The Swedish Behavioural Economist

Contrarians in the office

Did you know that there are more people living today than has ever died? The question is disliked by many people because they have to start their thinking engines – hard work for a lot of people. We are in what Daniel Kahneman call system 1, default mode, all day, or at least for 99,9% of the day. We rev up our thinking engines only occasionally and it is hard work. Our days pass and we hardly ever study what is going on around us.

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It is estimated that there are 3 times more people that have died than is alive today and my statement above was a myth – but hopefully it got you going.

I recently attended a presentation by the CEO of SAS. He was really good but during the turnaround-story I noticed that the new SAS was all about that things in the airline industry think are important, things like connections and price. The same day I met with the CEO of a Stockholm-based company with operations in 86 countries. He confessed that he hated SAS because of the poor culture: “The most important people for SAS are the employees. They do not care if they arrive on time and the crew never goes the extra mile to make you comfortable.” I tend to agree. Why don’t they just ask the passengers what they think? Venture out of system 1 for a brief moment…

Read more at EQapital.com

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Some really good books

There are some really good books I recommend you to read. My colleagues at Reaktion Value Labs and me have put some of them into a list. Here is two of mine absolute favourites.

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Thinking, fast and slow by Daniel Kahneman.

This book is the most bought but never read book in the world. It is prerequisite for our employees, ambassadors and friends. If you haven’t read this book, we don’t have anything to say to each other. It gets a bit heavy in the middle but have another glass of wine and carry on.

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Sapiens: A brief history of mankind by Yuval Noah Harari

This is a wonderful book that through a combination of history with philosophy and psychology provide us with many answers that we didn’t even know we had questions about.

To read the whole list please visit Reaktion Value Labs

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We are the problem with COP21

– thats why politicians need to learn psychology

We have just landed a international agreement to change the world. The challenge is that although we are happy and look forward to having saved the world, we, people, are poorly equipped to deliver.

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We happily take on tasks like writing a book or taking a class and we celebrate all the benefits and the costs, the time we have to invest, are small. So we are quick to take on tasks but as the deadline draws closer, the saliency of the costs and benefits changes. Authors are increasingly aware of the costs as the deadline approaches, while the benefits become increasingly less clear. Students basically can not have total freedom of completing a larger task without fixed milestones. It is quite clear that the performance of students are substantially worse than that of students with professors that monitor their time closely.

Read more at www.eqapital.se

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Credit Suisse entering the IB of the 21st century

The assumptions about what the market wants have been given far to much room during the 30 years leading potentially good companies astray – away from investments and into the swamp of short-term profits.

Tidjane Thiam

The board of directors of Credit Suisse were smart when they recruited Mr Tidjane Thiam from the insurance industry.

Read more about this in the article at EQapital.se

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Was Hamlet the first behavioral economist?

William Shakespeare was clearly a great thinker and I do not think he would have allowed Hamlet to ramble on, almost boring Ophelia to death, about giving up riches through suicide if there was not a deep meaning imbedded in the mystical statements. It is obvious that Be refers to “behavioural economics” and Hamlet was considering leaving traditional finance for a socially connected economic science. The man had a lot on his mind.

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We have struggled ever since. Daniel Kahneman is a master at putting into words what many people before him have felt but have feared to say; we are not very rational – in fact we are controlled by intuitive responses in turn controlled by emotions.

Read more n the article at EQapital.se

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There is no better branding than the financial branding

People in finance like to flatter themselves by trying to keep equity markets in a black box, dressing in pinstriped suits and throwing financial terminology around them. So are financial decisions in capital markets complex? Should we consult experts to make clever investments?

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The truth is that there are many people who’s job is to understand capital markets but as the markets are truly chaotic, they have the same chance to perform their job well as a ice cube can survive in hell. We just do not know what will happen in the next few months as we do not know what people are up to: some people sell and some people buy, for various striped reasons.

Read the hole article at EQapital.se

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We shape our companies…

…and afterwards our companies shape us.

This is a warped quote from Winston Churchill and from a speech the Prime minister made in the House of Comons. In the event, Churchill mentioned buildings and how we in the end are shaped by the quality of the buildings we occupy. The same goes for companies.hus i blått

The entrepreneur shapes the company and when it reaches a certain size, the company and its culture shape its employees. The Nobel price winner Dr Daniel Kahneman compared our two mental forces, system 1 being the intuitive response, to system 2, our logical reasoning, and suggested that system 1 is 200 000 times more powerful.

Read more in EQapital

 

 

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Activist turning chaos into predictions

How we wish that we could understand capital markets. Then it would make sense to do all the things we currently are doing, like make short-term forecasts on equity markets and certain equities. However, predicting markets does not make any sense at all. Improving companies and their communication however does.

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Historic development of equity prices cannot be predicted because it is truly chaotic. So many uncontrolled forces are at work and their unpredictable interactions are so complex those extremely small variations in the strength of the forces and the way they interact can produce huge differences in outcomes. Historic equity market development is what is called a “level two” chaotic system. Chaotic systems come in two forms.

Read more about the two chaotic systems at EQapital.se

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There is no business like engagement business

(when cruising in the 21st century)

This pharma company is not different from other companies except that it may have gone public a nudge to early; did not make it over the critical hurdle; the share price fell apart a few months after the final road show. So apart from struggling with product development and staff problems, Tom, the eager young MBA at the rudder, is increasingly feeling the pressure from the board and main owners over the poor stock performance.

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The investment bank got it all wrong; going public was not heaven. In fact, it was the basement nest to hell; and the problems started when the company went public.

It is clear that too many companies go public without a real plan for stakeholder engagement.

Read more about this in EQapital.se

 

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The equity markets have been hijacked – please return them immediately

We are so used to our surroundings that we do not appear to notice that the equity market has gradually lost its original function and turned into a non-scientific and highly unnatural bogus arrangement. It is of benefit only to the parasites being advisors and calling themselves “the market”. I confess to being a low-life parasite.

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At the outset, entrepreneurs met investors in one-off arrangements. This worked well when a voyage to east India was being financed but it becomes unsuitable for long-term ventures like an on-going enterprise. The equity markets turned into stock exchanges and is now a digital and global animal. Along the way, the markets switched its focus from financing to the trading of shares in large companies, entities that does not need financing.

Read the whole article at EQapital.se

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