According to Forbes, Harvard Kennedy School is running a three-day executive program called Investment Decisions and Behavioral Finance, led by faculty including Richard Zeckhauser, Michael Mauboussin, and Annie Duke. Designed for CIOs and asset managers, the course tackles markets defined by AI-amplified volatility and narrative cascades. The core insight is that the bottleneck in modern finance isn’t data or technology—it’s unchanging human behavior like loss aversion and herding. The program warns that AI may fuel a new kind of “recursive optimism” bubble, where people trade on what they think others believe. To combat this, it teaches practical decision-hygiene tools and behavioral overlays for investment systems.
AI Amplifies Our Worst Habits
Here’s the thing that really stuck with me. We talk about AI like it’s this cold, logical force, but according to this Harvard crew, it’s basically a megaphone for our oldest, dumbest instincts. The machines process information and move capital at light speed, but our brains? They’re still stuck in the savanna, getting anchored on the first number they see and fleeing from losses twice as hard as they chase gains. So what happens? AI creates these overwhelming signal flows, and in our panic to keep up, we fall back on mental shortcuts. Patterns like herding and momentum don’t fade away—they get supercharged. It’s not a tech problem. It’s a people problem on tech steroids.
The Next Bubble Is A Mirror
This is where it gets really fascinating. The faculty suggested we might be heading for classic bubble territory, but with a terrifying AI twist. Past manias were often about speculation on an asset. The next one could be driven by “recursive optimism.” Think about it: AI systems improve themselves, the narratives about their world-changing power spread exponentially, and investors start playing a meta-game. They’re not buying based on their own belief in the fundamentals. They’re buying because they think everyone else believes the narrative and will keep buying. It’s a bubble that feeds on its own reflection. And knowing it’s a bubble doesn’t help you. That’s just more information to be irrational about.
Winning Means Slowing Down
So what’s the antidote? The program pushes hard on “decision hygiene.” In a world begging you to speed up, the real edge might be in building a process that forces you to slow down. We’re talking structured frameworks that investment committees actually use to avoid anchoring on the loudest voice, to separate hard facts from seductive stories, and to make choices that hold up when the noise is deafening. It’s about building behavioral guardrails. Another huge point was designing portfolios for real human clients, not the rational robots in textbook models. You have to account for “behavioral endurance”—will your client actually stick with this plan when markets get scary? If the strategy ignores human behavior, it will fail. Full stop.
The Messy Human Reality
Perhaps the most refreshing take was the acknowledgement of the informal, social side of finance. The big moves aren’t just made on spreadsheets. They happen in hallways, over coffee, influenced by personal motivations and office politics. AI can’t automate that. The program, Investment Decisions and Behavioral Finance, seems to equip leaders for that messy reality. The future they hint at involves “behavioral overlays”—baking these psychological insights directly into investment systems to create measurable “behavioral alpha.” But that power needs ethics and transparency. In the end, the winners won’t be the ones with the fastest algorithms or the most data. They’ll be the ones with the most resilient, self-aware decision-making systems. The ones who remember the machine between the ears is the most important one to manage.
