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In 2003, two finance researchers noticed a strange pattern in the world’s stock-market prices. Between 1982 and 1997, prices across 26 of the world’s markets rose more on sunny days than on cloudy, rainy or snowy ones. Traders generally invest only after weighing a string of complex financial variables, yet somehow investors from Bangkok to Brussels were swayed by the weather.
We like to think that making important decisions is the result of careful contemplation and intelligence. But psychologists have uncovered a striking number of cues — some as simple as sunshine — that shape our thoughts, feelings and behaviors below the level of conscious awareness.
For example, if you’re struggling with a mental puzzle, watch a light bulb as it illuminates and you’ll be more likely to reach a solution. As a metaphor for insight, it actually leads us to insight. Other researchers have shown that we’re more likely to behave honestly when we’re looking at a picture of a pair of human eyes, gazing at ourselves in the mirror, or when we’re bathed in a blue light. All three cues suggest that we’re being watched — by ourselves, by other people or by the police, who identify themselves with blue lights in much of the world — so we tend to avoid unethical or dishonest behaviors.
Even the color of our clothing matters; when Olympic boxers and wrestlers are randomly drawn to wear red rather than blue uniforms, their chances of winning each bout rise from 45% to 55%.
Many of the most surprising of these effects emerge when we’re deciding how to spend and invest our money.
For instance, when we examined hundreds of stocks in the New York and American Exchange markets, my colleague Danny Oppenheimer and I found that stocks with simpler names outperformed their tongue-twisting counterparts. If you’re going to christen a new company, it literally pays to choose easy-to-remember names like Barnings or Hillard. Even the three-letter ticker codes assigned to each stock made a difference: after just 24 hours on the markets, stocks with pronounceable ticker codes (e.g., KAG) rose in value 33% more than those with unpronounceable ticker codes (e.g., KGA). The simpler or more fluent the name, the more familiar and comfortable it felt, so, like a sunny day, a simple name dampened the riskiness of the gamble.
There’s plenty of evidence that the rest of us fall prey to similar biases. If you look at the names of some of the largest companies in the world, you’ll notice something that inspired founder George Eastman to name his camera company Kodak: They begin with a strong, decisive hard C or K. One analysis conducted in 1979 found that companies like Coca-Cola, ConocoPhillips, Koch Industries and Costco made up 39 of the top 200 US companies, while a whopping 93 of those companies contained the sound somewhere in their names. The sound is one that conveys strength.
Much of the time these tricks of the trade leave us poorer than we were before, but sometimes they also make the world a better place. Psychologists have shown, for example, that people are much more likely to donate to hurricane relief charities when the hurricanes share their first initials. According to these results, Kims and Kens are more likely to donate to Hurricane Katrina relief funds than to Hurricane Sandy funds, but Sams and Saras are more likely to help the victims of Hurricane Sandy. (We’re not sure exactly why people donate more to aid relief for hurricanes that share their initials, but one possibility is that they’re more likely to pay attention to a charitable appeal if it has a note of personal relevance.)
If you look at the US Census, you’ll notice that a large proportion of male names begin with the letter J (names like James, John and Joseph), while a similar proportion of female names begin with the letter M (names like Mary, Maria and Margaret). Instead of choosing hurricane names randomly — or by running through the alphabet as we do today and have done since the middle of the 20th century — we could capitalize on this own-letter bias by naming more hurricanes with M- and J-names and fewer with O- and V-names. By my calculation, hurricane aid might have increased by as much as $500 million over the past decade had we chosen names that resonated for as much of the population as possible.
From weather conditions to simple, strong and self-relevant names, we’re easily swayed to part with our money when the conditions are right. The trick is recognizing those conditions when they arise, and doing our best to avoid the temptation to overspend. Of course, the process of correcting for sunny weather and silver-tongued names isn’t always easy, but it can’t hurt to think twice.
Adam Alter is an assistant professor of marketing and psychology at New York University Stern School of Business, and the author of “Drunk Tank Pink: And Other Unexpected Forces That Shape How We Think, Feel, and Behave” (The Penguin Press), out this week.