It is proposed that uncertainty, rather than risk, provides a much more realistic representation of the setting that we face when we come to pricing asset, and particularly corporate equities. We have gone a long way down the path of developing pricing models that incorporate risk (e.g. CAPM, APT, Fama and French empirical three-factor model) but comparatively little work has been done on the role (if any) that uncertainty plays in asset pricing. In order for uncertainly to affect pricing, it must have some influence on how investors incorporate information into pricing. Our contribution is to evaluate whether uncertainty influences the way by which investors respond to earnings announcements which will provide us with valuable insights as to the role that uncertainty plays in asset pricing.

In particular, we evaluate the proposition that investors will follow maxmin expected utility and so will progressively overweight bad news and underweight good news as they become more uncertain. Using VIX as a proxy for market uncertainty and earnings announcements as our information signal, we find that there is an asymmetric response to good and bad earnings news at high levels of uncertainty which is consistent with uncertainty breeding pessimism in the minds of investors. However, we do find evidence to suggest investors might have a more optimistic bent than is allowed under maxmin expected utility as indicated by how they react to earnings announcements when uncertainty is at the lower end of the scale.

• Breaking a complex decision into component parts.
• Generating a wide range of interesting choices in each of those sub categories.
• Creating multiple possible scenarios for answering the larger exam question.

Here is a brief tutorial on how to build one.

Goal of the Activity

Building a decision table is an activity that can be done with the internal team or the client.  It can be done in small or large groups. The goal of this activity is to explore the key drivers of a complex decision-like thinking through a complex deal or developing a new strategy–to generate multiple possible scenarios. These scenarios can be further refined using a variety of tools and techniques until the team finally arrives at single, fully integrated strategy. The work is based on the principles of Decision Quality.

Typically this work is driven by a standard Decision Playbook: Either one we already have, or one we pre-build as part of the customization process.  In some cases, the team will build a Decision Table from scratch.

Categories of Choices

The team starts by identifying all the relevant categories of choices. These collectively comprise the framework you’ll use to develop and test strategic scenarios. There are many ways to do this, but success looks like topic headings in some sort of logical order.  For example, if we wanted to develop a ”’human resources strategy”’, the topic headings might look like these:

• Talent model
• Sourcing
• Recruiting
• Hiring
• Onboarding
• Training
• Coaching and Mentoring
• Career Path
• Rewards and Recognition

Note: This isn’t meant to be a complete list, just an illustration. The implication here is that we want to make choices in each of those areas. The sum of the choices, one or more from each category, becomes a possible strategy.
These topics become individual column headings. MS Excel is an excellent tool to organize the work.
In an even more complex setting, we might want to identify headings in multiple areas. For example, in a large outsourcing deal, there might be a section or table for each of these areas:

• Desktop
• Servers
• Infrastructure
• Service Desk
• Human Resources
• Financial

Note: You can imagine that under each of these super headings, there would be multiple topics or columns we would want to explore.

Ranges of Choices

Once you have laid out the story line, or the topics you want to explore (we use the idea of story line because you should be able to imagine describing your preferred strategy by simply narrating across the tops of each of the columns), the next step is to think through the full range of choices in each of those columns or categories. This is an activity best done in groups, and should be a creative, brainstorming, lateral thinking exercise.

Values are what we want, choices are ‘what we can do.  A choice is something tangible, something you can buy with time or money. So while we might want customer satisfaction, that’s a value, not a choice–only the customer can choose to be satisfied. But we can choose to invest in training our people (for example).

• Choices should be mutually exclusive and collectively exhaustive.
• Choices should range from least to most, easiest to hardest, cheapest to most expensive, etc.

It is too often true that we gravitate immediately to choices that are familiar and safe. There are few better ways to kill innovative thinking. So the key thought here is to explore the full limits of each category of choice. For example, if we have a category called PRICE, here are some of the choices we could identify:

• More than anyone else
• Top of our peer group
• Par with our peer group
• Below peer group
• Lead the market
• Free
• Pay the customer

Note: Whether you would build a range of choices using those thoughts isn’t the point. All you need to notice here is that the range explores a FULL span of ideas. Why is this important? When we start to develop possible scenarios, exploring some extreme thoughts is often the key that unlocks the second and third idea that lead to a keen insight or sparkling strategy.

