Boxer shorts and risk
Why do we talk about risk? With research confirming that over 70% of people only associate this word with loss (ie no upside), we’d argue that we should actually be communicating uncertainty. Risk only communicates the downside. Read more to find out what pants have got to do with risk. Yup, you read that right.
A 2013 experiment found out that women took riskier financial decisions after touching men’s underwear. Eeeuww. Strange as that might sound, apparently the association of these garments fires up dopamine which has the impact of firing up our appetite for risk. The logical conclusion of this must be that investment houses should send out branded pants in their next campaign. The next logical conclusion must be that psychologists must be twisted souls to dream up these experiments in the first place.
I did enjoy telling the boss of the FCA this story at a recent drinks thing. I thought he might enjoy a 10 minute break from people sucking up to him or lobbying him furiously. He’s very diplomatic and didn’t arch an eyebrow but I think on balance he might prefer the standard diet of lobbying!
More seriously, the more that we run focus groups, interviews and generally bother people about money, the more I think that we have to tackle this 4 letter word ‘Risk’ before we talk about anything else. It stands between us and potential investors like a hungry, angry grizzly bear.
As psychologist Paul Davies told our recent conference delegates, risk is associated with downside. Well documented loss aversion means that we obsess with what we could lose and ignore the other side of the risk equation – namely the upside.
I have lost count of the number of people – and I’m talking savers with at least £10,000 in cash here – who tell me that investing is like gambling. This response is more common amongst women. But is it?
The 4:30 at Cheltenham has odds. The stock market doesn’t. And numbers can lead to false conclusions.
Here’s what a turkey might teach us about this.
On September 15th a baby turkey feels fear as the farmer walks in. But the scary farmer feeds it and turns on a heat lamp. The next day, the same happens. The turkey still worries but is a bit calmer. The following day he is even less worried. By day 100 he is horizontal. Based on past experience it is now statistically impossible that the farmer will kill it. But 100 days after September 15th is Christmas Eve.
He thought he was dealing with risk. But he was dealing with uncertainty. They are not the same.
Here’s my challenge to you. When was the last time you actually thought hard about the word risk. Or do you just take it for granted? We are not - as far as I have been told – mandated to use that word. We just have a responsible conversation with our customers about what they might experience.
Imagine if you logged on to the British Airways website to see great warnings about how flying could result in death, serious injury or hostage situations? We need to carefully understand the lay person’s associations and understanding of the word ‘risk’ and ask ourselves if it is indeed the best word to describe what we do.
We would love to run a content project on this topic with consumers – please talk to us if you’d like to know more or are interested.