Ever think, “I wish I knew what was going on inside of their head?” From clients to coworkers, family to friends, celebrities to strangers – understanding the behavior of others can be confounding. Having “The Answer” isn’t an option, but grasping the factors driving the complexity is.
Morgan Housel says, “You’ll hear in behavioral finance that humans are often irrational. This is true but incomplete. A lot of times people just look irrational in the eyes of others who have different motivations and goals than their own.” He continues, “Predicting the behavior of other people relies on understanding their motivations, incentives, social norms and how all those things change. That can be difficult if you are not a member of that group and have a different set of life experiences.”
If we are trying to figure out another person, we can’t just look at a single decision without also considering their worldview. It’s not enough to walk a mile in their shoes, we have to see it in their eyes, feel it in their past, and picture it in their future. Any parent has experienced some version of this difficulty. Any teenager has too. The other person seems bafflingly irrational at the moment merely because we are not them.
If we are studying groups of people (psychology, history, economics, etc.) we are even more likely to over-generalize and have our bias creep in. Housel uses the example of private-school-educated economists earning 100k+ to estimate the consumer behavior of a population predominantly living paycheck to paycheck. It doesn’t mean that their data is bad, it just highlights the inevitability of all sorts of translation errors. Life experience is hard to reduce.
Here’s what to remember: every thought we think is biased in some way. The same is true for everyone else. As Housel says, it doesn’t mean it’s irrational, but it does mean it’s incomplete.
Professionally, we can think of it as a puzzle. When we have expert experience, it’s like we have the end and corner pieces while our clients have the middle ones. Our job is to help mark a perimeter around what they’re seeing. Personally, it may be more of a mixed bag. When we gather, we maintain the mindset that the puzzle is incomplete unless both of our pieces are on the table, together.
So what is going on inside of their heads? A puzzle that they only know how to assemble some of. Not irrational, incomplete. Value happens when we work on those puzzles together.