Lord777
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How much money are you saving? I bet not at all. Perhaps you have a couple of loans that you cannot close in any way. Probably, you let down the sums of money unexpectedly falling on you at a time, and then execute yourself. Not worth it - this is not your personal fault. The peculiarities of the human psyche are to blame, and it is very, very difficult to deal with them.
Kill the embezzler in yourself!
How much money are you saving? I bet not at all. Perhaps you have a couple of loans that you cannot close in any way. Probably, you let down the sums of money unexpectedly falling on you at a time, and then execute yourself. Not worth it - this is not your personal fault. The peculiarities of the human psyche are to blame, and it is very, very difficult to deal with them.
Why do we spend so much and go into debt?
The short answer is: we are irrational hedonists, not thinking about tomorrow. Scientific answer: This behavior is due to the fact that we are all subject to a phenomenon called "hyperbolic discounting." Despite the complex name, which refers to furious formulas and graphs, the psychological meaning of this phenomenon is extremely simple: the value of pleasure here and now far exceeds the value of a similar or even greater pleasure after a certain period of time. Most people prefer to receive $ 10 this very minute than, say, $ 20 in a month.
“After us - even a deluge!”, “I'll think about it tomorrow” are well-known idioms that perfectly illustrate the phenomenon of hyperbolic discounting. Here you can add numerous variations of the story about the cunning man who promised that in 10 years he could teach the donkey to speak. However, the realization that we have this fundamental emotional-volitional and cognitive defect does not help to overcome it. A few numbers: in the period from 1980 to 2004, the number of personal bankruptcies increased almost 5 times - up to 1.5 million a year. This is the period when credit cards began to gain a truly massive distribution.
Why are we so carelessly planning our finances?
There is no consensus in the scientific literature on this issue. Evolutionary advocates argue that hyperbolic discounting is a fiery hello from our cave ancestors who would simply starve to death if they were engaged in long-term planning, instead of acting in the here and now. Adepts of cognitive psychology give a different explanation and see the reason in the abundance of "hot" cognitions in the mental structures of a person - that is, in the prevalence of affective ways of reasoning and making decisions. This approach to business greatly interferes with long-term planning, including financial. The role of the mass media should not be denied either. Advertising encourages consumption and tries to convince the audience that consumption is the key to happiness. As of 2009, US citizens had 1.3 billion credit cards on hand.
Hyperbolic discounting is also difficult for you because it is extremely beneficial to the market. Sellers are only too happy to use a number of win-win tricks against you. Trick number one - deferred and deferred payments. Simple calculations show that the amount you end up losing if you buy your favorite steamer, phone or laptop on credit will be significantly more than what you pay if you decide to pay it in full at the current market price. Therefore, it is more profitable to save money and postpone this purchase. However, the ability to have what you want here and now outweighs rational considerations. Chairs in the morning, money in the evening - the affective psyche is delighted.
Trick number two - subscription tricks. As you probably noticed, an annual pass paid in one tranche turns out to be a better purchase than several monthly passes, for each of which you give a separate amount. It doesn't matter what it is about - a fitness club, a newspaper or an account for an online game. You are going to download your elf and buy him Daedric armor over the years - it is wiser to purchase a long-term subscription. However, you will probably renew your membership every month long enough and end up overpaying.
Why do we do strange things?
Because a person is by nature a cognitive lazy person. When making decisions, we are guided by irrational arguments that save mental effort. To talk about all the cognitive biases, you will have to make a special issue of "Metropol" several hundred pages thick, so we will limit ourselves to a few of them. Let's start with the effect of asymmetric dominance, in common parlance - "bait product".
To stimulate demand for a particular product, stores display a “spoiled” version of it nearby. They expect the consumer to compare the two options and decide that this is a very good deal. Perhaps, to celebrate, he will even think that he took advantage of the inattention of the sellers who forgot to update the price tags, which means that he must immediately take it before the store's management realized it.
At the Sloan School of Management, an experiment was conducted with groups of students who were offered various subscription options to the Economist magazine. By including two options in the proposal, against the background of which the third looked clearly more profitable, the teachers were able to "weld" on a subscription 43% more than usual. The students were led to a relative economy, not realizing that in absolute terms they were forced to spend more, and after all, future professional economists participated in the experiment.
