Patterns and Authority
Humans, well most humans, have an inbuilt need to seek out order and organisation – for the majority of us it’s as hard wired as breathing.
Our brains are set up to look for patterns that explain things and make sense of our surroundings purpose – it’s a biological need which partly explains how bizarre cults come to be, and why some people take things like the zodiac very seriously.
It also helps to shed some light on the runaway growth of the big banks in Australia over the past year.
This forum lacks the space to do justice to the vast array of psychology and neurobiology as to what happens in the brain when humans are chasing order – but the most famous experiment ever done on the role of authority and obedience was done at Yale University by Stanely Milgram, and the results are here:
See here if you’re interested
http://psychology.about.com/od/historyofpsychology/a/milgram.htm
It seems that people, once covered by the cloak of authority will do just about anything – including administer a 450 volt shock to another human.
However, the effect of authority, inferred or otherwise, is something that affects many of us – it’s the reason for feeling guilty the moment a police car starts following you, even if you haven’t been speeding or robbing banks.
What’s interesting to us though is how this affects the industry of saving and investing.
One of the curious things that we have been noticing at burningpants is the absolute flight of capital to the big banks over the past 12 months as uncertainty has rocked the market.
The big four, that is CBA and Westpac, followed by NAB and ANZ, have been growing at 15% (September to September) – twice the speed of the rest of the market which has grown at about 7%.
Think about that for a second. Their offer is not necessarily better, in fact in many cases the offer being made by the big four banks is demonstrably worse than the niche players; they are not safer (the Government has guaranteed the first $1 million in savings) – they just have more authority.
It’s clear that one product above all in retail banking forms a proxy for how the public view a bank – a mortgage – which, given the emotional appeal one has on Australians, they’re the closest thing there is to a social good in financial services and are a pretty good proxy for the perceived authority that brands have.
If this is true, at least partly, then the ranking of brands is identified by looking at system growth; CBA system growth was 22.2%, Westpac system growth was 19% (curiously Bank West also enjoyed system growth of 19%), ANZ grew at 10% and NAB grew at 5%.
To make it clear how poor the NAB number really is, ING, with all its funding headaches and lack of distribution, grew at 3.5%, just shading it.
What’s not yet clear is, as we emerge from the financial crisis (if indeed we are emerging from this crisis), just where the cash and the debt goes in the next five years and the effect of this extraordinary system growth on markets in general.
Floost says:
Very interesting and amusing subject. I read with great pleasure.
hotspot shield says:
Amazing article, lots of intersting things to digest. Very informative