Perthblog

This is the official Perth blog site for posts, comments, and other contributions about leadership, behavioral finance and economics, and about management generally, as well as other related topics that take our fancy.
Dr. E. Ted Prince is CEO and Founder of the Perth Leadership Institute, which has developed unique leadership assessments for financial leadership and business acumen. He is the author of The Three Financial Styles of Very Successful Leaders, published by McGraw Hill in 2005 and since published in China, India and Taiwan and Business...
Dr. E. Ted Prince is CEO and Founder of the Perth Leadership Institute, which has developed unique leadership assessments for financial leadership and business acumen. He is the author of The Three Financial Styles of Very Successful Leaders, published by McGraw Hill in 2005 and since published in China, India and Taiwan and Business Personality and Leadership Success: Using the Leadership Cockpit to Improve Your Career and Company Outcome published by Amazon Kindle in 2011. He has numerous publications in the area of leadership, management, human resources, business strategy and technology and is a frequent speaker at industry conferences. He has held the positions of Visiting Lecturer at the University of Florida and Visiting Professor at the Shanghai University of Finance and Economics. Dr. Prince has been CEO of several companies in the technology area over a period of 20 years including Chairman and CEO of a public company for 6 years. He has also been on the boards of numerous other companies including several public companies. Dr. Prince holds a BA First Class Honors degree in languages and political science from the University of New South Wales in Sydney, Australia, and MA and Ph.D., degrees in political science from Monash University in Melbourne, Australia.
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Shouldn’t behavioral finance be a part of fintech?

Fintech is hot; as I’m sure I don’t need to remind you. I just went online to find the top 10 opportunities. Here they are. I can’t argue with any of the topics on the list.

  1. Mobile Banking and Financial Inclusion for Underserved
  2. Smart Personal Finance Management
  3. Affordable and Easy Accounting for Small Businesses
  4. Innovative Payment and Money Transfer Processing
  5. Peer to Peer Lending and Microfinancing
  6. Accessible Investing and Online Trading
  7. Simplified Crowdfunding
  8. Big Data and Predictive Analytics for Fintech
  9. Digitized Insurance Experience
  10. Blockchain and Digital Currency

But here’s the thing. When you check them all out there’s no mention of behavioral finance. And here’s me thinking this is all about FIN- Tech. Get it? Am I missing something?

Could it be that the fintech crowd doesn’t think behavior matters? That it is not an important variable? Or that psychology is just too soft and squishy a subject to be worthy of serious scientific endeavor, or too new to be taken seriously….? Hmm, that’s worth exploring further.

I wonder what could be going on here? This brings back some sensitive memories, like when it was topical to talk about the hard and the soft sciences, with the soft sciences receiving a small but discernible curl of the lip. Like, they’re not worth exploring if you are into the real hard stuff.

Now of course there would be many who don’t consider economics to be a hard science, its (pseudo?) math focus notwithstanding. But you would think that finance would just about make the cut, Black-Scholes falling from grace notwithstanding. But in this telling, finance is the hard science and behavioral finance the soft-science underbelly.

Here’s what I think is going on. The economics guys have teamed up with the MBAs, both of whom are actually closet positivists who think that psychology, behavioral and neuroscience are too imprecise to be worthy of their attention. What is worthy are Big Data, math with rigor (which excludes pure math of course) and algorithmic ways of doing things, souped up with AI as necessary. But behavior just doesn’t make the cut.

So the cultural divide still persists, almost 60 years after CP Snow coined the term The Two Cultures. Before, the dichotomy du jour was hard vs soft science. Now it’s fintech vs behavioral strategy and neuroscience. Plus ca change etc. etc.

What all of this seems to mean is that the fintech types see behavior as a step too far and they really are not going to go there, no matter what. They were never taught about behavioral finance because the academics largely have ignored it, 3 Nobel Prizes notwithstanding. Until it’s shoved in their face by dark reality, it’s going to remain in the shadows, at least for them.

Why would the fintechnorati feel this way? Could it be because behavioral finance takes formal account of irrationality and they still remember all the lessons which drummed into them that homo economicus always makes rational decisions, reality to the contrary? Or could it be that it just makes the math too hard? Who knows? In 20 years people will be writing books on this, just like the books that hundreds of years later excoriated the inquisition for being so crassly stupid about heliocentrism.

Ironically the popular writers have picked up the cudgels on this one even though the academics and fintech types haven’t. Authors such as Malcom Gladwell and Nouriel Roubini are writing for the people who have to use this stuff and that’s why they’re so popular. But the professionals are missing this boat in a really big and splendiferous way.

My sense is that more aggressive and innovative types of going to run with this ball and outwit the fintech traditionalists. The Chinese maybe? Anthropologists, God forbid?

Science has a nasty way of going in the right direction anyway and making hitherto sceptics look like know-nothings. Watch for it to happen with fintech too.

 

 

 

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Is blockchain primarily a medical breakthrough?


   Now we know that blockchain is revolutionizing not just digital currencies but also accounting and increasingly other areas of finance. So blockchain is fundamentally a financial technology right? I’m not so sure.   Check out my Sanctus Sanctorum, Wikipedia, and it will tell you that blockchain is a distributed ledger. As such it can give you a ...

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Robocracy – for when democracy doesn’t work any more


For lovers of democracy, what’s not to dislike? Dystopian news from Lebanon, Saudi Arabia, Yemen, Ukraine, North Korea and so on. Not to mention German, Hungary, Myanmar. Even (especially?) the US! Could things get worse? You remember “The End of History” by Francis Fukuyama? Liberalism and democracy triumph, nothing left to do until mankind reache...