Why, when it comes to marketing gimmicks, do we often find ourselves in the role of deceived simpletons, and sometimes venerable intellectuals and scientists with high IQs fall into this trap? The fact is that limited rationality is inherent in any Homo sapiens.
We do not have the physical ability to objectively weigh all the qualities of the offered goods, correlate them with the price and make the most rational decision. In addition, the human brain does not like to make choices, especially difficult ones. Some experts in the field of behavioral economics and neuroeconomics even talk about such a psychological phenomenon as "the pain of making decisions."
In the case of a bait product, the consumer's attention is artificially locked on two options, while one of the purchases looks like a much more profitable investment than the other. The brain clings to the opportunity to avoid the dreary procedure of analyzing the goods being sold and is happy to make a choice based on the price difference, while remaining fully confident that it has “made the right decision”.
A textbook example was Williams-Sonoma , which began selling such a strange device as a home bread maker for $ 275. The product was not in great demand, and then the company introduced the second version of the bread machine to the market - a little larger and one and a half times more expensive. After this move, sales of the first version skyrocketed. Consumers, who did not really understand why they needed a bread maker at home, began to perceive its original version as an advantageous offer - compared to the more expensive and bulky version.
Another example of a lucrative trick is restaurants that deliberately put the most expensive dishes at the top of the menu. Against their background, all other options for snacking begin to seem cheap. A similar trick is used by game publishers: they bring a creepy collector's edition of the game to the market so that, against its background, buying the regular version seems like a good deal. For example, if you go to the "Witcher" page in one of the main Russian gaming stores, then the first thing you will be offered to buy a collector's edition for 8,500 rubles. And only scrolling down, you will be relieved to find out that playing an aging monster hunter can be several times cheaper.
The second interesting example is the increased demand for unreasonably expensive goods. Aside from considerations of prestige, the high price becomes a kind of quality standard for many buyers. We include an internal “naive economist” who argues as follows: “Since a product is sold at that price, then it is being bought. Therefore, it is a worthwhile and high-quality piece. "
The American psychologist Robert Cialdini, author of the bestselling book "The Psychology of Influence", calls this psychological phenomenon "social proof" ( social proof ). At some deeply irrational level, we have the conviction that the majority are not wrong and “do like everyone else” is the most reasonable of all possible coping strategies. Without a doubt, in situations as close as possible to primitive conditions, this is true. For example, if you see people running away from somewhere in terror, you should run after them: what so frightened them is dangerous for you.
But in difficult situations, targeting the majority is a bad idea. Take the notorious pyramid schemes, whose success is largely due to social proof. As noted by Robert Schiller, winner of the 2013 Nobel Prize in Economics, it is the positive feedback from the first echelons of contributors that guarantees the success of the pyramid. They really make money and ring everyone around how cool it is.
However, the problem of high prices is not limited to herd behavior. There is also the so-called fundamental attribution error - the tendency to explain the behavior of "others" by their intrinsic motives and properties. When we look at a product with an affordable price tag, our instinct, subject to a fundamental attribution error, says that the seller did not just set the price - he knows better. Therefore, the sky-high price list is very often perceived as an indicator of high quality.
The factor of product complexity plays an important role here. No one will buy plastic drinking cups for 300 rubles apiece, but medicines are a completely different story. It is difficult for most consumers to comprehensively assess the quality of a particular drug, therefore, all other things being equal, their cost can become a guideline. We will choose an expensive drug, and not its cheap counterpart - just to "play it safe". By the way, in the case of expensive drugs, there is strong evidence that the price tag itself affects patients. Behavioral economics guru Dan Ariely found in one of the experiments that the effectiveness of an anesthetic drug directly depends on its cost - with exactly the same filling.
How not to add too much, because it is "super beneficial"?
Create control from the outside. Odysseus chained himself to the mast so that the singing of the sirens would not destroy him. An acquaintance of mine hid the credit card away from him - he put it in the collection of Gorky's stories. Someone makes a list of necessary purchases before going to the store, estimates their total cost and takes with them the corresponding amount. Many people set up an automatic transfer of part of their salary to a savings account.
