Consumers particular vulnerable to financial bullshit are more likely to be young, male, have a higher income, and be overconfident with regards to their own financial knowledge

Individual differences in susceptibility to financial bullshit. Mario Kienzler, Daniel Västfjäll, Gustav Tinghög. Journal of Behavioral and Experimental Finance, March 31 2022, 100655. https://doi.org/10.1016/j.jbef.2022.100655

Abstract: What is the effect of seemingly impressive verbal financial assertions that are presented as true and meaningful but are actually meaningless; that is, financial pseudo-profound bullshit? We develop and validate a novel measurement scale to assess consumers’ ability to detect and distinguish financial bullshit. We show that this financial bullshit scale captures a unique construct that is only moderately correlated with related constructs such as financial knowledge and cognitive abilities. Consumers particular vulnerable to financial bullshit are more likely to be young, male, have a higher income, and be overconfident with regards to their own financial knowledge. The ability to detect and distinguish financial bullshit also predicts financial well-being while being less predictive of consumers’ self-reported financial behavior, suggesting that susceptibility to financial bullshit is linked to affective rather than behavioral reactions. Our findings have implications for the understanding of how financial communication impacts consumer decision making and financial well-being. 

JEL: G41G51G53

Keywords: BullshitFinancial bullshitFinancial behaviorFinancial well-beingScale

4. Discussion and conclusion

The ability to detect and distinguish profound statements (and information) from plain gibberish is crucial for individual’s to effectively navigate any social system and make well informed decisions. Finance is often portrayed as a complex and difficult area of decision making, where interactions commonly are characterized by jargon, acronyms, and slogans. This provides a hotbed for bullshitting to thrive and obscure the view of consumers. We developed and validated a novel measurement scale that allows us to measure individual differences in susceptibility to financial bullshit – the financial bullshit scale. We show that this scale captures a unique construct that is only moderately correlated with related constructs such as financial literacy and numeric ability. Moreover, we show that the ability to detect financial bullshit is distinctively separate from the ability to detect general bullshit and predict financial behavior beyond the original general bullshit scale.

Our results also provide insights into ‘who is more susceptible for financial bullshit?’. Consumers particular vulnerable to financial bullshit were more likely to be young, male, have a higher income, and be overconfident with regards to their own financial knowledge. This finding is in line with prior research that found age to be positively related to people’s ability to distinguish profound and pseudo-profound communication in general (Erlandsson et al., 2018). The finding that women showed a greater ability to detect and distinguish bullshit from genuine financial statements is a little surprising given that prior research has documented a persistent gender gap in financial literacy which partly can be attributed to stereotype threat, which posits that inbuilt prejudices about gender and finance undermine performance among women in tasks involving finance (Tinghög et al., 2021). The finding that higher income was positively related to being susceptible to financial bullshit might also be surprising. However, it seems reasonable to believe that as income rise consumers become less vigilant when it comes to financial matters and therefore less alert when it comes to detecting to be affected by impressive financial language. Much in the same way that scarcity requires trade-off thinking and makes people more efficient (Mullainathan and Shafir, 2013).

We also investigated the consequences susceptibility to financial bullshit has for financial wellbeing and financial behavior. Our results show that the financial bullshit scale predicted subjective financial well-being. In particular, consumers with an increasing ability to detect bullshit felt more insecure about their finances. Put differently, consumers worse at distinguishing between bullshit and genuine communication exhibited an ignorance-is-bliss effect when it came to subjective financial wellbeing. This ignorance-is-bliss effect did however not extend to self-reported financial behavior in our study. Considering these results, being able to detect and distinguish bullshit from genuine financial statements is neither unequivocally a good nor a bad thing. On the good side, people who were less susceptible to financial bullshit displayed a greater ability on a number of financially relevant competencies (e.g., greater objective financial knowledge). On the bad side, susceptible to bullshit was also related to a decrease in perceived financial security about their own future financial situation.

Even if the financial bullshit scale was related to financial well-being, we did not find a systematic relationship to self-reported financial behaviors. The financial management behavior scale taps into everyday household finance behaviors and management strategies (e.g., keep a budget, pay bills on time). Prior research demonstrated that this scale is related to both self-control and financial well-being (Strömbäck et al., 2017, Strömbäck et al., 2020). In hindsight these general behaviors are likely less strongly related to individual differences in susceptibility to financial bullshit, than behaviors containing financial bullshit (e.g., purchase of questionable financial products or evaluating misleading claims about the financial performance of products). Our results, showing that susceptibility to financial bullshit was related to financial buzzword comprehension but not general financial behavior supports this notion. We also note that, the present research relates to research on overclaiming in the financial domain. For instance, previous research on overclaiming (e.g., Atir et al. 2015) used people’s self-assessed financial knowledge and compared it to their knowledge claims of fictional finance terms. We, on the other hand, used people’s self-assessed financial knowledge and compared it with their actual knowledge. We also showed that people’s financial sophistication can be related to their financial bullshit score.

Ideally the financial bullshit scale can be used in future research to advance understanding on how to make individuals better equipped to distill financial communication and navigate the financial landscape. As done here, the scale can be used to identify customers that are vulnerable to fall prey for seemingly impressive statements that could be misleading in negotiations and other financial situations involving human interactions (for more research on financial vulnerability, see O’Connor et al., 2019). By extending research on the psychology of bullshit into the domain of financial decision making we hope to spur future research on what we think is an overlooked topic in consumer research; the impact (bad) financial communication has on consumer financial decision making.

Finally, the present study has practical implications for financial institutions and policy makers. First, our results show that consumers vary in their susceptibility to financial bullshit and certain groups of consumers are more vulnerable to it than others. This information can be an important steppingstone for designing tailored interventions. For example, interventions aimed at helping consumers to make better decisions and feeling less anxious about their personal finances. Second, financial institutions need to consider that consumers with an increasing ability to detect bullshit felt more insecure about their finances. This suggests that financial institutions need to apply nuanced strategies to serve their customer base. For instance, help customers who can distinguish genuine and bullshit financial communication to feel more secure in their money matters rather than to merely provide them with sound financial advice. This should lead to positive consequences for actual and perceived financial well-being.