Neuroeconomics: Getting to the Root of How We Think About Things
Where do business and brain science meet? In some fascinating places.
Giant pharmaceutical and biotech companies like Pfizer and Merck invest millions of dollars in developing treatments for neurological disorders like Alzheimer’s. And it’s not just a big-company field. According to Business Insider, startup companies that are focused on drug development and other activities related to neuroscience raised $548.5 million in investments between January and September 2022, giving them capital to grow their companies and their ideas.
This is but one area – however high-powered – at the intersection of business and the brain. There are more. As Dr. Michael Platt illustrated to Wharton Global Youth students through his exploration of brain-centered brand loyalty, researchers are also studying the role that the human brain plays in consumer choice and management strategy.
We spoke with Dr. Elizabeth “Zab” Johnson, executive director of the Wharton Neuroscience Initiative at the Wharton School of the University of Pennsylvania, to help bridge our understanding of how brain science is challenging and advising the business world.
The Neuroscience Initiative, she says, is busier than ever doing projects with companies and collaborators. “It’s becoming increasingly known that analytics is going to be the future of business, so why not get to the root of how we think about things? Get to the data in your brain itself?” says Johnson, who is also an adjunct professor of marketing at Wharton. “One of my favorite things is to show students all the different ways that neuroscience is being put into practice in jobs and industries.”
Here are 3 ways Dr. Johnson and her colleagues are investigating and advancing how the study of the brain can improve business.
The neuroscience of teaming. How can neuroscience help companies manage their employees better and build a more effective working environment? A big project in the works at the Wharton Neuroscience Initiative is using neural data to figure out how to strengthen teamwork through enhanced team chemistry. “We take well-controlled lab studies and see how they apply in the real world,” notes Johnson. “We’re partnering with a global consulting company to see if we can measure aspects of the way they process a stream of videos to predict whether or not that means they will be well-suited or well-connected to people at their work. Then we look at ways for them to use that kind of prediction to help make people feel connected to one another. That is a huge issue in the future of work, especially as people are working remotely. They are feeling very disconnected…We are also studying innovation. Can we change the makeup of teams so that they include people who will be much more creative together?”
Neuromarketing. This is the OG of business and brain science that started back in the 1970s. Also called consumer neuroscience, it refers to measuring physiological and brain signals to better understand the choices and decisions that customers make – and then applying more optimal marketing strategies. For the past few years, Dr. Johnson – whose research primarily focuses on vision and visual behavior to understand how human observers look and navigate through the world — has teamed up with Wharton’s Barbara Kahn, a retail expert, to teach a Visual Marketing class to undergraduate students. Visual cognition is the way the brain responds to visual stimuli. Companies are better understanding visual cognition to build more effective marketing and advertising strategies. “A great example is the thumbnail [images] that streaming services like Netflix create to help you find the show you want to watch,” says Johnson. “They use the biological understanding of the human visual system to deconstruct all the frames of any given show so the thumbnails might be the most visually eye-catching. And then they take personal data on your preferences. If you really like romances or sci-fi, you’re more likely to be presented with a thumbnail that is both very visible to you, but also aligns well with your preferences.”
Companies on campus. Neuroscience as it applies to business is “exploding around us” right now, observes Johnson, in part because the technology used to study brain function, even on the periphery, is less expensive. Heart-rate monitors, for example, give you insight into cognition. Consumer wearable devices measure athletic ability and as Johnson says, that type of data can extend to “peak performance anything,” depending on what is being measured. She is eager to bring companies to Wharton’s campus to illustrate neuroscience in action. These have and will include people from the human and machine decision-making team at Toyota Research Institute, a vision scientist at Snapchat, and a leader from Ernst & Young’s Research, Learning and Development team. “The analytics that are coming from neuroscience are having an impact on every area in business,” Johnson concludes. “I can’t think of an area in business that isn’t touched in some way or couldn’t be touched by these developments.”
Conversation Starters
Netflix’s use of visual cognition to appeal to customers is a fascinating combination of brain science and consumer behavior. What other strategies have you encountered, particularly online? Think about advertising and banner placement. How are marketers using where and how we observe things to more effectively capture our attention?
Have you explored neuroscience at all? Possibly even neuroeconomics? What did you learn from the experience? Share your story in the comment section of this article.
Would you study neuroeconomics? Why or why not? Do you believe in the transformative power of brain science for business?
2. Neuroscience, indeed, holds a pivotal role in shaping the future of businesses, as it delves into the very core of human decision-making. As Sophia Feldman puts it, our inherent tendency towards irrational decisions can be mitigated by understanding the neurological underpinnings of our choices. This insight is invaluable across various business sectors, from consumer-focused companies striving to comprehend their customers’ preferences, to the medical industry aiming to unravel the mysteries of mental illnesses and brain disorders.
