Trust: The Core of Client Relationship Management
How trustworthy are you? How rational are you? Most of us think that we are more trustworthy and more rational than the average person, yet as a whole, we tend to rate others as less than average in these categories. How is that possible? At the 66th CFA Institute Annual Conference in Singapore, corporate training consultant Lim How, the author of two books about motivation, explained his model of human behavior by using a business perspective and a psychological one. His aim: to help investment professionals better understand the drivers of strong relationships.
The business, or economic, perspective put forward by How, an expert in the fields of critical thinking, leadership, and human relations, suggests that people are primarily rational, objective, and self-interested. The psychological perspective, however, holds that behavior is influenced both by rational and psychological factors. In the latter case, rationality is influenced by social contexts. In other words, what is rational to one person may seem irrational to another.
How emphasized — rightly, perhaps, given his audience of financial analysts — the distinction between mathematical rationality and human rationality. His thesis bears a strong resemblance to the burgeoning body of work in finance and economics that allows for behavioral elements in decision-making versus the pillar of classic economic theory, which holds that humans (aka “Homo economicus”) always maintain a robotic alliance to math and probability.