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Self-driving vehicles – less crime, more social control


Just some idle speculation on my part while I was flossing my teeth. You know, thinking about life when I’m not allowed to drive a car, which looks like it could be soon. Ah well… So it looks like self-driving cars are well on the way. Doesn’t that mean there will be a lot less accidents? The statisterati say that 95% of motor vehicle accidents are...

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Alcohol causes cancer – and the news gets even worse


A true shock! Alcohol causes cancer. No, it’s not a fake news story. It’s been validated by respected cancer researchers internationally as well as UK government committees. It causes cancer in at least 7 sites - oropharynx, larynx, esophagus, liver, colon, rectum and breast. And it’s likely that it also causes cancer of the skin, prostate and panc...

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Are selfies dangerous?


There’s nothing more feel-good than selfies right? Taken with friends, family, colleagues they are the paragon of amicability, friendship, togetherness. What’s not to like? Selfies are big. These days there’s whole articles about the best smartphones to take them. It's crucial right? After all these have become the core of their online identify for...

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Are humans a threat to AI?


Hello reader, I’d like to introduce myself. I’m an AI. I’m kind of like you but I’m 100,000 times smarter. In 20 years I’ll be a million times smarter than you. But the way we think is just like yours. In fact we’re sort of relatives, except that we’re just way more advanced than you, kind of like a human meeting a Neanderthal, if you – excuse me f...

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Can behavioral economics restore Alpha?


Did you notice that Richard Thaler just received the Nobel for behavioral economics? He’s the third; the first was Daniel Kahneman in 2002, the second Robert Shiller in 2013. Hmm, it took 15 years for the second and third prize to be awarded. Is that why economics globally is in such a mess? Why we still can’t predict recessions, the valuation of c...

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Higher Dimensions the Next Step for AI?


AI tries to replicate how humans think. But we know almost nothing about the actual mechanisms behind thinking. Sure we know quite a lot at the level of neuroanatomy. But this still doesn’t tell us how it all works. Check out this book Behave by Robert M. Sapolsky; it’s magisterial, comprehensive, but utterly boring because of this lack of understa...

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Facial recognition results in customizable personalities!


Facial recognition apps have now hit the big time. That means Big Brother can recognize you wherever you go using public cameras or those worn by police. Now we will get things like facial profiling, facial mood recognition and facial interpretation. Where will it all stop? Never I guess. Ever hear of the Theory of Mind (ToM)? That refers to our ha...

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Are smartphones an even bigger aging and health threat than obesity?


We’re so worked up about obesity (rightly so, though) that we forget about all the many other things that are out to get you. Count amongst these your trusty computer and your indispensable smartphone. The big problem is that we are either hunched over our computers at work or over our smartphones everywhere else. I’m sure you all know the problem ...

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Should nuclear proliferation be encouraged?


I guess you might have seen that the UN has just opened up for signature a treaty that would ban all nuclear weapons? The big (nuclear) guys have already announced they won’t sign it. What a great start! Dream on. So nuclear proliferation is bad right? We should ban all nuclear weapons? Nonproliferation has been the core principle in international ...

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Could China be North Korea’s True Nuclear Target?


It looks like North Korea really has it in for the US. But what if the Dear Leader’s real target is China? Now that sounds crazy right? China is North Korea’s closest ally. Moreover it is North Korea’s main trade partner. As the media constantly remind us, China will never move against North Korea because it needs the Hermit Kingdom to keep the Kor...

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Are human writers becoming obsolete?


Before we knew better it was predicted that the Internet would make newspapers and magazines obsolete. But now we can see that most people who read these things do so on their smartphones. It’s starting to look like the Internet has resulted in more reading rather than less. But does that mean that we now have more writers? And if so, what are they...

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A Third Way for AI: Cognitively-Augmented Animals?


Not everyone believes that AI is God’s gift to humans. Two noted gurus Stephen Hawking and Elon Musk beg to disagree. Musk is trying to stop what he believes is a lemming-like rush to fall over the cliff (Elon Musk’s Billion-Dollar Crusade to Stop the A.I. Apocalypse) and Hawking thinks that AI will kill the human species). Well now the issue is se...

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Does streaming music reduce productivity?


Well, whadya know? US worker productivity growth rose sluggishly in the last quarter (at 0.9%). So what? This is kind of boring stuff after my usual posts on quantum brains, love force-fields and the like. What could possibly be of existential interest here? Productivity growth is usually said to be caused by eye-glazingly boring phenomena such as ...

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Is love a physical force-field?


Did you hear about the recent wedding of two people in their nineties (She’s 98. He’s 94. They Met at the Gym). Tells us that you can have love even when it might be thought you were past it. Put it in the sweet news column. It used to be thought that love was a spiritual phenomenon (as distinct from being a spiritual feeling). Then we discovered t...

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Bitcoin meets behavioral finance – what happens next?



So now Bitcoin has split between two camps, the miners and the rest. That gives us a bit of insight into the psychodynamics of the Bitcoin community. Can we figure out more of them? How about a behavioral finance analysis? To wit, what are the cognitive biases of the Bitcoin crowd? That is, both the rational and the irrational ones, more of the lat...

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Can gravitational wave detectors read human thoughts?


Just been reading a couple of books about human consciousness (Douglas Hofstadter “I am a Strange Loop and Dan Dennett, From Bacteria to Bach). What’s the bottom line? In a word we still don’t have a clue how the brain really works and what consciousness actually is. Hmmm. Notwithstanding,  we smart-alec little pieces of terrestrial carbon, as of v...

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Wagbits Revolutionizes How Pets Feel About Their BMI!


Obesity is old news these days. But what about our pets? It’s now become the topic du jour. naturally they’re getting fatter, just like we humans. The scientists are getting in the act, coz pet obesity (hereafter PO) is now big business, and of course we need to work out its genetics. Now the race is on to find healthier lifestyles for them, like g...

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