Behavioural Economics, the power of music and the democratizing potential of blockchain are the driving forces behind the success of Rebecca Spour of Digitizing Assets
Evolutionarily speaking, we are the same animals that hunted and foraged for food ten thousand years ago. You might think we have improved our lot since then, but in many ways, our forefathers had it made: no loans to repay; no Facebook; no fad diets or utility bills. Early humans never felt the emptiness of an ignored Tweet or the anxiety of a hipster cafe. The only axe to grind was, well, the literal axe they might grind from time to time.
It’s worth remembering this when you go online to invest in cryptocurrency. Us humans behave rationally most of the time, making informed, calculated decisions based on research and due diligence, but put us under a little pressure and we are back in the wild, ready to fight or take flight.
What factors inform the financial choices we make? This is the question at the heart of Behavioural Economics. For many years, economic models were constructed on the assumption that we, as rational humans, made a prudent decision based on careful consideration. However, the past few decades has seen academics outline a vast range of economic theories in response to the increasing complexity of modern life.
For instance, at the height of the crypto bull market investors made decisions that appeared – in hindsight admittedly – far from rational. Rebecca Spour, of international consulting company Digitizing Assets, has leveraged her background in neuroscience to forge a successful financial career, advising investors on how best to take advantage of the digital asset revolution. I’m hoping that Rebecca can shed some light on why we invested in blockchain products that we knew so little about and had no reason to trust.
“My interests are at the intersection of neuroscience and finance. For so long we have followed modern portfolio theory, which assumes that people who are growing capital examine the technical fundamentals considering different time horizons, historical and geographical factors for example – and follow a certain business or investment model. But with ICOs, the promise of democratising capitalism and leveraging technology to build transparency and trust played a part in influencing the behaviour of investors.
There are a lot of shortcuts to simplify the assessment of probabilities in a decision-making process. Researchers must try to understand and reduce the deviation from the prevailing rational choice models. However, we are finding that these biases are sometimes systematic and not actually random. As a result, they often cannot be predicted.
Herbert Simon introduced the concept of bounded rationality. If the decision-making process is subject to outside factors, such as time constraints or the unavailability of information, then the process will be satisfactory rather than properly rational. And if decisions are not rational, then why are they being made? There are many reasons. Many ICOs promised to solve weighty problems. Investors responded to those promises, which served to mitigate the investment risk.
Decision makers often fall back on a rule of thumb approach, or an heuristic approach as we say in Economics. Investors anchor their reasoning to familiar states that they see in the world. Availability of information is very important. Retail investors have less access to information than venture capital funds, and this is one reason why heuristics is employed. Remember, the desire to be included is human nature. When you have suffered struggles, feeling part of a mission naturally informs decision making.”
Is the solution to somehow put our feelings and emotions aside, and approach investment opportunities dispassionately, somehow blocking out the hype and FOMO pressure?
“Emotion is inevitable in life. When we are looking at an investment opportunity, the approach is different from person to person. And understanding what the crowd thinks in the age of digital media is difficult. Many brands haven’t caught onto a term called ‘psychographic segmentation’ yet and still try to market to the masses instead of the quantified individual.
Assessing risk is challenging when you are entering an investment space for the first time, as many retail investors were during the ICO boom. There were no regulatory frameworks and investor protection mechanisms in place. A lot of people got badly hurt, but the overall promise of transparency and democratisation is still something I believe very strongly in.”
As anyone who has spent time on cryptocurrency-related social media will know, the cryptoverse is quite a tribal ecosystem. Schilling XRP appears to be the full-time job of some Twitterers, and you can’t be for both Bitcoin ABC and Bitcoin SV. With crypto, one is forced to take sides. This doesn’t happen with gold and oil, so why are we so passionate about our digital assets?
“It is part of the power of crowdfunding. It gives people a voice and a choice. Many projects are more like movements. Satoshi created a principal that was designed to incentivise algorithms to play by the rules, and we have tried to apply that to people. An economist might argue that people will make rational choices and take decisions that offer the highest yield, and this is the route to an efficient market that benefits everyone. But if someone is hungry and has $50 to last until the end of the month, it is unreasonable to expect that person to make decisions for the betterment of humanity.”
Rebecca’s other passion is music. In fact, her first exposure to blockchain was through the innovative work of singer/songwriter Imogen Heap. “I was a financial adviser at a large firm but I was also passionate about the arts. My mother was a music teacher and this certainly had an effect on me. I had friends who were involved in smart contract coding and they told me about Imogen Heap and the Mycelia project. I was fascinated, as I had been a fan of hers for many years. But music generally is part of everything I do. I have music on constantly – it’s a huge part of how I try to stay balanced as a person.”
When we speak, Toronto, where Rebecca lives, is caught in the frosty grip of a polar vortex. But even with the sub-zero temperatures to contend with, Canada is still a great place to call home, although Rebecca won’t be lulled into stereotyping her compatriots as liberal, sensible people.
“I don’t like to put a political label on any country. Canada is a place that celebrates diversity and the potential that everyone can bring to our nation. We help refugees, but also protect our established communities. We don’t have a perfect system, but I can see why Canada was recently voted the best place in the world to live. Toronto is a great city. Of course, it gets pretty cold sometimes, but we’re used to it. You can be who you are here, that’s what’s really phenomenal about Canada.”
I’m always fascinated to learn what Canadians make of its neighbour to the south, particularly as Canadian Prime Minister Justin Trudeau appears to behave in a manner that stands in stark contrast to the ever-controversial President Trump. But Rebecca is not one to bait strangers, much to my disappointment. “I try to empathise with any leader in the world. Being a leader and trying to represent millions of people can’t be easy. I like Melania’s fashion – she’s made some interesting statements with her clothing. I don’t want to give President Trump a hard time and I don’t want to criticise him either. Look, instead of us all criticising each other, let’s talk about ideas and innovations and how we can impact the world and leave a positive legacy.”
Rebecca also takes a positive stance when we discuss women in tech and business leadership. “We focus too much on gender in business. Of course, in any type of industry, there is a gender gap – the digital asset sector is no different. But there are great opportunities for women in this space, and that’s what I would rather focus on.”
So positive is Rebecca, that she bursts into song at one point in our conversation, with a voice like a gush of warm air in the cold depths of a Canadian winter. Her performance is in response to a question about legacy, also the title of a Nichole Nordeman song it transpires. The words may not be her own, but she sings them with conviction and grace.
I won’t lie, it feels alright to see your name in lights,
We all need an ‘Atta boy’ or ‘Atta girl’
But in the end, I’d like to hang my hat on more besides
The temporary trappings of this world.