Strategic Lenses

The whole point of building a decision table is to build strategic scenarios. Think of a strategic scenario as a potential story line, competitive response, or strategy for cracking the problem you’re trying to solve. Common problems we’re trying to solve are the tendency to favor solutions we’ve seen work in the past, solutions that are favored by politically powerful people, or strategies that seem easy to do. Along the way, we often start down a particular path without fully considering all the interdependencies and follow on effects. So to do these things, we build strategic scenarios, using a decision table:

• Consider a wide range of alternative strategies before we land on one.
• Ensure that we’re thinking about all the dependencies (that’s why we built the table).
• Ensure that we’re getting multiple and different points of view early in the process (that’s why we do this in teams).

The process generally works like this: Once the decision table is built, we identify three to five strategic lenses, each of which highlights a different but interesting thought. In a competitive sales situation, those scenarios might have names that sound like these:

• What Will a Competitor Likely Do?
• The Solution We Think Our Customer Wants
• Win on Price
• Change the Game Using Services
• Compliant Solution
• If the problem you’re working is internal, the strategic lenses might sound like these:
• Quick and Dirty: Just Get it Done
• Maximize Customer Experience
• Minimize Roll Out Risk
• Aggressive Cost Reduction
• Compete for Talent

Scenario Development

A team is assigned to each strategic lens. The teams can be of any manageable size. The teams create strategic scenarios using their lens and the common decision table, making choices in each column that best support their lens. For example, you can easily imagine that the team most focused on how Competitor A will bid will be making different choices that the team looking through the lens of “Changing the Game.”

This activity is done simultaneously, so the teams are all working in parallel, using the same tool set, at the same time. When they’re done, the teams present their strategic scenarios using the decision table to guide the process. Teams use some sort of code or color to mark their choices on the decision table. The different strategic scenarios are overlaid, often using dots on MS Excel documents, to show the individual choices, as well as how they cluster and compare across strategies.

For the past decade I have made a living helping people and corporations make smarter decisions.  I say that by way of disclosing my bias when I think about nearly everything.  Yesterday I blogged about General Petraeus’ testimony before the Armed Services Committee in advance of his taking over as the overlord of the “not war” in Afghanistan.  You should read it.  It is a marvel of circumlocution.

Good decision making begins with an exam question: The entire rationale for making a decision in the first place; a statement of the problem we’re trying to solve. Use your favorite search engine and see if you can figure out the answer to the question of why we’re in Afghanistan. I figure the President’s own words from his State of the Union are as good as any . . .

As we take the fight to al Qaeda, we are responsibly leaving Iraq to its people. As a candidate, I promised that I would end this war, and that is what I am doing as President. We will have all of our combat troops out of Iraq by the end of this August. We will support the Iraqi government as they hold elections, and continue to partner with the Iraqi people to promote regional peace and prosperity. But make no mistake: this war is ending, and all of our troops are coming home.

So basically the point is to “take the fight to al Qaeda” or more broadly to “fight terror over there so we don’t have to fight it here” or something like that.  I’m sure that there are more precise thoughts than that but basically that’s the mission the American people have been sold for the past eight years by two different administrations.

There are lots of ways to think about this, so let’s pick one: The Math

From the State Department, here’s what we know about Afghanistan:

• Area: 652,230 sq. km. (251,827 sq. mi.); slightly smaller than Texas.
• Population (July 2009 est.): 28.396 million; slightly smaller than Texas.
• GDP (2009 est., purchasing power parity): $23.35 billion.
• GDP growth (2009 est.): 3.4%. GDP growth average between 2004-2009: 11.25% (est.).
• GDP per capita (2009 est.): $800.

Keep in mind that GDP has been inflated by the US presence since we tossed the Taliban.

So how much have we spent to date on the “not war” in Afghanistan.  That’s a moving target, but here are some numbers that might help you understand. According to the site, Cost of War, the number to date (depending on when you read this) is $280 billion dollars. Add in the cost of the Iraq “not war” and we the people have spent about $1 trillion dollars “taking the fight to al Qaeda.”  To get a sense of some alternative uses of $1 trillion dollars, spend some time on the Cost of War site.

Keep in mind that these numbers don’t include the costs associated with the Obama surge of an additional 30,000 troops.  So what do those cost? Once source I found put the figure in 2008 at $500,000 per year.  A more recent source puts the figure much higher.

