The Imperfect Mind

I think a great parallel for healthcare consumerism is the shift to 401Ks. People had to take new responsibility. People had to begin to understand the markets. People had to think long-term. And, a certain percentage of those people failed. (At least that’s what I call it when I hear people are retiring with less than 2 years income in savings, no pension, and are therefore dependent on social security – see study from a few years ago.)

Obviously, we can risk a nation of people who fail at their healthcare and end up bankrupt, sick, and dependent on the government to bail them out.

So, I found a brief article in Money Magazine (Sept. 2007, pg 113) about Daniel Kahneman who won a Nobel Prize for explaining why people make the wrong decisions time after time about investing or spending money. He is a psychologist not an economist. Here were a few things from his interview (I paraphrased when not in quotes):

• It’s unrealistic to believe people are rational and use all available information to make consistent decisions.
• People respond to how things are positioned. (E.g., “An investment said to have a 80% chance of success sounds far more attractive than one with a 20% chance of failure.)
  • Reminds me of my previous points about loss avoidance versus savings.
• We need to make fewer decisions. He says there are two that matter: (1) “how much of your wealth you want to put at risk” and (2) “how much risk you want to take with it”.
  • I am sure there is a healthcare parallel here. What type of lifestyle do you want to have? And, how much work are you willing to put in to achieve that? (Not sure that’s it, but I think it can be simplified and a framework applied to let us make consistent decisions with long-term implications.)

Later, in the same magazine, Jason Zweig has an article titled “Your Money and Your Brain” which is excerpted from the book by the same name ©2007.

• “Your investing brain often drives you to do things that make no logical sense – but make perfect emotional sense.”
• “Scientists in the emerging field of ‘neuroeconomics’ – a hybrid of neuroscience, economics, and psychology – are making stunning discoveries about how the brain evaluates rewards, sizes up risks and calculates probabilities.”
• He talks about the thrill of the chase. Our mind is more excited anticipating a profit than when we get one. (Think about this in terms of the need for constant reinforcement and rewards to drive behavior over time.)
• He talks about the implications on long-term memory and an experiment showing that people were more likely to remember things that were associated with a reward than those that weren’t. (Think about this in terms of health education.)
• I think a great quote is “we tend to judge the probability of an event by the ease with which we can call it to mind.”
• He talks about the peer pressure impact on your brain. (We all saw this with the study last year on obesity linked to who your friends are.)