Our instincts often suggest that proper incentives should nudge people toward a more accurate understanding of reality. However, even financial incentives can sometimes be overpowered by identity. A compelling study, conducted by John Beshears, now at Harvard Business School, and Katy Milkman, a professor at the University of Pennsylvania’s Wharton School and author of the 2021 bestseller “How to Change,” investigated the behavior of over 6,000 stock analysts over an 18-year period. The researchers examined corporate earnings estimates and how analysts adjusted their positions when actual results didn’t align with their initial forecasts. The study aimed to determine if analysts, who had made earnings estimates that were significantly different from the general consensus, adapted their views after receiving contradictory data.