Furthermore, the potential of neuroscience extends beyond mere understanding to the realm of cognitive enhancement. The ongoing development of Neuralink by Elon Musk exemplifies this potential. Envision a society where knowledge can be directly uploaded into our minds, rendering the traditional, time-consuming learning process obsolete. This could revolutionize efficiency in our world, but it also raises questions about potential vulnerabilities, such as corruption and potential misuse.
The article’s discussion on the neuroscience of teaming and neuromarketing further underscores the profound impact of neuroscience on business strategies and how it can shape our society. The Wharton Neuroscience Initiative’s work on using neural data to improve team chemistry and the application of visual cognition in marketing strategies are fascinating examples of this intersection.
In conclusion, neuroscience, with its ability to decode the human mind, is poised to redefine business strategies and societal norms. However, as we tread this path of cognitive enhancement and instant learning, it is crucial to consider the ethical implications and potential risks associated with it.
Hey Eric,
I’m glad you’re well aware of the negative implications that neuroeconomics could have on us. It tends to be the side of the sword that most people overlook, especially as a society.
You mentioned Elon Musk’s Neuralink. The company with a mission to implant chips capable of processing brain signals into the brains of the physically disabled to allow them to control a mobile or laptop with their mind.
Although such a motive for a company may seem rather innocent at first, one would be naive to not think twice. Because the company also lists their mission as to unlock human potential.
My point is, there are some serious complexities that could come with the implementation of neuroscience. For example, with Neuralink, how much privacy will I have to my own thoughts and emotions while a chip in my brain decodes it all? But, I agree, it’s rather silly that I give the example of a company that currently only aims to help the unfortunate. So, instead, I’ll take the example of every major social media and dating app. Algorithms within these apps are constructed from piles of data to make us stay on for as long as possible. Personalised feeds, the bombardment of notifications and vibrant colours to seize our attention. I think we’re barely free to choose. Sometimes, I find myself picking up my phone before I even realise what I’m doing.
What scares me further is this could just be the tip of the iceberg. A debate around neuroscience is bound to rise in popularity along with the other conflicts our world is already facing, as it requires a fine line of morality not to be crossed.
Anyhow, Eric, I replied to your comment at first because I found this topic particularly interesting and enjoyed your viewpoints but now I also know we both have our eyes on Elon!
Warmly,
Fateh
Thank you so much for your reply Fateh, and congratulations on winning the runner up!!!
My friend always points out how I unironically match my outfits with my two favorite colors: Tiffany blue and baby pink, or, as she coined, the “gender reveal aesthetic.” I know not to base my consumer choices solely on my favorite colors, but I must admit that an invisible force – known as neuroeconomics – pulls me to stores sporting my aesthetic, which is partially why I like makeup brand Winky Lux better than Sephora, although Sephora has more options. I unconsciously judge books by their covers (or, in my case, colors), so who am I to tell others not to? Dr. Elizabeth Johnson provided three main ways the Wharton Neuroscience Initiative examines judgment in business and consumerism: The Neuroscience of Teaming, Neuromarketing, and Companies on Campus, which apply my business tendencies, and yours, my charming audience — including those of you who somehow don’t like my gender reveal aesthetic — to the wider world.
Dr. Johnson first addressed the neuroscience of teaming since a successful business is a sum of its successful parts. It would be nice to just give workers copies of the chapter on industrial and organizational psychology in my AP Psychology textbook and say, “Voila, problem solved,” but an efficient system of management and human resources department is the core of the harmony of these successful parts. From high-school drama-like squabbles, such as having the same office crush and getting irked by the guy in the next cubicle incessantly clicking his pen, to quarrels involving growing contempt competing for the promotion of the century or controversy surrounding board of directors elections, a harmonious work environment is paramount to quash smites before they become big blow-ups. In a world where much of the workforce has switched to online, those intimate and by-chance passing-by conversations are nonexistent, preventing many people from forming positive opinions about others. The Neuroscience of Teaming can prevent lawsuits through simple mediation and collaborative environments, bring in more revenue for businesses with inspired workers, and cause smiles through naturally increased dopamine levels over drinking monstrous amounts of coffee to make work bearable.
