A little booklet on Behavioural Economics for kids gives this wonderful example on how the same ten minutes can be experienced in very different ways. The first option is a threat. The second has the joy of ten more wonderful extra minutes to play. In both cases the kid has ten minutes. One has more chances than the other of ending in tears. Welcome to parental training in Behavioural Economics! OK, not quite!
This example comes under the so-called ‘framing effect’, something obvious but often ignored. Another example of ‘how we make choices’ is this: what do you prefer, something that is advertised at 10 dollars but comes with a cash discount of 50c, or the 10 dollar item that is advertised at 9.50 dollars but gives you the 50c credit on your credit card? In both cases you pay 9.50 dollars. People tend to feel much better with the first choice where there is a ‘discount’.
There is a long list of ‘effects’ of this kind that Behavioural Economics, although it has not discovered them (they are well entrenched in traditional Psychology), has managed to apply to day-to-day decision making, including investment decisions.
Framing is important in everyday life in organizations, not only in the decision-making arena but also in the more generic area of the analysis of situations and conversations. The old adage ‘We don’t have problems, we have opportunities’ belongs here. It has been trivialised a lot, because it’s over-used and has become management jargon. But it has very good basis from a behavioural perspective. Problem solving is a completely different occupation to opportunity building. Both examples here are looking at the same issue: ‘ten minutes’, ‘ten dollars’.
Next time you only have two hours left for your presentation and you have started panicking, think that you still have two hours to prepare for that (wonderful) presentation. The second option will give you ‘plenty of time.’