If you Meet Expectations, You are Not Doing a Good Job : Economic Decisions – jesperastrom.com

Posted by | February 21, 2010 | Economic Decisions | One Comment

There is a change about to take place. We as humans are somehow starting to make an attempt at understanding ourselves without simplifications. We might still limit our scope, but we have at least started to look at facts and situations rather than models. Yes, some models can still be created, but a model is always merely a depiction of a perspective given a set of circumstances. What then happens in reality is never very coherent, sometimes not even when all circumstances are met.

Behavioral economics are growing in influence. This makes me glad. I am an ex-econometrics student who has always been fond in looking to the individual rather than the model. Well, I love making models, but for me a model, a strategy or a tool set is always flawed if it doesn’t continuously change.

In physics they got this point several years ago as they discovered quantum physics. In SEO, some people understand it as the way you cannot rely on static values in a world where trust is changing as the aggregate value of your links change over time, even if the total amount of inbound links do not. In economics, they have been a bit conservative and we have yet seen the move from static model to individual until now.

We as people change. Not only our physical appearance but also in the way we face the same situation two times. We aim for positive outcomes in all our choices. If we believe that a previous action was not to our satisfaction we will make a different choice the next time we are met with the same situation. Also, a positive outcome for one person is not THE positive outcome for every person. It is all relative over time and from where we start. Our expectations are dependent upon what degree of utility we currently have.

Thus, a positive outcome can in itself become a less satisfactory outcome over time which is something many of us forget when trying to communicate and get attention. We ask the same question or propose the same value proposition as we base our decisions on history. This might lead to a positive result for the person we ask the question to the first time. Second time the person makes the same choice, they the same pay off. If this payoff is not changed over time, the payoff will be expected. If the payoff is expected, then the value of the payoff decrease.

You might wonder why I write this, well, it is because these findings have huge implications on what we do as marketeers and dialogue creators.

Our behavior has to continuously change if we want the marginal value of our actions to constantly increase. What I mean by this is that we have to look past success of the past and always look to answer the same question in a new way for the future. That way we maintain the value of our efforts and get the greatest return on investment.

I will write more on this in coming weeks.

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