Behavioral AI

Turn your organization's data into concrete, hands-on solutions using principles from behavioral economics Behavioral AI: Unleash Decision Making with Data is a hands-on playbook for enterprises who want to turn their customer and client data into actionable insights and lasting business value. This is not a high-level, abstract discussion of "big data" or artificial intelligence. It is a practical roadmap designed to use a variety of academic disciplines to help companies develop real-world AI and data solutions for everyday business use. Praise for BEHAVIORAL AI "'Nullius in verba' is the motto of the Royal Society, which means 'no one's words'. At no time in history does humankind have as much data as we do now and perhaps at no time in history are we challenged with what to do with it. A lot has been written about use of data and a lot has been written on how to decode behavior for actionable insights, but rarely the two have come together. Rogayeh has masterfully captured the nexus of data, AI and behavior in this book. Apart from simplifying new and emerging concepts, she has layered how the model works within practice. A must-read for anyone who embraces 'nullius in verba' and uses 'impossible' as a stepping stone."
-SHAKIR MOIN, President, Marketing, Coca-Cola North America "Behavioral AI is the ultimate playbook for unlocking the soul of data. Tabrizi offers a fresh, incisive look at the intersection of AI and behavioral science, merging the art of human intuition with the rigor of data. This book takes you behind the algorithms and into the heart of decision making, showing that the real magic lies where data meets human psychology. A must-read for anyone looking to harness AI to its fullest potential-not just for data but for meaningful insight."
-DAVID J. KATZ, EVP & Chief Marketing Officer, Randa Apparel & Accessories "An enlightening look at how economic principles and AI can combine to make a real difference, Behavioral AI offers practical tools and fresh perspectives for understanding consumer behavior at its core. This book makes it clear that successful AI isn't just about technology or collecting more data-it's about understanding people and asking better questions. Behavioral AI is a vital resource for any leader looking to build connections that last and understand the science behind the intersection of AI and behavioral economics."
-MENG CHEE, former EVP & CPO, Walmart

Preface xi 
Chapter 1 Magic Happens at the Intersections 1 
Asking the Right Questions: Data, Intuition, and Strategy 3 
Simplifying the Complexity 6 
Connecting the Dots 8 
Uncovering Hidden Patterns: Models and Algorithms in Action 10 
Decoding Consumer Behavior: The Interplay of Psychology and Economics 11 
Empowering Behavioral Economics: The Synergy of Data Analytics, ML, and AI 14 
Crafting a Customer- Centric Paradigm: The Fusion of Technology and Behavioral Insights 17 
Chapter 2 It Is All Connected: Behavioral Economics, Decision-Making, Biases, and Heuristics 19 
History and Origins of Behavioral Economics 20 
Early Days 21 
Entering Mainstream Economics 23 
Current Research and Practical Applications 26 
Back to the Beginning 30 
Psychology of Decision- Making 33 
Dual- Process Theories 33 
Heuristics and Biases 35 
Noise 39 
Prospect Theory 40 
Nudging 42 
Experimentation 46 
How It Works 47 
Uber and Experimentation 49 
Chapter 3 Minimal Data, Maximal Impact: From Big Data to Minimum Viable Data 53 
How Much Data Are We Talking About? Lots and Lots 55 
You Do Not Need a Lot of Data to Get Started, You Need the MVD 58 
Asking the Right Questions, Again! 59 
Synthetic Data: What It Is and What It Isn't 63 
Survey Data to the Rescue 67 
Chapter 4 Building Intelligence: AI and ML Essentials, Transforming Data into Intelligence 73 
Classical AI 76 
ML 78 
Deep Learning 82 
Generative AI 86 
Machine Intelligence and Biologically Inspired Models 90 
Chapter 5 Real-World Impact: Harnessing AI and ml for Practical Solutions 95 
Unleashing the Full Potential of AI: Beyond the Hype 96 
Rethinking Segmentation: Beyond Demographics and Life Stages 97 
Uncovering Unexpected Customer Patterns 101 
Predicting Intent and Mapping Customer Journeys 104 
Overcoming Challenges in Predicting Customer Intent 106 
Predicting and Managing Returns 108 
The Power and Nuances of Recommendation Models 111 
Broadening Horizons: Beyond Category Killers 114 
Enhancing In- Store Experience with Recommendation Models 116 
Leveraging Propensity Models for Targeted Campaigns 118 
Personalized Pricing: Influencing Behaviors and Financial Outcomes 121 
Behavioral Economics in Personalized Pricing Strategies 124 
Forecasting: Understanding the Dynamics of Demand 127 
The Power of Forecasting and Optimization 131 
Transparent MMMs 132 
Ensembling Models for Enhanced Forecasting 133 
The Interplay of Demand Forecasting and Inventory Optimization 133 
Conclusion 135 
Chapter 6 Decoding Complexity: Leveraging Systems Thinking in Modern Organizations 137 
Only a Wet Baby Likes Change: Loss Aversion + Status Quo Bias 140 
It Gets Better! Commitment Device, Peer Effect, and Sunk Cost Fallacy 145 
Conclusion 151 
Chapter 7 Unlocking Scale: Overcoming Operational and Organizational Complexity in Scaling AI Projects 155 
Enablers of Success 156 
Communication and Intellectual Diversity 159 
Building Trust, Experimentation, and Adoption 164 
Interpretation Layers 166 
The Power of Experimentation 169 
Measuring ROI Through Experimentation 171 
Conclusion 173 
Epilogue 175 
Notes 179 
Additional Reading 189 
Bibliography 197 
Acknowledgments 205 
About the Author 207 
Index 209