The cost of sending one U.S. soldier in Afghanistan for one year is $1 million versus an estimated $12,000 for an Afghani soldier, according to Steve Daggett, a specialist with the Congressional Research Service. Those numbers fall within the calculations that the Obama administration has been using. The Obama administration is calculating $1 billion per 1,000 troops deployed to Afghanistan.

To put the cost of the surge in a different light, US tax payers will spend the entire GDP of Afghanistan to send 30,000 troops there to achieve what?

And how much does it cost the Taliban / Al Queda to fight back? It’s hard to put a number on that but a simple metric might be the cost of an AK-47.  It turns out that fighting Americans is a growth business.  A few years ago you could get a locally made knock-off for the equivalent of a few hundred dollars . . . so half a year’s pay.  Today, the price in Pakistan has bloomed to nearly $1,500. Throw in some ammunition and a year’s pay and call it $3,000 per annum, half that if you assume the person holding the gun is a variable cost.

This is the time when you need to stop and think about the mission and the math: $1 million vs. $3,000.  One bullet kills either one.

We have been in Afghanistan eight years.  Every year, on average, we spend the entire GDP of Afghanistan chasing after a couple of thousand bad guys that can be equipped and paid for less than one of our soldiers.

The war is unwinable for three reasons, all math related.

1. It only takes one bad guy to do the thing we have spent $1 trillion dollars to prevent: commit a terrorist act on the homeland.  Call it 100.
2. The other side can replace them faster and cheaper than we can kill them.
3. We’re going broke.  The other side can wait.

The problem here is the problem statement. It’s like the war on drugs.  ”Taking the fight” to the bad guys never ends.  There is no end zone. There is no way of knowing that you’re winning.  More importantly, the cost of the other side to stay in the game is orders of magnitude lower than what we spend. The other side ALWAYS WINS for the simple reason that all they have to do is stay in the game.  Eventually the high cost player is bled dry. The only way out is to change the question.

Finally, a reminder.  The people voting to keep us in this mess work for us.  You voted for them (or failed to). It’s time to speak up.  It’s time to stop the madness.

“There are things we know we know about terrorism.  There are things we know we don’t know.  And there are things that are unknown unknowns.  We don’t know that we don’t know.”

Here’s a snip from the interview.  Well worth reading the entire thing.  Apparently there are four more parts to come.

Dunning and Kruger argued in their paper, “When people are incompetent in the strategies they adopt to achieve success and satisfaction, they suffer a dual burden: Not only do they reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the ability to realize it.  Instead, like Mr. Wheeler, they are left with the erroneous impression they are doing just fine.”

It became known as the Dunning-Kruger Effect — our incompetence masks our ability to recognize our incompetence.  But just how prevalent is this effect?  In search of more details, I called David Dunning at his offices at Cornell:

DAVID DUNNING: Well, my specialty is decision-making.  How well do people make the decisions they have to make in life?  And I became very interested in judgments about the self, simply because, well, people tend to say things, whether it be in everyday life or in the lab, that just couldn’t possibly be true.  And I became fascinated with that.  Not just that people said these positive things about themselves, but they really, really believed them.  Which led to my observation: if you’re incompetent, you can’t know you’re incompetent.

ERROL MORRIS: Why not?

DAVID DUNNING: If you knew it, you’d say, “Wait a minute.  The decision I just made does not make much sense.  I had better go and get some independent advice.”   But when you’re incompetent, the skills you need to produce a right answer are exactly the skills you need to recognize what a right answer is.  In logical reasoning, in parenting, in management, problem solving, the skills you use to produce the right answer are exactly the same skills you use to evaluate the answer.  And so we went on to see if this could possibly be true in many other areas.  And to our astonishment, it was very, very true.

ERROL MORRIS: Many other areas?

DAVID DUNNING: If you look at our 1999 article, we measured skills where we had the right answers.  Grammar, logic.  And our test-subjects were all college students doing college student-type things.  Presumably, they also should know whether or not they’re getting the right answers.  And yet, we had these students who were doing badly in grammar, who didn’t know they were doing badly in grammar.  We believed that they should know they were doing badly, and when they didn’t, that really surprised us.

ERROL MORRIS: The students that were unaware they were doing badly — in what sense?  Were they truly oblivious? Were they self-deceived?  Were they in denial?  How would you describe it?