At the heart of all these actions is the understanding that at a certain moment a person can show weakness. By the way, the market is quite responsive to this request, offering a huge number of devices for self-control. For example, flying alarms that ring until you catch them, or smartphone apps that go into hysterics when you gorge on carbohydrates. It is important to understand where your weak point is and find the right control mechanism to help you rein in yourself.
How to get rid of expensive show-off that annoy many?
Small real achievements are better than conspicuous consumption. Each person has his own reference group - that is, those people whose assessments are important to him. It is among the members of this group that you find friends and sexual partners. If you are anxious to improve your status, find out what is valued in your reference group and work on it. By the way, as you grow intellectually and professionally, the composition and size of the group will change.
How to curb impulsiveness when shopping?
Even after realizing the failure of your consumer values, you will still make impulsive and strange purchases on a regular basis. If our affective sphere were so easily regulated, world history would be much more boring. But the good news is that we can minimize the impact of various cognitive biases by expanding our intellectual baggage. For example, now you are no longer so easy to trick with the tricks described in this article? In order not to get into a mess when shopping, and in general in life, expand your intellectual horizons.
Why do we consume for show?
The most convincing answer to this question is offered by evolutionary psychology. And this answer is very simple: we need sex, and status consumption is, we think, a good way to get it. Our very distant ancestors lived in small communities of 20-30 people each, and during their life they communicated with people from several other communities. In such a situation, round-the-clock care of one's reputation and social status was really necessary for sex, that is, for the transfer of one's genes.
Evolutionary psychologist Jeffrey Miller argues that advertising deliberately exploits our ancient fear of being a pariah in a small hunting community and thus being without sex. But how justified is the ancient strategy of maintaining status in a modern metropolis?
His colleagues at the University of Texas, Peacocks, Porsches, and Thorstein Veblen: Conscious Consumption as a Sexual Signaling System, argue that it makes sense if you want a short-term, easy-going relationship without major commitments. If you are a man inclined to create a family, then it is better to refuse conspicuous consumption.
Of course, it would be incorrect to reduce status consumption to sex alone. The need for security is an equally powerful driving force, and consumerism creates the illusion of this security.
Have you noticed that the heroes of various sagas and epics constantly brag about their military exploits? Interestingly, they are indeed extremely competent as warriors and commanders. They have no reason to be complex, but for some reason in their stories they still very often resort to serious exaggerations. An evolutionary explanation for this strategy is proactive intimidation of potential enemies. Who dares to attack a hero who starts every weekend by slaying multiple dragons? Game of Thrones fans will remember that House Lannister was instrumental in spreading the song about the plight of the Castamere Rains so that no one would ever think to rebel against them.
In Demonstrative Consumption as Costly Advertising, anthropologist and historian Fraser Neumann finds evidence to support this point of view by examining the phenomenon of status consumption in the Mesoamerican pyramids. The gigantic structures were used by the ruler as a way to tell neighboring states about his power and to prevent the emergence of opposition within the country.
In modern society, the psychological program aimed at preventive intimidation has not gone away, and the old method no longer works. Most of us, even with a large fortune, cannot acquire a personal army and turn our office into a gloomy black citadel, the mere sight of which would terrify competitors.
For lack of anything better, we use conspicuous consumption in the hope of protecting ourselves. However, this time our psyche gets trapped and goes down the wrong path. There is a whole layer of sociological research showing that conspicuous consumption leads to an increase in social tension and crime. Recently published work on this topic, by economists Daniel and Joan Hicks (USA), states that conspicuous consumption is a sure way to become a victim of violence. The researchers were surprised that there was no clear relationship between conspicuous consumption and crimes against property. That is, if you are rich and flaunt it, not the chances of being robbed or deceived by fraudsters increase, but the risk of paying for show off with your life or health.
We are following the path of least resistance. The psyche is sounding the alarm: it is dangerous all around, competitors are stepping on their heels, and we ought to remind everyone what a powerful warrior and demanded lover you are. And then it seems like it's time to think about your real achievements, so that you have something to boast about. But it is difficult. It's easier to buy a new smartphone and toss it into the crucible of our ancient fear.
