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This chapter focuses on psychological pressure in a competitive environment. It tests the hypothesis that if incentives become sufficiently large, the performance of professional players should become much less subject to the effects of anxiety, distress, and other pressures, perhaps even entirely free from psychological biases. This hypothesis is studied by taking advantage of a unique natural experiment in Argentina that was run for only one season. In the season 1988–89, the Argentine league championship decided to experiment with an unusual point system: After each drawn (tied) match, there would be a penalty shoot-out to determine which team got a bonus point.

This chapter considers the challenges posed by economic models by introducing a statistical arbitrage trader named Todd and his use of financial algorithms. Todd's strategy also illustrates the novelty entailed in modern arbitrage, that is, the exploitation of mispricings across markets for securities whose value is ambiguously related. The chapter shows that there was a tension running through Todd's work. Whereas he sought to avoid psychological biases by relying on rigid decision rules, the uncertainty introduced by his algorithms often forced him to abandon his rules and rely on his judgment, as well as on social cues from the floor. Such tension is illustrative of a broader challenge posed by uncertainty in quantitative finance, which demands that traders develop precise numerical estimates and subsequently call them into question.

In this chapter we examine group-level social and psychological processes that support symbolic management. We describe how social distancing, a kind of social influence in which groups isolate individuals who deviate from group norms, operates at multiple levels of the governance system: within boards, in relations between leaders and information intermediaries, and within larger professional communities. We then describe how pluralistic ignorance occurs at multiple levels of governance. Pluralistic ignorance is a systematic tendency for group members to underestimate the extent to which their concerns about a policy or practice are shared by other members. We explain how this bias occurs in small groups within the firm, including top management teams and boards, and among professional communities outside the firm, including security analysts. We go on to explain how these processes contribute to suboptimal firm strategies, policies, and practices, including various forms of symbolic decoupling.

Are behavioral biases prevalent in commodities and futures markets? Although retail equity investors display many psychological biases, investors who are more sophisticated exhibit fewer biases. The market makers, traders (locals), speculators, hedgers, and institutions of the commodities and futures markets tend to be professional participants, and thus less prone to behavioral biases. Nevertheless, the fast-paced action of these markets is an environment that fosters behavioral errors. This chapter reviews the literature on the pervasiveness of prospect theory behavior and other biases in these markets. Strong evidence indicates that market participants exhibit loss aversion, the impact of reference points, the disposition effect, and overconfidence. They also engage in positive feedback trading and momentum investing. Lastly, the chapter reviews risk-taking and behavioral biases by the type of market participant, particularly focusing on market makers, floor traders, clearing members, and the public.

Over the years there has been some controversy regarding the comparison between chimpanzees and bonobos. Whereas some authors have stressed their differences, others have stressed their similarities. One striking difference between wild chimpanzees and bonobos is tool use, especially in foraging contexts. While several chimpanzee populations possess tool kits formed by multiple tools (and their associated techniques) to exploit embedded resources, bonobos display no such tool specialization. However, studies in the laboratory have shown that bonobos are perfectly capable of using tools. In fact, several studies devoted to investigate the cognitive abilities underlying tool use have failed to detect any substantial differences between the two species. This chapter explores three aspects that could explain the difference between chimpanzees and bonobos in their propensity to use tools in the wild: socio-ecological factors, social versus technical cognition, and personality profiles. Au cours du temps, il y a eu beaucoup de controverse en relation aux comparaisons entres les chimpanzés et les bonobos. Alors que certains auteurs ont stressé les différences entre eux, d’autres ont stressé les similarités. Une grande différence entre les chipmanzés et les bonobos sauvages est l’utilisation des outils, spécialement en butinage. Tandis que plusieurs populations de chimpanzés possèdent des boîtes à outils diverses (et leur techniques respectives) pour exploiter les ressources, les bonobos ne montrent pas une spécialisation pareille. Cependant, les études en laboratoir ont montré que les bonobos sont capables d’utiliser des outils. En faite, plusieurs études des facultés cognitives dans l’utilisation des outils n’ont pas pu détecter de différences substantielles entre les deux espèces. Je vais explorer trois aspects qui pourraient expliquer les différences entre les chimpanzés et les bonobos en ce qui concerne leur tendance naturelle à utiliser les outils: facteurs socio-écologiques, cognition social vs. technique, et profils de personnalité.

Because overarching policy goals are distant and open to interpretation, policy makers yield to cognitive bias by constructing policies around visible elements (salient referents). US wartime policy makers thus defined US goals in Vietnam, Iraq, and Afghanistan first to serve proximate goals; then to serve disjoined tasks; eventually to serve available US (political, economic, and military) resources; and finally to serve a fixed-exit schedule, at which point leaving became the primary objective. In consequence, they exaggerated the benefits of preferred policies, ignored their accompanying costs and requirements, and underappreciated the benefits of available alternatives. These non-rational tendencies, though pervasive in decision-making, become disabling problems in the complex environment of asymmetric conflicts. With their many interdependent parts, these demanding environments confound planning and tax resources. The result was shortsighted, suboptimal policies that failed to live up to ever-diminishing expectations.

This chapter discusses the powerful psychological biases that make possible the dehumanizing impulse. The fact that people sometimes believe that other people who appear human are really less than human illustrates something important about how the human mind works. It shows that we do not think that merely looking human is what makes a being human. Instead, we think of humanness as something deeper that is “inside” of them—something more than the portions of the physical body that meet the eye. This tendency to essentialize kinds of living things helps us get along in the world, even though it is scientifically misleading. But, as the chapter shows, it also produces states of mind that are immensely dangerous and toxic. Acknowledging one's own tendency to essentialize, and remaining vigilant about combatting it, is a crucial step toward resisting dehumanization.

This chapter examines different psychological biases pertinent to collecting art and other items, which are part of every client’s world to some degree. Wealth management has a tradition of management by silo, each guided by its own revenue stream. Yet, the chapter shows how financial advisors can incorporate a client’s interest in and further purchasing of art as an asset with long-term value increases. This is especially applicable to a changing world where art is available and traded globally. With the proliferation of social media and web-based resources, art and collectibles are now more accessible as an asset class option. Wealth management must adjust its client service model to leverage the informational commodity of art and incorporate it into wealth management.