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Resilience in the Face of COVID-19
Brunswick Senior Advisor Paddy McGuinness, former UK Deputy National Security Adviser, on how businesses can chart a course amid the fear and uncertainty. We are all becoming more familiar with this disease than we care to be—and may become yet more so. Still uncertainty remains. It began even with the terminology. Coronavirus is a descriptor, a general term. Under the microscope, the virus has crown-like spikes, hence corona. The common cold and variances of it are coronaviruses. COVID-19 (as in Corona Virus Disease 2019) is the effect that this particular coronavirus has on the human being—that’s the disease the world’s grappling with. That’s the distinction between the two terms. We’ve now spoken to more than 150 clients about their situation. That has given us a broad view of the corporate response across affected geographies from Asia, through the Middle East and Europe to the Americas, a window into how those responses have played out and the challenges continually unfolding. Here’s what we’ve been advising our clients: First, develop a single view that’s grounded in professional, well-sourced information. In government we called this “a commonly recognized information picture.” That view has to be based on the responsible medical experts: the World Health Organization, the Center for Disease Control, Public Health England and similar bodies. You do not get it from the newspapers, from social media, from friends, or even your local medic. You operate on the basis of informed medical and public health advice. The current vocal challenge to that advice in Europe and the US is not reason to depart from it as your foundation for the actions you take. A leadership team needs to develop the discipline to clarify that generic narrative into a specific frame for their business context and then operate within it. It’s dangerous for leaders to start pretending they’re epidemiologists. Have a single view and stick to it. I’ve been on calls with leadership teams where there’s agreement on that view and then someone says, “But I read that the disease ...” Don’t go there. Don’t work on that basis. The uncertainty is difficult enough to deal with. Don’t add to it. You will be focused first on the safety—the human consequences—of your course of action and then on the resilience of your business. That may cause you to anticipate some of the “Non Pharmaceutical Interventions” that government makes. Brunswick has. Having established your position, think through how you’re going to communicate it to employees, customers, and investors. What about your suppliers and regulators? How might you engage with local public health officials and local authorities? Exaggeration and understatement are equally unhelpful. These engagements need to be tailored, yet aligned within your broader narrative. Leaders also need to plan for reasonable worst-case scenarios. Covid-19 has already spread in a way that we hoped wouldn’t happen, and in a way that standard business continuity planning doesn’t cover. Now, many in the workforce have to work from home. Among other considerations, that produces additional cyber and data vulnerability. What if schools close and your employees have children at home they have to look after? What will your IT capabilities be if 20 to 40 percent of your team is incapacitated at any one time during the peak period? Are your HR teams prepared to deal with the most unfortunate case, where employees or their close relatives pass away? In extreme times, it can be tempting to take extreme positions. A lesson of crises is never to enter into something without knowing how you’re going to get out of it, how to reverse it. If companies are going to start shutting down their operations, how are they going to open again? On what justification? Taking fixed positions amid great uncertainty can prove restrictive—or counterproductive—when circumstances change. Resilience is the ability to respond and recover to the state prior to the event, having learned the lessons of the event. Respond and recover—that’s the long-term goal here. Covid-19 will pass. We know from other pandemics that recovery does come. How can you position yourself to take advantage of that recovery, to get back with speed and strength? Because some companies will. Now more than ever senior leaders need to talk about how things will be the other side of the crisis and to describe signs of recovery. This is easiest for enterprises with transnational reach. They recount what is happening in Asia as the disease passes so that European and US stakeholders can see beyond the immediate demands of emergency response. On a personal level, stick close to the medical experts and the people who know what they’re talking about. I may well get Covid-19 here in the United Kingdom. I assume that, like the vast majority of healthy people who get it, I will experience mild to moderate symptoms and recover just fine. If I don’t, I want health services to be available. I want the spread to be managed at sustainable levels, so I am doing what Government asks of me and avoiding all but essential contact with others and unnecessary travel. I expect that more will be asked of me, my family and colleagues before we are through this. I wouldn’t let Covid-19 overwhelm you in your daily life, given what we know. That’s certainly my intention: carry on with as much normality as possible, support others and use the unexpected circumstances to prepare for the recovery phase which will come.
