I have a particular weakness for oriental perfumes, especially the handmade varieties, even though they can be somewhat pricey. So when I stumbled across a Google ad by easyCOSMETIC offering the objects of my desire at an 18 percent discount to regular store prices, I was naturally drawn to it. In reality, there was probably nothing accidental about this ‘discovery’; Google undoubtedly put this ad under my nose in full knowledge that I like these things. Nonetheless, even after I had sought out the next best internet offer, the price was still nine percent cheaper. At least, this is what I thought at first. (more...)
Archive for the ‘Decision-Making’ Category
Smog in the Perfumerie
Wednesday, February 1st, 2012Lifelong Sport
Wednesday, January 25th, 2012I had to read in yesterday’s Guardian newspaper that my beloved gym, Fitness First, is in financial difficulty. The sports studio chain, the world’s largest, is in negotiations with its creditor banks to secure a reduction in the interest it pays on loans of over £600 million. Apparently, it is already struggling to meet the repayments. The report reminded me of the lifelong membership (access to all studios worldwide) that Fitness First offered in 2008 for the handsome fee of 4000 euros. Compared to the typical monthly subscription fee for established members of 80 euros, the figure seemed reasonable and, without taking foregone interest rates into consideration, subscribers would reach their breakeven after four or five years. (more...)
Tripping Over Small Probabilities
Tuesday, January 24th, 2012I know the feeling all too well – the sudden realisation that one’s keys are lost. The numbing sensation with each passing minute that one’s access has been denied to yet another place: home, office, locker, mailbox, and bike shed. So when I read my colleagues recent blog post about a friend robbed by a junkie, I was painfully reminded of an episode two years ago when my keys vanished. (more...)
Negotiating from a Losing Position
Monday, December 19th, 2011Some consider the eurozone debt crisis to be the result of a fundamental design flaw. They may be right. But then, when in political history has any project been done completely right from the outset. Political and financial frameworks have always had to be modified or adjusted as a function of new events or opinions. What marks out this particular crisis is that the decision-makers seem unable to make a single meaningful step further. Two years and 15 summits into the crisis and we are still engaged in fire-fighting. (more...)
Eurozone Crisis – Give it a Rest
Wednesday, December 14th, 2011Choice fatigue has been a theme that we have regularly visited on this blog – especially in the context of the eurozone debt crisis. The predictions of the decision-making research have proved very prescient: when people are tired, stressed, or simply have too many options to choose from, they tend to opt for the default alternative. But what happens when each decision-maker goes to a summit not knowing what the default actually is? (more...)
The Unbiased Advisor
Friday, December 9th, 2011Expectation management is a tough task when one is the president of the ECB. Mario Draghi yesterday had to admit to being “surprised by the implicit meaning” that was given to his comments in the European Parliament last week when he said the ECB could follow faster fiscal union with “other elements.” His admittedly vague references were widely interpreted as a sign that the Bank would embark on more aggressive sovereign bond purchases as soon as the EU leaders make a first step on the fiscal side. But this was not meant. (more...)
The Rogue Within
Friday, November 18th, 2011“Most of the people in this room have it in them to become a rogue trader.” This is how I challenged a large group of institutional investors at one of my recent behavioural finance seminars. The suggestion raised numerous titters, but there was not a single word of opposition. They understood that loss-aversion is a powerful human motive and, in addition, that the passage of time dulls a person’s perception of the enormity of the damage. (more...)
Old versus New or Worse versus Better?
Monday, November 14th, 2011“No” seems to be the favoured expression of Bundesbank president, Jens Weidmann: no to ECB bond purchases; no to private sector involvement in the Greek bailout; no to employing Bundesbank gold as collateral for an IMF loan. He believes that changing the rules of the game, i.e., the legal provisions of monetary union, just because they don’t fit any longer, undermines trust. Hence, he subscribes to a particular brand of central bank purism. He is right in one respect. EU decision-making does look poorly thought out, inconsistent, even expedient. (more...)
Europe's Escalating Commitment
Tuesday, November 8th, 2011This weekend I was invited over to a friend’s for dinner and, of course, the conversation came around to the European debt crisis. For once the topic was not a question of how to protect one’s own money or where the crisis will lead Germany. Rather, one fellow diner asked if the bailout orgy shouldn’t be stopped altogether, as it is becoming increasingly apparent that the aid package for struggling eurozone countries is growing out of all proportion. (more...)
The Auto-Enrolment 'Nudge'
Friday, November 4th, 2011A discussion about the desirability of nudging techniques became very heated at a recent investor seminar on behavioural finance. Policymakers ‘nudge’ when they encourage people to make particular choices by employing techniques drawn from behavioural psychology. For instance, changing the default status in the company pension scheme for new employees from out-unless-opted-in to in-unless-opted-out tends to increase the participation rate. (more...)
