Go Beyond the Obvious

The classic insight that comes from the realms of behavioural economics is that as humans, most of us harbour the irrational belief that we are rational.

I recently revisited some old theories I had read, which made me reflect. In recent weeks I have become mindful of the need to take notice of everyday events, take notice of my first impressions be it from news events or everyday observations at work or just about any aspect of life.

The motto is “Go beyond the obvious.” To consciously strive to see what does not seem apparent at first glance, to listen to what is not being said but is being intended, basing it on data.

Adam Simith who first spoke of rational choice theory put forth his belief that humans are rational beings, driven by self-interest and would therefore make rational choices- the invisible hand that created equilibrium- as he famously said. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

Many eminent economists and psychologists followed him further refining our understanding, showing why rationality is bounded.

And while today we trust in the overall ability of humans to be 'rational', we also factor in the presence of the ‘villains’ so to speak: a whole range of cognitive biases, affective biases, attention deficits, perception biases – all factors that act as constraints to rationality.

In his theory of bounded rationality, Herbert Simon stated that rationality is bounded by many variables that directly and indirectly impact decision making- with most rational choices being influenced by ‘satisficing’- a term he used to denote that we go for choices that are optimal enough to satisfy and suffice us (but perhaps just in that specific moment or circumstance)  

And therefore, it is important to take note of our irrationality, to go deeper and consider facts before taking decisions be it related to a business or one related to a personal life choice.

 It is essential to be conscious of the fact that first impressions are flawed by our own clouded lens. The mantra therefore, ‘Think again. Reconsider…’ something that Daniel Kahneman explained in such depths in his book “Thinking Fast and Slow” A book I revisit from time to time.

This is the classic insight that comes from the realms of behavioural economics:  As humans, most of us harbour the irrational belief that we are rational. That is why think again, go beyond the obvious…