Science: From the mid-1990s, economists inspired by psychologists started exploring the true nature of economic and later financial, decisions. Discoveries about how humans make decisions undermined but also enriched the traditional model of the rational, self-interested decision-maker. Researchers started to examine cognitive limitations, social aspects of decision-making, the impact of emotion (such as fear and greed) and many other ways in which humans fail to make optimal economic decisions. Behavioral Economics, Behavioral Finance, and Strategic Thought emerged as new disciplines. They are now about to link up with economic history and political economy. -Why? It’s because humans are an evolved species with a specific (and limited) behavioral repertoire that, generation after generation, is bound to repeat the same mistakes when it comes to money, strategic decision-making, and most other things.
The 2008 financial crisis moved this new research into main stream. Experts in finance and economics turned to behavioral and historical perspectives to understand why it had happened yet again: Why economic systems go through bubbles and crashes and will do so in the future.
A novel and still fringe (but promising) topic in decision-making is intuition for which there is now sound scientific evidence, and which can be very helpful in competitive environments.
Practice: Discoveries of systematic human decision flaws have impacted governance, strategy, management and finance. High-level decision-makers and those who inspire to such positions increasingly realize that technical (e.g. mathematics, accounting) skills or knowledge (e.g., familiarity with regulations or law) are of limited use unless their thinking and decision-making is unbiased, and free from irrelevant emotion and herd behavior. Fortunately, we increasingly know how to correct, or at least improve, economic decisions. Additionally, humans as a species have a specific set of behavioral tendencies: knowing the mistakes others tend to make allows an informed agent (including yourself if you so choose) to exploit their weaknesses for a competitive advantage.