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Behavioral Revolution

Some of the biggest challenges confronting humanity stem from human behaviors, such as poor diet and lack of exercise, unsustainable energy use and excessive consumption. Due to demographics and globalization, they are now becoming increasingly urgent, bringing behavioral economics (BE) into the mainstream.

BE marries insights from psychology and economics to demonstrate our irrational behavior in a number of ways, such as to value an impulse purchase today over a secure retirement decades later or a stronger aversion of losing US$100 than wishing to gain US$100, leading to unpredictable behavior on stock markets and elsewhere.

However, our behavioral biases are consistent and unidirectional, which means they can be used to help us make better decisions, instead of hurting us. The huge economic opportunity in these behavioral challenges is attracting governments and the private sector. Large companies, in a variety of sectors, and many start-ups are experimenting with BE approaches.

The digital revolution is catalyzing the deployment of BE. Smartphones and sensors can monitor behavior and adapt incentives in real-time, real-world conditions. In addition, social media can tap the immensely motivating power of social norms and gamification.

Pact is an app that uses BE to turn behavioral weaknesses into strengths. Users make a weekly pact, choosing how often they intend to exercise and wagering money on their commitment. Users who fail to honor their pact forfeit the money they wagered — aversion to this tangible loss has proven to be a great motivator. The forfeited money is pooled and distributed to those who did go to the gym — turning hyperbolic time discounting on its head by making rewards from exercise immediate instead of deferred.

In the area of retirement savings, companies are paying close attention to the presentation of different choices (known as choice architecture) in their plans. Businesses and governments will have to overcome challenges as BE approaches are more widely adopted.

Behavioral economists don’t yet know enough about whether nudges that work in the short term will lose their impact over time, and practitioners will need to experiment and learn along the way.

Lastly, businesses and organizations need to realign short-term institutional incentives, such as election cycles and quarterly earnings expectations, toward the long-term focus needed to address our biggest collective challenges.


Nobiletec is a multi-national consultancy firm specializes in B2B, B2C and P2P FinTech solutions.

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