares the current scientific issues that pique his interest.
[01:02:29] Mental Health - Prof. Howe shares his observations concerning the state of mental health in the United States and the way it affects people's financial decisions.
[01:06:28] Gamblers – Prof. Howe outlines his view on gambling and how this relates to the human capacity for pattern recognition
[01:08:52] Books – Prof. Howe shares several books that are worth reading.
Connect with Professor John Howe:
Mentioned in the episode:
Your body language may shape who you are | Amy Cuddy: youtube.com/watch?v=Ks-_Mh1QhMc
The Foolish Corner: Avoiding Mind Traps in Personal Financial Decisions: amazon.com/Foolish-Corner-Avoiding-Financial-Decisions/dp/099851070X
Science Fictions: How Fraud, Bias, Negligence, and Hype Undermine the Search for Truth: amazon.com/Science-Fictions-Negligence-Undermine-Search/dp/1250222699
Rationality: What It Is, Why It Seems Scarce, Why It Matters: amazon.com/Rationality-What-Seems-Scarce-Matters/dp/0525561994
Misbehaving: The Making of Behavioral Economics: amazon.com/Misbehaving-Behavioral-Economics-Richard-Thaler/dp/039335279X
Thinking, Fast and Slow: amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555
The Psychology of Money: Timeless lessons on wealth, greed, and happiness: amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681