Sir John Hegarty and the power of doing interesting things
Sir John Hegarty is the Creative Founder of the global Ad agency Bartle Bogle Hegarty (known as BBH) and is the world-renowned creator of legendary ad campaigns for Levi’s, Lego, and Audi, Johnny Walker’s Keep Walking, the Links Effect amongst many others. John is also one of TIE’s incredible mentors. His Mantra Do Interesting Things and Interesting Things will happen to you is something I personally find so inspiring. Today, John will inspire you with wonderful nuggets on how to live your best life.
Criminals are opportunists, and the COVID-19 global onslaught has brought with it not just health threats but cybersecurity risks, too. Within weeks of the COVID-19 outbreak, hackers have already commandeered the virus to unleash cyberattacks, sending emails purporting to provide coronavirus guidance laced with cyberattack software. In one more alarming case, they appear to have attacked a hospital and forced it to cancel operations and take key systems offline. As the outbreak continues to intensify, the UK National Cyber Security Centre (NCSC) warned that the volume of these attacks will likely increase, pointing to the increased registration of coronavirus-related webpages. Criminals are opportunists, and the COVID-19 global onslaught has brought with it not just health threats but cybersecurity risks, too. As companies move to protect the health of their workforce, it’s also important to protect the systems they’re using to run their businesses. It’s especially important for hospitals to shore-up their cyber defenses. If they don’t, just as they are racing to respond to COVID-19, they could face situations like University Hospital Brno in the Czech Republic, which earlier this month was forced to divert patients and cancel planned operations while it worked to address an attack. The most likely cyber threats are email “phishing” campaigns that use the coronavirus as a lure to get the recipient to open an attachment that contains malware. According to the NCSC, such “phishing” attempts are happening on a global scale in multiple countries, which has led to both a theft of money and sensitive data. Similarly, known hacker groups have been launching websites purporting to sell masks or other safety-related measures for coronavirus, possibly to use them as another vector for cyberattacks. The NCSC has also cautioned that these attacks are “versatile and can be conducted through various media, adapted to different sectors and monetized via multiple means, including ransomware, credential theft, bitcoin or fraud.” The cybersecurity firm ProofPoint has seen a rise in these cyberattack emails with COVID-19 themes since January. Both ProofPoint and IBM’s X-Force cybersecurity unit identified a campaign that targeted users in Japan with an email masquerading as a coronavirus information email that carries with it a potent type of cybercrime software. In the US, the Secret Service recently warned of scams from online criminals posing as sellers of high-demand medical supplies to prevent coronavirus. They’ll require payment upfront and not send the products. Cyber criminals have also been posing as the World Health Organization and the US Centers for Disease Control and Prevention (CDC), sending fraudulent emails from the former and “creating domain names similar to the CDC’s web address to request passwords and even bitcoin donations to fund a vaccine” for the latter. In addition to the use of the coronavirus as a cyberattack vector, the growing need for working remotely to mitigate the spread of COVID-19 has increased companies’ exposure to cyber threats. The increase in remote work creates more opportunities for hackers to make inroads from less secure locations. Companies should also ensure they can provide adequate security when their whole workforce is remote. They should quickly work through the security implications of workers choosing to switch to insecure personal devices. With national-level pressures on home broadband, staff will also resort to mobile hotspots, which are often less secure. And enabling remote connectivity at scale, with the right security configurations, can be a challenge even with months of preparation time. A recent US Department of Homeland Security COVID-19 cybersecurity notice pointed to the importance of making sure that security measures are up to date for companies’ remote access systems. Additional measures to consider include enabling multifactor authentication—which can require two or more steps to verify a user’s identity before granting access to corporate networks. The NCSC is also working to identify malicious sites responsible for phishing and cyberattack software. A final looming cyberthreat related to Covid-19 is disinformation. The World Health Organization and other agencies have for months been combatting disinformation campaigns spreading false information about the origins of and treatments for COVID-19—reports that seed more confusion and increase risks to society. All of that means that computer virus risks are emerging as the biological virus spreads—and both are a threat to business. Cyber risk