The German men's team led European football from 1954 to 1996. Perhaps it’s no coincidence that the country’s women have also had a turn in that role.
Big, rich countries tend to do well in international sport. But more than that, Germany’s female footballers have learned from Germany’s men. They benefit from what academics call “peer effects”: they have caught the habits of people near them. Countries in football generally learn through peer effects. Across western Europe, the Italians, French, Germans and Dutch have been copying each others’ styles for decades. That has helped this relatively small region, with just five percent of the world’s population, win so many football World Cups.
The power of peers
Female footballers have been learning from the more experienced men. Silvia Neid, the German women’s coach, watched men’s football at least as often as women’s. “To find new ideas or developments you have to look around, and sometimes I find something interesting in the men’s game,” she told a German newspaper. However, she added: “The 4-2-3-1 system, which brought the men such success in the 2010 World Cup, has been played by the German women since 2001.” Perhaps the peer effects are starting to flow from women’s to men’s football, too.But certainly, the success of German women shows the power of peer effects.
This effect works in countless areas in life. For instance, if you share a room with a good student at university, your own academic results will probably improve. And peer effects are especially powerful in personal finance. As savers and consumers, we catch the habits of our peers. Our video on peer pressure explains that if your neighbour buys an expensive car, you are more likely to get one too.The trick is then to learn from peers with good financial habits. That doesn’t necessarily mean copying multimillionaires glimpsed on TV. But by studying friends and relatives who manage their money cleverly and rarely seem to run out, you will probably do better than by going on shopping trips with spendthrift pals.
Do what I do
People who are like us can help or hinder us in our decision making. A 2014 investigation showed peer effects can even alter long-term savings decisions. This survey investigated the results of a law change giving people in Israel the option to move to a multitude of other pension funds, or stay with their employer’s pension plan.
A vast majority (93%) of the 10,723 employees studied chose to remain with their company savings programme, as present bias and inertia might suggest. But among those who did switch, many chose funds that offered worse terms than the old one. “By far the most popular fund chosen by those employees who switched did not stand out in terms of performance, transaction costs, or services,” researchers Yevgeny Mugerman, Orly Sade and Moses Shayo wrote. Individuals appear to be strongly influenced by their peers, who are not necessarily experts in the subject matter.
So don't forget the potential for positive peer effects next time you're in a social situation. Team up with those you admire: it might pay off well.