DAVID DUNNING: There have been many psychological studies that tell us what we see and what we hear is shaped by our preferences, our wishes, our fears, our desires and so forth.  We literally see the world the way we want to see it.  But the Dunning-Kruger effect suggests that there is a problem beyond that.  Even if you are just the most honest, impartial person that you could be, you would still have a problem — namely, when your knowledge or expertise is imperfect, you really don’t know it.  Left to your own devices, you just don’t know it.   We’re not very good at knowing what we don’t know.

I get emails every week asking for permission to reprint, quote, and distribute one or more papers I wrote on decision-making.  It’s been forever since I actually looked at what you can download on this site so I went back and looked.  Here’s a snip from a paper on innovation I wrote.  The words seem useful even today . . .

Having participated in the tail end of it as a go-to-market consultant to a number of incubator companies, I had a ringside seat to both the good and the really ugly of the dot.com excitement. At literally the height of the boom, days before the wall started coming down, I wrote a kind of innovator’s credo that I called the disruptor’s dilemma, which had the following dimensions.

Nothing is Known. If it really hasn’t been done before, there are few if any known market requirements, and therefore your planning and projections are pretty much guesswork.

What Used To Work, Won’t.  The strategies and tactics that worked so well in the value system you just left probably won’t work in the market space you’re about to enter.

Half of What You Decide Is Wrong.  As a result of the first two points, you have to make the assumption that at least half of the decisions you make are probably wrong.

Half Of What You Learn Is Right.  You’ll spend every waking minute on a massive learning curve, and the feedback you’ll receive will usually be completely contradictory.  You should worry if that’s not the case.  The question is: where is the truth?

All Of What’s Right Is Only Useful For Half As Long As It Used To Be.  Just because something is true, doesn’t mean it will continue to be true.

Success Is Out There, It’s Just Somewhere Else.  If you keep learning, adapting, and innovating you might just succeed.  It’s just that success probably won’t lie where you thought it would.

Depending on your point of view, this is either a recitation of the worst of the dot.com hyperbole, or it is a reasonable set of guidelines for nurturing innovation. This led me to articulate what I then saw, and still see, as the “Six Laws of Successful Innovation,” which are as follows:

Your plans won’t hold up so compress your planning.  Bring the right people to the problem; stress test your thinking, make clear decisions, keep your documentation simple, and launch decisively.

Keep it simple. Complexity shows up all by itself.

Once you launch, go fast and hard.  Compress your learning into small segments of time and space. Think in 100-day increments.

Embrace your mistakes.  Mistakes are good because they tell you what not to do, so don’t cover them up. You’re probably going to make a bunch, so plan how you’re going to learn from your mistakes.

Expect the unexpected. You’re going to whack some beehives in the process (particularly if you’re really innovating), and the bees are going to swarm.  Don’t expect the market to sit around and watch as you try to redefine reality. Expect pushback.  Expect to be counterattacked from unexpected directions. Expect partners to make silly decisions.  It should all tell you that you’re doing something right.

You’re going to win in unexpected ways so build your organization, rewards structure, and partnership agreements accordingly.

If we want to improve our life results and get more of what we want, we must make different and higher-quality decisions. The other choice is to keep doing the same things over and over or hope that someone or something will come along and help us out.  This is called Magical Thinking.  It isn’t helpful.

Most of us are not as good at decision-making as we think we are. Why not? One of the biggest reasons is our succeptibility to influence by the people around us, something writer Laurence Gonzalez calls “groupness.”

[amtap book:isbn=0393058387]

The idea is simple: When we are in a group setting we tend to turn our brains off and take our clues from the people around us.  Think you don’t?  You do. Consider Gonzales’s story about NASA and not one but two space shuttle disasters.

After the space shuttle Columbia broke up in flight on February 1, 2003, a commission was formed to investigate the accident. It covered all the mechanical and physical facts of the explosion, but that left a very basic and vexing problem. The accident had been avoidable and had not been avoided. That meant, in effect, that the smartest guys in the world had done the dumbest thing in the world. Twice. The commission’s report sought to explain how this could happen by talking about the very sorts of mental models and scripts, along with group hostilities, that shape the lives of the Rattlers and Eagles of this world and that shaped the experiences of John Tanner and Homo erectus as well.