mitigation efforts should account for the different ways that a company can be affected, including impacts on the technical, operational, legal and reputational aspects of a business. Often, the reputational effects of a cyberattack are more significant than direct the business or technical impact. To mitigate all of the potential impacts of cyberattacks taking advantage of the Covid-19 outbreak, companies should: Review and update crisis and cybersecurity response plans, and ensure internal and external communications response plans are robust. Confirm that members of the crisis management team understand their roles and responsibilities. Make sure all communications channels have the latest security patches. Review and update access controls, particularly when remote access is used heavily, to make sure that only those who require access to sensitive systems to do their jobs have it. Take extra care when handling medical information. For companies managing employees who have contracted Covid-19, it’s important that personal health information is handled with strong security measures, including encryption. Educate employees about the cyber risks that may attempt to capitalize on fear of the Covid-19 virus—whether it be phishing email or disinformation. Covid-19 poses a number of short- and long-term challenges to business resilience, and the virus’s trajectory is quick and unpredictable. But it’s possible to anticipate and mitigate a number of the cyber threats that will try to ride the virus’s coattails. The companies that do will be more resilient and better positioned to withstand the direct health and operational effects of the virus.
Best-selling author Peter Singer talks with the Brunswick Review about winning the increasingly crowded and contentious war for attention What do Isis and Taylor Swift have in common? According to author and digital-security strategist Peter Singer, both the terrorist organization and pop star are fighting for your attention online and employing similar tactics to try and win it. ISIS kicked off its 2014 invasion of Mosul with the hashtag, “#AllEyesonISIS.” More recently, the terror group posted photos of its members holding cute cats in an effort to make them more relatable – tactics familiar to most celebrities and online marketers around the world. These online battles, the rules governing them, and their real-world impact are the focus of Mr. Singer’s latest book, LikeWar, which he coauthored with Emerson T. Brooking, at the time a research fellow with the Council of Foreign Relations. “A generation ago people talked about the emergence of cyber war, the hacking of networks. A ‘LikeWar’ is the flip side: the hacking of people and ideas on those networks. Power in this conflict is the command of attention,” says Mr. Singer, who in addition to his writing is also a strategist and Senior Fellow at the New America Foundation. Pretty much everyone who posts online – from governments to marketers to reality TV stars – is a combatant in this fight for virality, according to Mr. Singer. Triumph in a “LikeWar” and you command attention to your product or propaganda or personality. Lose and you cede control of the spotlight and the agenda. Mr. Singer recently spoke with Brunswick’s Siobhan Gorman about the trends he’s seeing in LikeWars around the world, and what companies can do to avoid being on the losing end. What were you most surprised by in researching LikeWar? One of the more interesting characters in the book was at one time voted TV’s greatest villain: Spencer Pratt, a reality TV star on MTV’s “The Hills.” He’s basically one of these people who became famous almost for nothing. But what Pratt figured out really early was the power of narrative, which allowed him to become famous through, as he put it, “manipulating the media.” In the same week, I interviewed both Pratt and the person at the US State Department who’s in charge of the US government’s efforts to battle ISIS online. And Pratt, this California bro who’s talking about how to manipulate the media to get attention, understood more of what was playing out online than the person at the State Department. Spencer Pratt, a reality TV star… understood more of what was playing out online than the person at the State Department.” How much have online conflicts changed the rules in the last few years? First, the internet has left adolescence. It’s only just now starting to flex its muscles and deal with some of its responsibilities. The structure of the network changes how these battles play out. So, it’s this contest of both psychological but also algorithmic manipulation. What you see go across your screen on social media is not always decided by you. The rule makers of this global fight are a handful of Silicon Valley engineers. Another aspect of it is that social media has effectively rendered secrets of any consequence almost impossible to keep. As one CIA person put it to us, “secrets now come with a half-life.” Virality matters more than veracity; the truth doesn’t always win out. In fact, the truth can be buried underneath a sea of lies and likes. And the last part is that we’re all part of it. All of