To prepare for the upcoming holiday shopping season, I’m reading ‘Priceless: The Myth of Fair Value (and How to Take Advantage of It)‘ by William Poundstone. Poundstone references a wide variety of psychology studies which show consumers are unable to accurately estimate fair prices and are “strongly influenced by the unconscious, irrational, and politically incorrect.”…
Most sports fans know home teams have an advantage over visiting teams even though they have never seen any hard facts which prove it. While fans believe in the home field advantage, they hotly debate the reason for its existence. Over the years, I’ve heard a variety of explanations from not having to travel, to…
Lake Woebegone is a fictional Minnesota town on the radio show A Prairie Home Companion which is described as a place “where all the women are strong, all the men are good-looking, and all the children are above average.” Lake Woebegone may be fictional but the tendency of people to overestimate their own positive qualities and…
If a stretch of highway is often congested, we should add another lane to increase capacity. Wrong. In “The Fundamental Law of Road Congestion: Evidence from U.S. Cities,” researchers show any increased capacity from additional roads is temporary. Traffic increases to fill the added capacity. The study’s startling findings include: The number of vehicle-kilometers traveled…
It might be time to move out of the suburbs. Until about 100 years ago, almost every city in the world was laid out on a rectangular grid. New York City and Washington D.C. are prototypical U.S. examples; most European capitals are also. Starting around 1930 however, city designers abandoned dense urban grids for garden…
I prefer one-on-one instruction or small group trainings to learning from books. This might be because I went to a very small high school with a graduating class of 13 or because I like to explore topics by asking questions. Given my background, I’ve always believed that smaller classes are more effective; more individualized interactions…
I believe every manager is a member of three teams: The people that report to that manager. This is usually what someone means when they refer to “my team.” The external stakeholders in other departments they work with every day. For example, marketing is often considered part of the extended team for sales or development. Their peers…
What percentage of people wash their hands after going to the restroom? This is a difficult question to answer accurately. Surveys are unreliable because people are not likely to be truthful about behavior that is considered socially unacceptable. Surveys under-report the true percentage. Even if it is difficult, estimating the percentage of people who engage…
The numerosity heuristic can ruin your diet. According to numerosity, people pay more attention to the number of units rather than the type of units which leads to faulty conclusions. Research shows we will pay more for a 7-day vacation than a one week vacation, and will complain less about a flight that is delayed for…
Learning about the numerosity heuristic can save you money. As a three-time CEO, I’ve had a lot of experience with incentive stock options and have been appalled by how poorly they are understood by employees. Many employees fixated on the number of shares they were granted, rather than the percentage of shares outstanding. They would multiply their…