Kill the embezzler in yourself!
How much money are you saving? I bet not at all. Perhaps you have a couple of loans that you cannot close in any way. Probably, you let down the sums of money unexpectedly falling on you at a time, and then execute yourself. Not worth it - this is not your personal fault. The peculiarities of the human psyche are to blame, and it is very, very difficult to deal with them.
Why do we spend so much and go into debt?
The short answer is: we are irrational hedonists, not thinking about tomorrow. Scientific answer: This behavior is due to the fact that we are all subject to a phenomenon called "hyperbolic discounting." Despite the complex name, which refers to furious formulas and graphs, the psychological meaning of this phenomenon is extremely simple: the value of pleasure here and now far exceeds the value of a similar or even greater pleasure after a certain period of time. Most people prefer to receive $ 10 this very minute than, say, $ 20 in a month.
“After us - even a deluge!”, “I'll think about it tomorrow” are well-known idioms that perfectly illustrate the phenomenon of hyperbolic discounting. Here you can add numerous variations of the story about the cunning man who promised that in 10 years he could teach the donkey to speak. However, the realization that we have this fundamental emotional-volitional and cognitive defect does not help to overcome it. A few numbers: in the period from 1980 to 2004, the number of personal bankruptcies increased almost 5 times - up to 1.5 million a year. This is the period when credit cards began to gain a truly massive distribution.
Why are we so carelessly planning our finances?
There is no consensus in the scientific literature on this issue. Evolutionary advocates argue that hyperbolic discounting is a fiery hello from our cave ancestors who would simply starve to death if they were engaged in long-term planning, instead of acting in the here and now. Adepts of cognitive psychology give a different explanation and see the reason in the abundance of "hot" cognitions in the mental structures of a person - that is, in the prevalence of affective ways of reasoning and making decisions. This approach to business greatly interferes with long-term planning, including financial. The role of the mass media should not be denied either. Advertising encourages consumption and tries to convince the audience that consumption is the key to happiness. As of 2009, US citizens had 1.3 billion credit cards on hand.
Hyperbolic discounting is also difficult for you because it is extremely beneficial to the market. Sellers are only too happy to use a number of win-win tricks against you. Trick number one - deferred and deferred payments. Simple calculations show that the amount you end up losing if you buy your favorite steamer, phone or laptop on credit will be significantly more than what you pay if you decide to pay it in full at the current market price. Therefore, it is more profitable to save money and postpone this purchase. However, the ability to have what you want here and now outweighs rational considerations. Chairs in the morning, money in the evening - the affective psyche is delighted.
Trick number two - subscription tricks. As you probably noticed, an annual pass paid in one tranche turns out to be a better purchase than several monthly passes, for each of which you give a separate amount. It doesn't matter what it is about - a fitness club, a newspaper or an account for an online game. You are going to download your elf and buy him Daedric armor over the years - it is wiser to purchase a long-term subscription. However, you will probably renew your membership every month long enough and end up overpaying.
Why do we do strange things?
Because a person is by nature a cognitive lazy person. When making decisions, we are guided by irrational arguments that save mental effort. To talk about all the cognitive biases, you will have to make a special issue of "Metropol" several hundred pages thick, so we will limit ourselves to a few of them. Let's start with the effect of asymmetric dominance, in common parlance - "bait product".
To stimulate demand for a particular product, stores display a “spoiled” version of it nearby. They expect the consumer to compare the two options and decide that this is a very good deal. Perhaps, to celebrate, he will even think that he took advantage of the inattention of the sellers who forgot to update the price tags, which means that he must immediately take it before the store's management realized it.
At the Sloan School of Management, an experiment was conducted with groups of students who were offered various subscription options to the Economist magazine. By including two options in the proposal, against the background of which the third looked clearly more profitable, the teachers were able to "weld" on a subscription 43% more than usual. The students were led to a relative economy, not realizing that in absolute terms they were forced to spend more, and after all, future professional economists participated in the experiment.