our decisions as individuals shape which side gets attention, and therefore which side wins out. But you highlight that this is playing out differently in China. Exactly. There are two different models shaping the internet, and shaping people’s behavior through the internet, playing out in the West and in China. Essentially, internet activity in China is all combined. Look at WeChat, which is used for everything from social media to mobile payment; it’s Amazon meets Facebook meets Pizza Hut delivery. And you combine that with an authoritarian government that’s had a multi-decade plan for building out surveillance, and you get the social credit system, which is like Orwellian surveillance crossed with marketing. The social credit system allows both companies and the government to mine and combine all the different points of information that an online citizen in China reveals of themselves, and then use that to create a single score – think of it as your financial credit score of your “trustworthiness.” For example, if you buy diapers your score goes up, because that indicates you’re a parent and a good parent. If you play video games for longer than an hour your score goes down because you’re wasting time online. And it’s all networked. Your friends and family know your score. It creates a soft form of collective censorship; if your brother posts something that’s critical of the government, you’re the one who goes to him and says, “Knock it off ’cause you’re hurting my score.” And you do that because the score has real consequences. Already it’s being used for everything from seating on trains and job applications to online dating. Your score literally shapes your romantic prospects. So, you have this massive global competition between Chinese tech companies and other global tech companies not only for access to markets, but also for whose vision of the internet is going to win out. How can companies win a “LikeWar”? Everyone’s wondering: What are the best ways to drive your message out there and have it triumph over others? The best companies I’ve seen create a narrative, have a story and have emotion – in particular, they have emotion that provokes a reaction of some kind. It’s all about planned authenticity. That sounds like a contradiction, but it’s about acting in ways that are genuine, but are also tailored because you’re aware that the world is watching you. A good comparison here is Wendy’s versus Hillary Clinton. Wendy’s is a hamburger chain – not a real person – but it acts and comes across as “authentic” online and has developed a massive following. They’re funny, irreverent. Yet Hillary Clinton – a very real person – never felt very authentic in her online messaging. And that’s because it involved a large number of people – by one account, 11 different people – all weighing in on what should be tweeted out. Inundation and experimentation are also key. Throwing not just one message out there, but massive amounts of them. Treating each message as both a kind of weapon, but also an experiment that allows you to then learn, refine, do it again, do it again, do it again. How do you measure and gauge battles online now? Is it just volume? It all depends on what your battle is, what your end goal is. Is it driving sales? Is it getting people to vote for you, to show up to your conference? This is what the US gets wrong about Russian propaganda and its disinformation campaigns. We think they’re designed to make people love or trust a government. From its very start back in the 1920s, the goal of propaganda coming from the Soviet Union, and today Russia, has been instead to make you distrust – distrust everything, disbelieve everything. And we can see it’s been incredibly effective for them. First, we need to recognize that we’re a part of the battle. In fact, we’re a target of most of the battles. How effective have disinformation campaigns actually been in the US? What can be done? One of the scariest and maybe saddest things we discovered is that the US is now the story that other nations point to as the example of what you don’t want to have happen. There’s no silver bullet, of course. But one example was something called the Active Measures Working Group, a Cold War organization that brought together the intelligence community, diplomats and communicators to identify incoming KGB disinformation campaigns and then develop responses to them. We’re dealing with the modern, way more effective online version of something similar, and we haven’t got anything like that. There are also digital literacy programs. I find it stunning that the US supports education programs to help citizens and kids in Ukraine learn about what to do and how to think about online disinformation, but we don’t do that for our own students. What can people like you or me do? First, we need to recognize that we’re a part of the battle. In fact, we’re a target of most of the battles. And we need to better understand how the platforms work that we use all the time. A majority of people actually still don’t understand how social media companies make money. The other is to seek out the truth. How do we do that? And the best way is