Do You Want To Bet? /August 16, 2013
If I were to toss a coin on the understanding that if it landed on tails you would give me £10 how much would you need to receive in order to join in the game?
The logical answer is any number greater than £10, £10 and five pence for example. The actual answer is most people require a significantly higher reward than potential loss to engage. Nearer £20 in fact.
In economics this is known as Prospect Theory and identifying it was enough to win Daniel Kahneman a Nobel Prize in Economics.
Stated another way, people are a lot more sensitive to losses than equivalent gains. Any good marketer or salesman will emphasise the cost of not buying the product or service, a point I read recently in a book called Selling to the Old Brain.
The premise of both the theory and the book is that our decision making centre is not the more creative expansive neo-cortex, but the hard wired Old or Reptilian Brain. We make decisions from a platform of survival rather than reasoned processing.
These accepted theories describe the world well and explain why change is so hard both at an individual and societal level. Those who stand to lose from change will fight much harder than those who stand to gain an equivalent amount.
But is that changing?
Last weeks newsletter posted an excellent video called two planets which describes the emerging phenomenon of the Neo consumer. The Neo is the current driver of the most vibrant aspects of the economy and it would appear that their decisions are being made from neither the survival obsessed Reptilian Brain or the more cognitively cute neo-cortex.
As if to emphasise the growing gap between the Old and the New, the darling of the old paradigm survival economics, Wal-mart, announced it's worst ever growth figures. The article on Zero-hedge states "While the 'people of Wal-Mart' may reflect the people of America, we hope that the growth of Wal-Mart (approx zero) does not reflect the growth of America".
Sadly, the Wal-Mart figures expose much deeper truths about the state of the US economy, but as a metaphor it is perfect. If you want to thrive in the emerging paradigm your decision making has to come from a place well away from the Reptilian brain. Wal-Mart will no doubt survive...but it will be much more fun playing in the expansive world of the new paradigm Neos.
We recognise the Neo as demonstrating the characteristics of so many of the kids we have worked with. They feel rather than think what's right for them. They are unable to compromise. They choose through resonance rather than fear and would rather go without than make incoherent choices. Their processing is moving from the reptilian brain to the heart brain.
I see examples of this shift right across society, whether it be in choices of information sources, dis-connection from old paradigm politics, right down to my own consumption. Mass marketing based on peoples fears and insecurities is going to find relevance only in the crumbling parts of the economy, where low margin, low quality, low expectation products and services compete to an increasingly financially squeezed population.
The emerging economy will be based on resonance marketing to smaller groups, often non-local because of the internet. Real growth and expansion will be outside the 'one Coke fits all' model and products will be provided by those with a passion for their trade, for they will choose their trade by resonance.
At the same time corporations are increasingly dis-connected from their clients, the emerging businesses will be a part of their client's community. Product evolution and development will be co-creative projects as business/client boundaries become blurred and experience trumps profit as the driver. Ironically profits will be greatest in those sectors which adopt this mentality, as demonstrated in the two planets video.
What are your prospects? Which planet do you chose?
love
Bill