Managers at NASA had fashioned a psychological framework that allowed them to systematically ignore clear evidence that they were heading into trouble. NASA’s triumphant experiences in putting men on the moon during the Apollo program of the 1960s had led to the formation of mental models and behavioral scripts in the organizational culture that persisted despite drastic changes in the environment, such as greatly reduced budgets and overwhelming evidence that essential pieces of equipment were malfunctioning.

The second force influencing critical decisions at NASA was groupness. The final report of the commission on the Columbia accident said, “External criticism and doubt…reinforced the will to ‘impose the party line vision on the environment, not to reconsider it….’ This in turn led to ‘flawed decision making, self deception, introversion and diminished curiosity about the world outside the perfect place.’”

The report is quoting Garry D. Brewer, a professor of organizational behavior at Yale University, who was attempting to explain how management at NASA could have behaved the way it did. The “external criticism and doubt” came, for example, after the explosion of the space shuttle Challenger in 1986, the first time that NASA made the worst mistake it could have made. That criticism came, significantly, from outside of the in-group.13

The combination of groupness and persistent mental models made for an organization that could not take in new information when that information did not accord with its indelible concept of itself as the “perfect place,” as Brewer called it. Moreover, it could take any contradictory information and reinterpret it as confirming the existing model. This came about through two major influences that made NASA’s models unassailable and made its culture hostile to all outside groups. To begin with, there was the unprecedented investment not just of money but also of personal and emotional effort during the Apollo program. The divorce rate was high, as marriages fell apart under the strain. People literally gave their lives for the effort. Gus Grissom, Roger Chaffee, and Ed White died in a fire during a test on the launch pad in 1967. But following all that sacrifice was an astounding success, arguably the highest achievement of human technical culture, with men walking on the moon while we watched them on television. This has all the ingredients necessary to form robust models and scripts (big investment, big reward). And that experience simply hardened the shell of groupness that already characterized NASA.

NASA’s unspoken and unconscious attitude by that time was: We must be right; after all, we put a man on the moon. There had been many reinforcing steps along the way, too. During Apollo 13, for example, the concept that “failure is not an option” was developed, and the safe return of Apollo 13 served to strengthen the models and the ability of groupness to repel ideas from outside. It also promoted a dangerously wrong idea. For failure, unfortunately, is always an option.

The big problem here is that successful outcomes, broadly defined, caused people to ignore disconfirming information, out of spec performance, and dysfunctional decision processes.  Or to put it differently, if nothing bad happens, we must be doing something right. More . . .

As the investigating board put it, “Both Columbia and Challenger were lost also because of the failure of NASA’s organizational system…. Both accidents were ‘failures of foresight’ in which history played a prominent role.”

In the case of Challenger, engineers were faced with the fact that fuel in the solid rocket boosters was burning through the rubber O-rings that sealed the seams where sections of the rockets were joined. Groupness dictated that no one outside that immediate culture was fit to judge the fruits of their labors. Confirmation bias is a phenomenon in psychology by which people tend to take any information as confirmation of what they already believe. In addition, they tend to ignore or miss any information that doesn’t confirm what they already believe. This can work to gradually revise a mental model in a one-way direction. Because NASA believed that “we’re the best” and that “failure is not an option,” all information tended to support that conclusion, no matter how contrary it might have seemed to an outsider.

Each time the solid rocket fuel burned the rubber O-rings during launch without an accident happening, the engineers at NASA readjusted their models and scripts slightly to accommodate that as “normal.” Through a subtle progression, a complete failure of design was turned into an acceptable situation. Each time nothing bad happened, they did it again. This confirmed the mental model, even while groupness helped to keep conflicting information from having any effect. The weather was the spinning roulette wheel in this complex system that NASA managers had unwittingly set up for themselves. All they needed was for cold enough weather to coincide with a launch, because cold made the rubber O-rings more brittle and therefore more likely to burn through. It was just a matter of time. The ape-like hierarchy at NASA ensured that those engineers who knew or suspected the truth would not be heard.

What makes this whole story especially sad is that NASA learned nothing about decision-making, the root of the problem.

The same array of troubles bedeviled Columbia. Insulating foam blew off the main fuel tank and hit the orbiter. The engineers had seen it happen a number of times, but management kept on launching anyway. When nothing bad happened, they took that as confirmation that they were right and reset their mental models to accommodate the malfunction. As the final report on the accident clearly stated, “The initial Shuttle design predicted neither foam debris problems nor poor sealing action of the Solid Rocket Booster joints. To experience either on a mission was a violation of design specifications. The anomalies were signals of potential danger, not something to be tolerated.”