to remember the ancient parable of the blind man and the elephant – don’t just rely on one source, pull from multiple different sources. That’s been proven in a series of academic studies as the best way to find the facts online. It’s not exactly new, but it’s effective. Where will the next online war be fought? The cell phone in your pocket, or if we’re being futuristic, the augmented reality glasses that you wear as you walk down the street. It’ll come from the keepsake videos that you play on them. If you want to know what comes next in the internet there have always been two places to go: university research labs and the porn industry. That’s been the case with webcams, chat rooms and so on. What we’re seeing playing out now are called “deep fakes,” which use artificial intelligence to create hyper-realistic videos and images. There’s also “madcoms,” which are hyper-realistic chat bots that make it seem like you’re talking to another person online. Combine the two, and the voices, the images, the information that we’ll increasingly see online might be fake, but hyper-realistic. The tools that militaries and tech companies are using to fight back against the AI-created deep fakes are other AI. So, the future of online conflict looks like it’ll be two AIs battling back and forth. Let me give you a historic parallel, because we’ve been dealing with these issues for a very long time. The first newspaper came when a German printer figured out a way to monetize his press’s downtime by publishing a weekly collection of news and advice. And in publishing the first newspaper, he created an entire industry, a new profession that sold information itself. And it created a market for something that had never before existed – but in creating that market, truth has often fallen by the wayside. One of the very first newspapers in America about a century later was called the New England Courant. It published a series of letters by a woman named Mrs. Silence Do-good. The actual writer of the letters was a 16-year-old apprentice at the newspaper named Benjamin Franklin, making him the founding father of fake news in America. In some sense it’s always been there, using deception and marketing to persuade people to your view.
Under Armour’s response to a cyber attack achieved the seemingly impossible: Rather than fueling outrage, it actually drew praise. Brunswick’s Siobhan Gorman reports. In late March last year, Under Armour learned that its MyFitnessPal app, which tracks diet and exercise, had a data breach that affected 150 million users. It’s not uncommon for companies to take several weeks—or even months—to publicly announce a cyber attack of that scale. Under Armour did so in four days. Tokë Vandervoort on What Made The Difference 1. Relationships External relationships are how we found out about the breach, and they’re how we knew which advisers and expertise to bring on board right away. We had those in place and had put a lot of effort into maintaining them and keeping them up to date. Internally, the trust we’d built allowed us to move as quickly as we did. Both paid huge dividends. 2. Preparedness I don’t know anybody whose incident response team meets every other week, but ours does. Sometimes we’re just shooting the breeze, but other times we’re asking: “What’s going on in the business? What are you hearing? What’s happening?” We enjoy a great relationship with the product team, the engineering team, the IT security team, the IT team ... It’s not just sharing information, but also getting to know one another, which ties back to the importance of relationships—knowing what’s going on and who to call. 3. Practice We do a table top every year for a data incident. I’ve heard people say table tops are too expensive—we make up our own. Security and privacy get together and create a two- or three-hour game. One year it’ll be a supply chain issue, another year it’ll be a data event. We invite decision-makers from across the organization so that people then have a sense of what it feels like to make decisions without full information and to have to do so under a lot of pressure. People appreciate not just how hard these decisions are, but they know who the other people are, and the issues that they’re confronted with. The companies that have the most confident response are the ones where everybody knows their roles—not some giant team of people who have never worked together. When you have complete clarity of purpose, focus and leadership, you can get anything done.
Rob Campbell on why it pays to shake things up
Rob is a mischief-maker and passionately believes in culture, creativity and chaos. He’s worked with names like NIKE, Virgin and Metallica at agencies including Cynic, Wieden+Kennedy and R/GA and has proudly been called an “asshole” by Lars Ulrich, Richard Branson and Dan Wieden. I ask Rob what’s he’s done in his life that has perhaps raised some eyebrows, but that he’s most proud of. He tells us his COVID story, and shares positive insights. We hear how three African American women fundamentally changed his view on the world, and how being exposed to completely different cultures have shaped his life.
