How we decide (to buy): Google’s “the messy middle” and the Advisor
12 January 2022
This decision dynamic has huge implications for consumers, including investors.
Just as one emerges from the pandemic funk we are confronted with another inconvenient truth. We are not rational decision-makers; but lazy, emotional misers in need of a friendly voice to decide matters.
Nobel prize synthesis
The basis of decision making has been well-documented in: forests of libraries; reels of videos and bytes of podcasts. The Nobel winning insights of Kahneman’s ‘Thinking, Fast and Slow’ perhaps best captures this decision dynamic. It posits a two-system approach: an emotional (Fast) “System I” coupled with a rational (Slow) “System II”; both with a reliance on heuristics. (For those who wish to refresh their memories, a 15-minute video-synthesis of the tome is here).
Google’s riff
Yet further research, as well as the work of the “Behavioural Architects” (yes;they exist, at Google), has reaffirmed the notion that many decisions are mired in a “messy middle”. It is the nefarious nexus of the twin parallel processes of: Exploration (expansive in nature) and Evaluation (a narrowing process); leading from trigger to purchase (see Chart 1). This ‘clover’ is an overlay to the Kahneman I-II paradigm system.
Chart 1: Google’s decision ‘clover’ (Source: Google)
The BAs at Team Google are in search of insights with regard to how consumers make decisions in an online environment; full of abundant choice and limitless information. The BAs studied 310,000 purchases. They have concluded that people deal with scale and complexity by using cognitive biases, encoded deep in their psychology. In the world of Investing (dominated by online sources, curation, commentary, promotions and affirmations) these insights are relevant and vital to understand.
The BAs claim that many of our decisions, including investment ones, are shaped by one’s journey through the “messy middle” — a complex space between triggers and purchase, exploration and evaluation; where customers are won and lost. The ‘purchase (aka investment) journey’ is no longer the McKinsey ‘double donut’ , but the Google ‘clover’.
The BAs have identified 6 “biases” that guide us through any messy middle journey.
1. Category heuristics: Short descriptions of key product specifications can simplify purchase decisions.
2. Power of now: The longer one has to wait for a product, the weaker the proposition becomes.
3. Social proof: Recommendations and reviews from others can be very persuasive.
4. Scarcity bias: As stock or availability of a product decreases, the more desirable it becomes.
5. Authority bias: Being swayed by an expert or trusted source.
6. Power of free: A free gift with a purchase, even if unrelated, can be a powerful motivator.
Manipulation or Motivation?
Frighteningly, but not unexpectedly, the BAs created completely fictitious product/service-offering (loaded with super-charged attributes across the 6 biases) to test their theory. These confections did remarkable well versus established, real-life, leading branded alternatives. These fictitious offerings scored between 28% of shopper preferences (for a breakfast cereal) to 87% (car insurance). A result repeated regardless of category: consumer; electronics, food, travel, vehicle purchase, financial products, etc.
This result reaffirms the age-old marketing adage; as well as underscoring how easily our independent and rational decisions can be manipulated.
Uncertain? The full study is available here: ‘Think with Google’ .
Truly, caveat emptor!
Advisors still (in)valuable
So what role does a human advisor play in this rapidly digitizing environment of always available, endless choice?
Surprisingly, a great deal. In a recent study by McKinsey & Co, only 15% of respondent were comfortable with a digital-only decision. The study revealed that a (large) degree of human interaction is desired as one traverses that ‘messy middle’. Well over 40% of respondents engaged in some form of dialogue with an advisor; even if remotely.
Regardless, the messy middle phenomenon places a premium on any advisory firm to craft and project a digital frame that facilitates the Google clover of search, discovery and decision.
You are not alone. May some at Gate Capital Group could help?
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Justin Jenk is business professional who enjoys simplifying-decisions-by-connecting-dots. His rare career encompasses; roles as a manager, advisor, investor and board member; with a track record of successes. He is a graduate of Oxford and Harvard universities. Justin can be found at justinjenk.com or www.raktas.ee or researchgate.