But in the culture that had evolved at NASA, each return from a successful mission was another moon landing. If the world had largely come to ignore space launches, NASA was still hearing applause that was, by the time of Columbia, more than thirty years old. So, instead of peering more deeply into the problem, they gradually revised their models until they were literally interpreting failure as success. The final report of the commission said:

Engineers and managers incorporated worsening anomalies into the engineering experience base, which functioned as an elastic waistband, expanding to hold larger deviations from the original design. Anomalies that did not lead to catastrophic failure were treated as a source of valid engineering data that justified further flights.

The moral of the story . . .

And this is precisely how a mental model can be expected to function. It operates on a simple rule: if nothing bad happens, you must be doing something right [emphasis added]. So influential were NASA’s models and scripts, and so delusional its self-confidence bred of groupness, that even after Columbia broke up, killing all on board, the space shuttle program manager told the press that he was “comfortable” with his previous assessments of risk and didn’t think the foam debris had caused the accident. But remember that a key feature of this system is that, taken one small step at a time, each decision always seems correct.

“Practical wisdom,” Aristotle told us, “is the combination of moral will and moral skill.” A wise person knows when and how to make the exception to every rule, as the janitors knew when to ignore the job duties in the service of other objectives. A wise person knows how to improvise,as Luke did when he re-washed the floor. Real-world problems are often ambiguous and ill-defined and the context is always changing. A wise person is like a jazz musician — using the notes on the page, but dancing around them, inventing combinations that are appropriate for the situation and the people at hand. A wise person knows how to use these moral skills in the service of the right aims. To serve other people, not to manipulate other people. And finally, perhaps most important, a wise person is made, not born. Wisdom depends on experience, and not just any experience. You need the time to get to know the people that you’re serving. You need permission to be allowed to improvise, try new things, occasionally to fail and to learn from your failures. And you need to be mentored by wise teachers.”

Entitlement is something that’s part of human narcissism. It’s an ego thing that transcends generations. When something goes wrong for others, it’s their fault. When something goes wrong for us, it’s not ours; it’s the fault of external forces. We project blame.

This projection often antagonizes a situation. Feeling entitled to something you aren’t getting leads to frustration, which leads to bratty behavior and confrontation. Nearly 80 percent of Americans say rudeness — particularly behind the wheel, on cellphones and in customer service — should be regarded as a serious national problem, according to a study by the opinion research firm Public Agenda.

An airport is a petri dish for rude behavior: a bunch of people in close quarters under time constraints. Stress and impatience lay down the welcome mat for brattiness.

"You have people screaming at customer representatives at airports because it’s snowing out — as if they’re entitled to have a sunny day," says professor W. Keith Campbell, who specializes in the study of narcissism at the University of Georgia. "That’s where it gets out of hand. With entitlement, the issue is, yeah, there are certain times where we’re entitled and other times we’re not. The problem is when we have that meter wrong."

It’s unreasonable to spend an hour on hold, in other words, but there are situations when basic entitlement turns into self-infatuation and blatant disrespect for others. All of this is tied to the feeling of not being satisfied, of thinking that some force is blocking the way to a goal we think we deserve.

"The question is, ‘What the heck is enough?’ " says writer and psychologist Carl Pickhardt, who specializes in parenting and child development in his private practice in Austin. "I see that all the time. A couple comes in for marriage counseling, and they ask me, ‘Are we happy enough?’ Somebody’s at a job they like, but are they successful enough? People have to make that choice. We are a dissatisfaction market society. Advertising constantly creates the notion that whatever we have is not enough. We can declare independence of that."

But how? It’s about realigning our expectations and then squelching the nagging voice in our minds that propels our discontent. Pennsylvania psychologist Pauline Wallin calls this voice our "inner brat," which is an evil twin to our "inner child." After years of counseling clients who routinely made mountains out of molehills, Wallin dived into the concept, named it and produced the book "Taming Your Inner Brat: A Guide for Transforming Self-Defeating Behavior."

[amtap book:isbn=1885171854]

This sense of it’s never enough is the ego getting in the way of what might otherwise pass for a rational decision process. Public Exhibit A from just this week is the news, shocking and depressing, that the righter-of-wrongs himself, Elliot Spitzer, has apparently been caught on a Federal Wiretap arranging to meet a prostitute.