When will we know the outcome of the 2020 White House race?
Dr Trevor McCrisken comments: "Election Day is upon us. With an unprecedented 90 million Americans already having cast their votes early, the final push is all about getting as many supporters as possible to turnout to vote. "Early indications are that Biden and the Democrats are doing very well but they'll be trying to convince their remaining supporters not to be complacent and to get to the polling stations; for Trump and the Republicans turnout is also crucial as they hope for a late surge of support to secure four more years in the White House and to retain control of the Senate in the US Congress. "One big question is how long it will take to know the results. Different states have different rules about when they can count postal votes and the millions of in-person votes cast early. Others will accept postal votes that are postmarked up to and including Election Day itself. Many states will be declared overnight on Tuesday into Wednesday as per usual, but several crucial states may take much longer to be decided if no clear winner emerges and the vote counts and recounts go on for days or even weeks. "If one candidate or other emerges with a strong lead across 25 to 30 states then we're likely to know the winner of the presidential race on Wednesday. But if the margins are as close as they have been in recent elections in crucial swing states then it could take much longer for the results to become clear. Legal challenges to swing state results are very likely, especially if Biden or Trump has only won those states by relatively small numbers. We may not know the winner for several days - if not weeks or even a couple of months! "The last disputed presidential election in 2000 was not decided until the US Supreme Court intervened in mid-December to stop recounts in Florida, meaning that George W. Bush defeated Al Gore. The courts could again be crucial in settling the contests this year, not only in Florida but in other swing states if the voting margins are very close. With Trump and Senate Republicans having successfully tipped the balance to conservatives on the Supreme Court, newly appointed Justice Amy Coney Barrett could prove a significant character in this year's election battle." 3 November 2020
Tomorrow is the day. After a presidential campaign like no other in a year like no other, America will either elect a new president or give U.S. President Donald Trump four more years in the White House. What will happen in possible swing states like Florida, North Carolina, Ohio or Pennsylvania? Will Arizona or Georgia impact the end result? Like all U.S. presidential elections, the balance of the Electoral College rests on just a few states. There are a few key points to cover if you are a journalist: • What were the top issues for Florida voters? • Are mail-in ballots going to be an issue? • It was all eyes on the Sunshine State in 2000 when it took weeks to know the results – what’s changed since then? • And did any candidate do or say anything in particular to sway or disappoint the Florida electorate? • What will be the deciding factor in other swing states? • Did the debates persuade undecided voters? It is going to be a busy day, and potentially a long week, as America counts its votes. If you are covering the election, then let our experts help. Kevin Wagner, Ph.D., is Florida Atlantic University’s renowned political science expert. He is here to answer all your questions and is available for interviews. Simply click on his icon now to arrange an interview today.
MEDIA RELEASE: Stay Alert Stay Safe: Daylight saving time ends soon
CAA South Central Ontario ( CAA SCO) is reminding all motorists and pedestrians to stay alert as daylight saving time ends at 2 a.m. on Sunday, November 1. The return to standard time means fewer daylight hours and reduced visibility for all road users. “We know that typically, in November, there is a spike in collisions between motorists and pedestrians. Road safety and pedestrian safety are a shared responsibility. Taking precautions and being aware of other road users helps us all arrive at our destinations safely,” says Raymond Chan, manager of government relations, CAA SCO. While pedestrian incidents increase every year at this time, the latest research indicates the potential for harm is even higher today due to COVID-19. Earlier this year, CAA SCO conducted a study of 1500 Ontario licenced drivers that found, because of COVID-19, people are most comfortable driving their vehicles, walking or cycling to get around over the coming months. The study also found that: Respondents were more likely walking one to three times a week before the pandemic but are more likely to walk four to seven times per week during the pandemic. These numbers are in line with a CAA National survey that also found 30 per cent of cyclists increased their activity. “Our study also showed that not yielding to cyclists/pedestrians and drivers running stop signs or red lights were the most reckless driving behaviours seen within city limits during