This healthy and productive work environment would then be able to execute neuromarketing to target consumers; because a book’s cover matters. As a digital marketing intern for the DONUT Daily News, I’ve learned that every tidbit, such as spacing, abbreviations, caps, fonts, color, and emojis, is essential to make the DONUT seem appealing and approachable. Dr. Johnson uses Netflix’s thumbnail as another example because, in some cases, the only thing you can judge a book by is its cover, and you’re more likely to have an affinity for a personalized cover. For example, I have opted to watch Korean, French, or Spanish flicks dubbed in English over American movies because of the attractive covers or trailers under my custom profile. And, believe it or not, there are a few scenarios where my gender reveal aesthetic would be a turnoff, such as when I’m looking for a bone-chilling horror film on Halloween night. Visual cognition affects the efficacy and growth of companies and how consumers develop their tastes; the mind explores and purchases based on the stimuli presented. Some hidden gems stay hidden because their exteriors are not shiny enough.
Lastly, Dr. Johnson addresses how the Neuroscience Initiative will bring people from diverse companies, from Toyota to Snapchat, to campus to recreate and improve seemingly unrelated companies’ harmony in the real world. Neuroscience in business is “exploding around us,” in Dr. Johnson’s words, allowing trends and innovations to make consumerism delightfully unpredictable, spicing life up. Since these neuroscience and psychological strategies apply to virtually every area in business, discovering more about neuroeconomics can help the unpredictability of consumerism and results of business management execute more smoothly. As seen from the growth in tie-dye clothing during the counterculture to the recent increase in AI investments, businesses must constantly adjust to changing times. Neuroeconomics in business is a consistent beacon of light for businesses to self-manage efficiently.
I’m glad I’m not “rational like machines,” as used by sophomore Sophie Feldman. My gender reveal aesthetic helps guide my exploration of products, which gives my personality and purchases flair. Because of my irrationality, my purchases are unlike anyone else’s in the world, which I would rather have than a cookie-cutter world of cookie-cutter humans making cookie-cutter purchases. However, it turns out my gender reveal aesthetic does have some economic benefits– Tiffany & Co will always have me as a forever customer.
Hello Jullea,
I was drawn to your comment due to the depth of understanding and personal touch you provided in relation to the article. Your unique perspective encapsulates what Dr. Johnson articulates so well: the intersection of neuroscience and business profoundly impacts the way we work, consume, and perceive our environments.
The concept of the ‘neuroscience of teaming’ that you explored, dovetails into the recent global shift towards remote work. Like you noted, the traditional in-person interactions that facilitated relationship-building are no longer present. The pandemic-era work environment has led to feelings of isolation and disconnection, accentuating the need for innovation in team management. The idea that neuroscience can aid in predicting team dynamics and facilitating stronger connections is certainly a groundbreaking approach that could revolutionize HR practices.
I found your mention of the “gender reveal aesthetic” intriguing. It effectively demonstrated how our subconscious preferences – like your color inclinations – impact our consumer behavior. It’s the exact mechanism that Dr. Johnson was alluding to with Netflix’s thumbnail strategy, a great instance of neuromarketing at work. These subtle, yet powerful influences shape our decisions, often without us even realizing it.
To add to your reflections, I’d like to bring in a dimension of neuroscience that was not explicitly discussed but seems implicit in these practices – ethics. As neuroscience continues to inform business practices, ethical considerations around consumer privacy, data handling, and consent gain paramount importance. Striking a balance between leveraging neuroscience for business innovation and ensuring ethical responsibility could be one of the biggest challenges we face in the near future.
Neuromarketing, as effective as it can be, also raises important ethical considerations. For instance, how much influence should businesses be allowed to exert on consumer decisions? Is there a point where this influence becomes manipulation? And who determines what is acceptable and what crosses the line?
Your point about businesses like Tiffany & Co benefiting from individualized aesthetics highlights the impact of neuroscience in business. But as we move forward, striking a balance between leveraging these scientific insights and ensuring ethical business practices will be critical.
Looking forward to your thoughts on the ethical implications of these developments!
From my experience, neuroeconomics is most advantageous on the internet as proved by Netflix’s success. And, the pandemic surged internet usage. Naturally, it is also the period I’ve met with neuroeconomics techniques – the first of which is “the neuroscience of teaming.”
I was freshly out of my prep year and started the 9th grade. This year, I had half the English classes of the prep year, so the lessons had to be more efficient to enhance my English (It is my and my peers’ second language). With the awareness of our situation, my teacher started to assign us to breakout rooms to work with each other after about a month of observing us. Little had I known, she was applying a very similar technique to one stated by Dr. Johnson to create superior team chemistries. She even published a research paper about the year she spent with us experimenting with neuroscience. Honestly, her lessons were the ones that made me love literature.
