I’m a bit of a nut about behavioural economics – I think I might have been an economist in a past life (although economists probably don’t have past lives). I love the Freakonomics books, and their podcast is one of my favourites.
Applied economics – in my mind anyway – is about making decisions based on data, and searching the data on just about anything for surprising patterns.
The book Moneyball (and subsequent movie of the same name starring Brad Pitt) is a great example of this idea applied to baseball in the US. It tells the story of Billy Beane and how the team he managed, the Oakland A’s, massively over-performed given their tiny budget by making decisions based on what the data said.
Incidentally he applied the theories of a guy called Bill James. James is the ultimate baseball geek, a statistician who wrote an annual baseball abstract discussing what the data actually said about baseball and how to win. These theories, when applied by Billy Beane and eventually everyone else, have transformed baseball in the US, and in 2006 Time magazine named James in its 100 most influential people in the world.
I think there are a lot of other disciplines that could use a similar revolution. Medicine is one. There is an enormous amount of data gathered by doctors around the world on symptoms, diagnoses, treatments and outcomes that seems to be underused by doctors and patients making decisions. If I ever have a serious illness, and am weighing up different treatment options, I would love to see actual numbers that tell me what the statistical outcomes of the various options are.
I think we can pay more attention to the data in our practices and businesses too. My friend Craig at The Loyalty Zone helps people put numbers to the question of what their customers think of their business. And when I work with people launching a new offering or cluster to market, the key data I’m interested in is the conversion rate. What percentage of the people in your target market that you put the offer to actually said yes?
Love to hear your thoughts about behavioural economics or making decisions in your business based on data – you can leave them below.