the pandemic," says Chan. "We are facing additional challenges this year. Physical distancing means pedestrians may step out onto the road to keep their distance from others or may take longer to cross at intersections. It is important now more than ever to remind road users to follow the rules of the road and be patient." What motorists can do to stay safe: Always look for pedestrians crossing the road. Be alert and attentive while driving and yield to pedestrians who are stepping on to the road to maintain physical distancing. Mind your blind spots. Be aware of blind spots when making turns at intersections. Stay focused and vigilant behind the wheel. Avoid distractions inside and outside of your vehicle. Slow down in school zones. Reduce your speed and obey speed limits in school zones and residential neighbourhoods. Prepare for the unexpected. Residential streets and school zones have different types of obstacles, such as children playing outdoors, riding bikes, skateboarding, etc. Be cautious and considerate. Be alert around stopped transit vehicles and be courteous to pedestrians with different mobility needs that may require more time. Use your lights. Motorists should use their full lighting system when it gets dark and in low visibility situations. What pedestrians can do to stay safe: Be careful when physical distancing on the sidewalk. Try to avoid stepping out onto road and if you end up stepping on the road, ensure there are no vehicles in the lane. Always be aware of your surroundings. Avoid distractions and be alert while crossing the street and stepping onto the road. Follow the flow. Follow signals and cross at designated locations or crosswalks. Stop, look, and listen. Ensure all traffic has come to a complete stop before crossing the road. Keep an eye out. Make eye contact with motorists—never assume that drivers can see you or know your intentions. Be visible. Pedestrians should wear bright or reflective clothing or accessories at night to help with visibility. Additionally, motorists should take extra caution on Halloween as some regions could have trick or treaters and they may have the added visual restrictions of wearing a mask or face shield. CAA SCO is offering free reflector tags at CAA Stores that can be attached to backpacks and jackets. Find your nearest CAA Store here and stop by to get up to four free tags per family.
Want to save on home loans? Just talk to your peers!
For most of us, finance is complex. Yet making financial decisions is part of day-to-day life. Take mortgages. Around 60 percent of U.S. households have a home mortgage, but how many actually understand its real value? Calculating things like interest rate trade-offs or closing costs is not easy, and research finds that a majority of families make financial mistakes because they fail to understand benefits or savings that might be open to them in refinancing. There are ways to overcome this kind of “information friction”—the obstacles to understanding that make it hard for people to process complex financial ideas and concepts. One of these is education. Ensuring that people have direct access to clear information can help inform household decisions. That seems pretty basic. Another, perhaps less understood, mechanism is the “peer effect”—the way we learn from and are influenced by what our peers or colleagues say or do. A new paper published in the Review of Financial Studies by Gonzalo Maturana, associate professor of finance, takes a fresh look at how the peer effect can help households make better decisions about their mortgages. And he finds that work colleagues and associates can actually have a far greater positive impact on our financial outcomes than we might expect. Together with Jordan Nickerson from MIT’s Sloan School of Management, Maturana ran a large-scale study of a particular U.S. peer group: public school teachers employed by the state of Texas. Here’s what the study found: Where there was a lot of mortgage refinancing going on among teachers in a particular school, individuals were a stunning 20.7 percent more likely to refinance their own mortgage. In other words, they were far more disposed to investigate alternatives and take advantage of the better deals on offer. The peer effect was also a critical factor in their subsequent choice of mortgage lender. Maturana and Nickerson also found that the more savings a particular peer group was making in mortgage repayments, the more refinancing activity there was in that school or teacher network. It is clear. With financial decisions, the network effect can create a positive feedback loop, said Maturana. Household finance and mortgages are top of mind and play a part in most American families – and if you are a journalist looking to cover this topic – then let our experts help. Gonzalo Maturana is an Associate Professor of Finance at the Goizueta Business School. He is an expert in the areas of corporate, household and real estate finance. Gonzalo is available to speak to media regarding this topic – simply click on his icon now to arrange an interview today.