Again during the pandemic, I have met with neuromarketing through Google ads. Naturally, I also encountered relatives explaining oddly accurate ads with the big tech companies listening to us. Of course, that was a myth, but also it had some truth in it. For some context, I love horror media. So about three months ago, I saw an ad with an image of a pentagram out of a horror movie in the dead of night. I was startled and scared but intrigued to click on the ad. After about 15 minutes of doubting, I found the courage to click on the ad and got directed to a game website called “Diablo IV.” Its timing and target were so great that I checked all the other games of the producer to get some idea of the pentagram in the ad. The next day, my brother confessed that he Googled this game using my computer.
Almost proving the power of these ads, I know people that buy stuff usually from these ads, one being my father. He even got his teeth replacement surgery online from these ads. As he describes, he was getting dental ads because of the articles on the topic he read a week before, and ads that the company in the ads was an economical option. So, he just fell into the trap of neuromarketing because of his biological systems, as Dr. Johnson points out.
So, these big tech companies track our browsing history and cookies to appeal to our wants and needs. And due to the mere exposure effect, we get more inclined to buy products from the ads we see the most. That’s how the companies cleverly use neuroeconomics to promote, visit, and buy from them.
All in all, neuroeconomics fascinates me with how it subtly enhanced my learning, tricked my father, and showed me an unforgettable ad. Luckily, it will flourish even more with the launch of Apple’s Vision Pro. I am eager to see which innovative neuroeconomic techniques the future holds.
“We are built in such a way to make irrational decisions.”
Sophia Feldman [On how neuroeconomics studies the underlying brain mechanisms that
explain why we make those decisions.]
Sophia shows in her quote the importance of neuroeconomics without explicitly saying it. This field of science can allow us to look at our decisions from different perspectives. Finally, from the rational one: Why finally? Otherwise, it is not possible to do so.
We manipulate our perception of action (obviously), but even when we ask an impartial observer to judge our decisions, we will not obtain the perfect outcome. The imperfection of the human brain binds every potential impartial observer.
Personally, this article helped me realize how important milestones may be ahead of us. Every little improvement in society’s decision-making has the potential to prevent a disaster. Do you think I exaggerate? Then look back to the crisis in 2008. Now we know that human greed was the main cause, but there were no rational ways to gauge it.
For the purpose of Wharton Global Youth
CW Contest R4, 2023
I really believe in transformative power of brain science for business because I can see that is already has some really good implication for business, such as marketing and teams, and I think that in future more and more aspects of business will begin to rely on neuroscience.
While reading this article, I couldn’t help but be reminded of my childhood. I grew up surrounded by the shelves of my family’s local small business. To fill my free time, I curiously watched the customers and memorized their orders, be it a liter of Coca-Cola or a bag of Lay’s Barbeque chips. Without even realizing, my 8-year-old self was incorporating concepts of neuroscience into our family business. Whenever a customer came in and forgot what she was getting, I’d remind her of her two daily gallons of diet green tea.
The finance world is thought to be strict, cold, and straightforward; business deals are dealt with no mercy, relations with coworkers have established boundaries, and the 9 to 5 schedule is consistent. However, Dr. Johnson’s optimistic inputs on how neuroscience can add some color into this world is intriguing.
While neuroscience is often associated with the study of brain function and cognition, its applications extend far beyond mental health. The business world, which is slowly becoming disconnected through the remote job market, is more in need of effective working environments than ever.
Studying the brain has double-sided applications in the finance hub: it can increase interest among customers while instilling creativity among coworkers.
Dr. Johnson mentioned in the article, “One of my favorite things is to show students all the different ways that neuroscience is being put into practice in jobs and industries.” Neuroscience adds a crucial aspect to the finance world on a level never seen before: the creation of personalized products tailored to individual needs and preferences. By understanding the neural mechanisms behind decision-making and consumer behavior, companies can develop products that resonate more deeply with their customers. This approach not only enhances customer satisfaction but also fosters brand loyalty and drives sales. Products are created to appease everyone, but that is never possible. However, with the added aspect of the study of behavior, humans can have personalized products, be it personalized medication, entertainment, and many other things.
Expanding on this idea, researchers have already begun to look into precision psychiatry, a field that can be very lucrative if successful, which looks into psychological treatments that are personalized to a patient’s needs. Just as a human’s behavior and genetic makeup is unique, so are their needs. Combining finance and neuroscience does conjure the possibility of improved working environments and creative products. However, it also adds a large personalized aspect to the game. Customers can get products suited specifically to their preferences while workers are able to maintain a peaceful and effective work environment that boosts productivity. Ultimately, the integration of neuroscience into finance promises not only to enhance business practices but also to enrich the human experience, fostering a world where both consumers and workers thrive in a more personalized and empathetic landscape.