Gov. Eliot Spitzer has been caught on a federal wiretap arranging to meet with a high-priced prostitute at a Washington hotel last month, according to a person briefed on the federal investigation.

An affidavit in the federal investigation into a prostitution ring said that a wiretap recording captured a man identified as Client 9 on a telephone call confirming plans to have a woman travel from New York to Washington, where he had reserved a hotel room. The person briefed on the case identified Mr. Spitzer as Client 9.

If you’re interested in motorcycles, perhaps you should avoid it. This thoroughly engaging doodad allows you to wile away the hours not only dreaming about the brand-new throwback Vincent you can’t afford, but to dream about it in specific, customized-for-you detail. Brilliant.

People have two relationships with choices. One is that they are overwhelmed by the choices they perceive they face. Sometimes that’s because there are too many. Sometimes that’s because of the perceived consequences (in which case the problem isn’t with the choices, it’s with the outcomes you associate with the choices).

More often, we have too few choices, or at least two few interesting choices. There are lots of reasons for that, most of which have to do with being stuck in a rut . . . a rut of defining the problem in the same old ways or looking in the same old places for solutions.

The Vincent Motors Configurator is brilliant on the last point. It gives you lots of ideas. And because the company wants to sell you a bike, it gives you lots of ideas about how to think about and dream about their bike.

It’s brilliant for another reason as well (there, I’ve used that adjective thrice now). It engages the user in a branded transaction. That means it has done the following . . .

Involves the customer

Engages information for trust. With every mouse click, you’re trusting the brand more and giving the company more information.

Adapts the experience based on the interchange.

Delivers the essence of the brand.

I have a paper on the Branded Customer Experience. Email me if you’re interested.

Blogged with Flock

Tags: VincentMotors, Configurator, midlife rider, motorcycles, lust

We may have life and liberty. But the pursuit of happiness isn’t going so well.

As a country, we are richer than ever. Yet surveys show that Americans are no happier than they were 30 years ago. The key problem: We aren’t very good at figuring out what will make us happy.

We constantly hanker after fancier cars and fatter paychecks — and, initially, such things boost our happiness. But the glow of satisfaction quickly fades and soon we’re yearning for something else.

Similarly, we tell our friends that our kids are our greatest joy. Research, however, suggests the arrival of children lowers parents’ reported happiness, as they struggle with the daily stresses involved.

Which raises the obvious question: Why do we keep striving after these things?

If you’re not a Wall Street Journal reader, you won’t get to read the rest of the article, but the reasons fall into a couple of different categories

We’re strivers. Happiness is a very appealing notion. After all, our founding fathers were the first and only people to lay down that we have an inalienable right to at least pursue it. But it’s the pursue part that gets us every time. If you believe in evolution, then you need to remember that we’re wired to strive and to procreate, not to be happy. That’s why we don’t live in caves anymore. That’s why there are 6 billion of us.

We’re lousy forecasters. Another way of saying this is that the grass always looks greener on the other side. It may in fact be greener, but it won’t always be, and who says greener will make us happier anyway? Famous economists Daniel Kahneman and David Schkade did a study on this phenomenon. Here’s what the WSJ had to say about the results . . .

They asked university students in the Midwest and Southern California where they thought someone like themselves would be happier — and both groups picked California, in large part because of the better weather. Yet, when asked how satisfied they were with their own lives, both groups were equally happy.

“When you’re thinking about moving to California, you’re thinking about the beaches and the weather,” says Mr. Schkade, a management professor at the University of California at San Diego. “But you aren’t thinking about the fact that you’ll still be spending a lot of time in the grocery store or doing chores. People emphasize differences that are easy to observe ahead of time and forget about the similarities.”

When we predict what will make us happy, we’re also influenced by how we feel today. If we buy the weekly groceries just after we’ve had lunch, we will shop much more selectively. The downside: A few days later, we will be staring unhappily into an empty refrigerator.

Maybe most important, we fail to anticipate how quickly we will adapt to improvements in our lives. We think everything will be wonderful when we move into the bigger house. We don’t realize that, after a few months, we will take the extra space for granted.

Take none of this as an indictment of striving, dreaming, or wanting. Just be careful with the conceit that having some new thing or experience will result in some new permanent state of elevated bliss. It won’t. That’s neither good nor bad. It just is.

kah