Greg B Davies combines academic rigour and real-life industry experience across a wide range of applied behavioural science topics … helping people make better decisions in practice.
His PhD in Behavioural Decision Theory was awarded by the University of Cambridge, and he is a specialist in both the theory and practice of investment decision making and financial advice.
He has lectured at Imperial College London and LSE, held associate fellowships at Oxford’s Said Business School and University College London, and is co-author of the book Behavioral Investment Management.
In 2006 he founded and led the first behavioural finance team in the banking world at Barclays where he was a Managing Director and Global Head of Behavioural Quant Finance for a decade.
Since 2017 Greg B Davies has been Head of Behavioural Science at fintech Oxford Risk, where he leads the development of its behavioural decision support software to help people make the best possible financial decisions.
He is a frequent speaker and lecturer, and runs Behavioural Wine Tasting events with Master of Wine John Downes, illustrating decision science with the help of wine.
Greg B Davies is Chair of Sound and Music, the UK’s national organisation for new music, and was co-creator of Open Outcry, a ‘reality opera’ premiered in London in 2012, creating live performance from a functioning trading floor.
How to design decision processes to make better investing decisions.
In all decisions poor decisions arise from the tension between the ‘right’ decision, and the ‘comfortable’ decision.
This need for emotional comfort means that investors continually deviate from good financial decisions, at the cost of financial returns – for investments this can cost on average 3% per year over time (and this is without considering other financial decisions: savings, debt, insurance etc.). Times of uncertainty and stress, and the rise of social media and accessible day trading all exacerbate this emotional cost of investing.
Improving decision-making requires moving towards a better trade-off between optimal and comfortable… finding a cheaper way of buying the emotional comfort that we all need. There are many ways of narrowing the gap, making investors more comfortable with better investment solutions … but to do this well requires understand each individual investor’s unique financial personality.
This requires significant commitment and effort, but everyone can become a better decision maker, whatever their objectives, by implementing a set of practical tools to control:
· You – use objective data to determine where your decision-making is poor and needs improvement
· Your environment – redesign the context of your decisions
· Your processes – build practical tools to improve decision-making
Decision prosthetics can help guide people more consistently to better decisions.
In financial advice, as in medicine, there is an important distinction between diagnosis and prescription.
To diagnose complex situations humans should use decision prosthetics, tools, and technology to reduce human fallibility … but these need to be accurate.
Prescription on the other hand requires consideration of values, for which human judgement is vital, but which is aided by accurate diagnosis
Well-designed decision support tools can therefore enable humans to be more consistently their best selves.
· Improve accuracy of diagnosis.
· Reduce noise and improve consistency, removing human bias.
· Improve efficiency, taking on tasks humans are bad at, and giving people the gift of time to focus on what they do best.
· Guide humans in their complex task of assessing values, ambiguity, and providing emotional comfort.
For financial advice this requires the use of tools that accurately diagnose the complexity of the investor’s situation, including both their financial circumstances and their financial personality, and then bringing all this complexity together in a tool that guides advisers through the complexity, but doesn’t prescribe the solution … helping advisers most effectively help those they advise.
Human decisions aren’t just biased… they’re also noisy: two people facing the same decision, and equipped with exactly the same information, will very often come to very different answers. Sometimes this variety should be celebrated. But when the decision maker is a doctor, judge, or financial advisor, then you want the decision to be right much more than to express the whims of the decider. This decision noise is pervasive, dangerous, and costly in advice of all sorts, and in business decisions. However, behavioural science techniques can both help us diagnose and rectify decision noise.
Applied behavioural science is maturing beyond superficial lists of ‘biases’ and ‘nudges’ applied to isolated decisions, to deploying a broader behavioural toolkit to a wider set of problems. Applying behavioural science at the intersection of Data, Design, and Digital offers the potential to address the complex problems people need to navigate in living their lives, building decision prosthetics that actively engage rather than passively nudge.
Traditional investing theory emphasises maximising risk-adjusted returns: building suitable portfolios for investors required really understanding their attitudes to risk. However, understanding investors’ risk tolerance is a behaviourally complex area that is often flawed.
However, even if an investor’s risk tolerance is well understood … it is a very incomplete notion of what investors actually want: the best returns they can get relative to the stress, discomfort, and anxiety they’ll need to endure over the investment journey. Investors objectives are better described by maximising anxiety-adjusted returns: going beyond risk tolerance to understand composure and short-term risk attitudes, and build solutions that are emotionally comfortable as well as financially suitable.
But even this is narrow. The next frontier is preference-adjusted returns: understanding investors’ behavioural preferences for sustainability and real outcomes of their investing on the world. Investing on this basis delivers portfolio solutions that reflect investors values in solutions that matter, as well as being comfortable and financially suitable.
How understanding investors’ preferences more closely can help create closer emotional links between investors and their portfolios, helping investors to put their savings to work, and keep it invested. Ironically, letting in non-financial value delivers better investment outcomes.
Making better business decisions & eliminating decision bias with the help of wine. A unique, interactive event combining decision science, live psychology & wine.
We use wine tasting as an accessible, interactive, and fun way to illustrate how easily people’s perceptions are biased – this is done through blind tasting of wines (usually 3 white and then 3 red) and online polling software to play back the audience’s perceptions, opinions, and biases.
John Downes is one of 400 Masters of Wine in the world, and he talks about the wines in detail, but more importantly about techniques to debias decision making in wine tasting. I have for more than two decades specialised in applied behavioural finance and the psychology of investing, and weave in throughout the links to the psychology of decision making more generally, and to debiasing techniques in business, investing, and finance.
The wine related content depends a lot on the specific wines served, and on John’s expertise. However, the links from the wines to broader decision science and behavioural science are flexible and can be tailored to your audience and requirements. Most commonly I link this to investing decisions and biases, but the content can be connected to a number of decision-making areas – I can certainly adapt the session to suit any industry or audience as required.
Despite the core concept and structure being the same, we have used it in a wide variety of ways, from executive team gatherings to client events, to large scale conference tastings, and virtual events throughout lockdown.
The event is also certified by CPD Certification Service for continuing professional development.
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