Why, when it comes to marketing gimmicks, do we often find ourselves in the role of deceived simpletons, and sometimes venerable intellectuals and scientists with high IQs fall into this trap? The fact is that limited rationality is inherent in any Homo sapiens.
We do not have the physical ability to objectively weigh all the qualities of the offered goods, correlate them with the price and make the most rational decision. In addition, the human brain does not like to make choices, especially difficult ones. Some experts in the field of behavioral economics and neuroeconomics even talk about such a psychological phenomenon as "the pain of making decisions."
In the case of a bait product, the consumer's attention is artificially locked on two options, while one of the purchases looks like a much more profitable investment than the other. The brain clings to the opportunity to avoid the dreary procedure of analyzing the goods being sold and is happy to make a choice based on the price difference, while remaining fully confident that it has “made the right decision”.
A textbook example was Williams-Sonoma , which began selling such a strange device as a home bread maker for $ 275. The product was not in great demand, and then the company introduced the second version of the bread machine to the market - a little larger and one and a half times more expensive. After this move, sales of the first version skyrocketed. Consumers, who did not really understand why they needed a bread maker at home, began to perceive its original version as an advantageous offer - compared to the more expensive and bulky version.
Another example of a lucrative trick is restaurants that deliberately put the most expensive dishes at the top of the menu. Against their background, all other options for snacking begin to seem cheap. A similar trick is used by game publishers: they bring a creepy collector's edition of the game to the market so that, against its background, buying the regular version seems like a good deal. For example, if you go to the "Witcher" page in one of the main Russian gaming stores, then the first thing you will be offered to buy a collector's edition for 8,500 rubles. And only scrolling down, you will be relieved to find out that playing an aging monster hunter can be several times cheaper.
The second interesting example is the increased demand for unreasonably expensive goods. Aside from considerations of prestige, the high price becomes a kind of quality standard for many buyers. We include an internal “naive economist” who argues as follows: “Since a product is sold at that price, then it is being bought. Therefore, it is a worthwhile and high-quality piece. "
The American psychologist Robert Cialdini, author of the bestselling book "The Psychology of Influence", calls this psychological phenomenon "social proof" ( social proof ). At some deeply irrational level, we have the conviction that the majority are not wrong and “do like everyone else” is the most reasonable of all possible coping strategies. Without a doubt, in situations as close as possible to primitive conditions, this is true. For example, if you see people running away from somewhere in terror, you should run after them: what so frightened them is dangerous for you.
But in difficult situations, targeting the majority is a bad idea. Take the notorious pyramid schemes, whose success is largely due to social proof. As noted by Robert Schiller, winner of the 2013 Nobel Prize in Economics, it is the positive feedback from the first echelons of contributors that guarantees the success of the pyramid. They really make money and ring everyone around how cool it is.
However, the problem of high prices is not limited to herd behavior. There is also the so-called fundamental attribution error - the tendency to explain the behavior of "others" by their intrinsic motives and properties. When we look at a product with an affordable price tag, our instinct, subject to a fundamental attribution error, says that the seller did not just set the price - he knows better. Therefore, the sky-high price list is very often perceived as an indicator of high quality.
The factor of product complexity plays an important role here. No one will buy plastic drinking cups for 300 rubles apiece, but medicines are a completely different story. It is difficult for most consumers to comprehensively assess the quality of a particular drug, therefore, all other things being equal, their cost can become a guideline. We will choose an expensive drug, and not its cheap counterpart - just to "play it safe". By the way, in the case of expensive drugs, there is strong evidence that the price tag itself affects patients. Behavioral economics guru Dan Ariely found in one of the experiments that the effectiveness of an anesthetic drug directly depends on its cost - with exactly the same filling.
How not to add too much, because it is "super beneficial"?
Create control from the outside. Odysseus chained himself to the mast so that the singing of the sirens would not destroy him. An acquaintance of mine hid the credit card away from him - he put it in the collection of Gorky's stories. Someone makes a list of necessary purchases before going to the store, estimates their total cost and takes with them the corresponding amount. Many people set up an automatic transfer of part of their salary to a savings account.
