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What is behavioral economics? Why does it matter to you?

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Podcast Episodes

What is behavioral economics? Why does it matter to you?

264. Herding: Are You a Guppy? (Refreshed Episode)

Today’s episode is all about herding. We humans are a herding species, just like cows and sheep and guppies, and this has a big impact on our behavior. We are tribal and we look to others to help us stay safe and make good decisions. Or, at least, what our subconscious tells us is a good decision. 🙂 This is why things like testimonials are so important. 

Herding has a dedicated chapter in my first book, What Your Customer Wants and Can’t Tell You because they are so important for businesses to understand. 

The reason I chose to refresh this episode is because of the guest who is joining me this coming Friday, Nick Epley. We talk about the importance of social connection and why we often don’t do the things that will help us to be happier because we perceive them as being uncomfortable or awkward or against the social norms in the moment. 

In the business context, imagine how much value could come from having a simple chat with your colleagues or people at a conference. Most people probably stick to their groups where they are already comfortable and don’t strike up a conversation, but what could happen if you did? There is a lot of value in breaking from the herd and having that conversation, even for less than a minute, which we will talk about more on Friday when episode 265 with Dr. Nick Epley comes out.

And as you listen today, I encourage you to reflect on all the times you thought about striking up a conversation or asking a question and didn’t. What aspects of herding made you feel like you shouldn’t and what can you do in the future to engage with others more? It is valuable for you both professionally and personally, I promise.

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HERE'S A 2 MINUTE TIP.

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SHOW NOTES:

  • [00:39] Today’s episode is all about herding. We humans are a herding species, just like cows and sheep and guppies, and this has a big impact on our behavior.
  • [02:21] In the business context, imagine how much value could come from having a simple chat with your colleagues or people at a conference.
  • [04:07] Humans herd in the same way as other species for most of the same reasons. The main reason animals herd is for protection. 
  • [05:41] Herding is in our nature. 
  • [08:02] Herding helps us learn by observation. Watching where others go and following the group keeps you safe. 
  • [09:38] As humans have evolved, herding behavior has not always served us well. Herding is there to protect individuals, not the group or a complex society as a whole. 
  • [11:41] We choose restaurants by online reviews and crowdedness. We think the people must know something we don’t. 
  • [12:58] People are more likely to leave tips when others have done it.  
  • [15:51] Herding mentality is much more likely to come out when people feel vulnerable or are unsure of themselves.   
  • [17:23] It is better to be conventionally wrong than unconventionally right. 
  • [18:58] Studies have shown that up to 75% of participants will give an answer they know is wrong to go with the group. 
  • [21:07] When everyone follows the herd and doesn’t take the time to do their own research stocks or companies get artificially inflated by the confidence of others.  
  • [23:42] Crypto is absolutely impacted by the herd mentality. 
  • [24:16] Always beware if your brain is making you feel anxious to take steps and do something just because everyone is doing it or having your FOMO triggered in a way that makes you want to do less research before investing your time, energy, or other resources.  
  • [27:48] People like to be part of the group and this is increased when the other people in the group are comparable and more like you. 
  • [28:14] Whatever your business does, you are in the business of solving problems. The only reason people buy anything is to solve a problem. 
  • [30:52] Being in a group makes us feel safe and happy because of this release of oxytocin. When we are not part of the group, our brains do whatever they can to get that bliss feeling back by seeking out more group relationships to help us feel safe and warm. 
  • [33:28] while we can’t change our natural tendency to herd, you do have options to change your behavior. 
  • [34:28] Understanding what will trigger herd mentality in your customers for both good and bad can help you to message better and more effectively. 
  • [36:52] If you really care about starting a movement, have the courage to follow and show others how to follow. When you find a lone nut doing something great, have the guts to be the first one to stand up and join in. 
  • [37:09] Melina’s closing thoughts
  • [40:52] Be thoughtful with the numbers you put out into the world, and consider the herding implications for what you want people to do in the long run.
  • [41:59] Consider how social norms and herding instincts may keep you from having conversations with other people.
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