At the heart of all these actions is the understanding that at a certain moment a person can show weakness. By the way, the market is quite responsive to this request, offering a huge number of devices for self-control. For example, flying alarms that ring until you catch them, or smartphone apps that go into hysterics when you gorge on carbohydrates. It is important to understand where your weak point is and find the right control mechanism to help you rein in yourself.
How to get rid of expensive show-off that annoy many?
Small real achievements are better than conspicuous consumption. Each person has his own reference group - that is, those people whose assessments are important to him. It is among the members of this group that you find friends and sexual partners. If you are anxious to improve your status, find out what is valued in your reference group and work on it. By the way, as you grow intellectually and professionally, the composition and size of the group will change.
How to curb impulsiveness when shopping?
Even after realizing the failure of your consumer values, you will still make impulsive and strange purchases on a regular basis. If our affective sphere were so easily regulated, world history would be much more boring. But the good news is that we can minimize the impact of various cognitive biases by expanding our intellectual baggage. For example, now you are no longer so easy to trick with the tricks described in this article? In order not to get into a mess when shopping, and in general in life, expand your intellectual horizons.
Why do we consume for show?
The most convincing answer to this question is offered by evolutionary psychology. And this answer is very simple: we need sex, and status consumption is, we think, a good way to get it. Our very distant ancestors lived in small communities of 20-30 people each, and during their life they communicated with people from several other communities. In such a situation, round-the-clock care of one's reputation and social status was really necessary for sex, that is, for the transfer of one's genes.
Evolutionary psychologist Jeffrey Miller argues that advertising deliberately exploits our ancient fear of being a pariah in a small hunting community and thus being without sex. But how justified is the ancient strategy of maintaining status in a modern metropolis?
His colleagues at the University of Texas, Peacocks, Porsches, and Thorstein Veblen: Conscious Consumption as a Sexual Signaling System, argue that it makes sense if you want a short-term, easy-going relationship without major commitments. If you are a man inclined to create a family, then it is better to refuse conspicuous consumption.
Of course, it would be incorrect to reduce status consumption to sex alone. The need for security is an equally powerful driving force, and consumerism creates the illusion of this security.
Have you noticed that the heroes of various sagas and epics constantly brag about their military exploits? Interestingly, they are indeed extremely competent as warriors and commanders. They have no reason to be complex, but for some reason in their stories they still very often resort to serious exaggerations. An evolutionary explanation for this strategy is proactive intimidation of potential enemies. Who dares to attack a hero who starts every weekend by slaying multiple dragons? Game of Thrones fans will remember that House Lannister was instrumental in spreading the song about the plight of the Castamere Rains so that no one would ever think to rebel against them.
In Demonstrative Consumption as Costly Advertising, anthropologist and historian Fraser Neumann finds evidence to support this point of view by examining the phenomenon of status consumption in the Mesoamerican pyramids. The gigantic structures were used by the ruler as a way to tell neighboring states about his power and to prevent the emergence of opposition within the country.
In modern society, the psychological program aimed at preventive intimidation has not gone away, and the old method no longer works. Most of us, even with a large fortune, cannot acquire a personal army and turn our office into a gloomy black citadel, the mere sight of which would terrify competitors.
For lack of anything better, we use conspicuous consumption in the hope of protecting ourselves. However, this time our psyche gets trapped and goes down the wrong path. There is a whole layer of sociological research showing that conspicuous consumption leads to an increase in social tension and crime. Recently published work on this topic, by economists Daniel and Joan Hicks (USA), states that conspicuous consumption is a sure way to become a victim of violence. The researchers were surprised that there was no clear relationship between conspicuous consumption and crimes against property. That is, if you are rich and flaunt it, not the chances of being robbed or deceived by fraudsters increase, but the risk of paying for show off with your life or health.
We are following the path of least resistance. The psyche is sounding the alarm: it is dangerous all around, competitors are stepping on their heels, and we ought to remind everyone what a powerful warrior and demanded lover you are. And then it seems like it's time to think about your real achievements, so that you have something to boast about. But it is difficult. It's easier to buy a new smartphone and toss it into the crucible of our ancient fear.
