Stop Once Satisfied

I remember someone telling me the big difference between America's eating habits and Europe's habits.  He said that Americans finish eating once the plate is empty.  Europeans on the other hand stop eating once they are no longer hungry.  That cultural difference is why America has the higher obesity rates.  

Well, so that person claimed.  But, whether or not it is true, it stayed with me.  

But I think that's something worthwhile to think about.  Is a lack of satisfaction a large reason why we have enormous obesity problems in the US?  If people were trained better to stop once satisfied, would that eliminate a lot of behavioral problems we have today? 

Perhaps the obesity problem is deeper than that.  Maybe it is genetic.  Or maybe overweight parents often bear overweight children just because they eat the same unhealthy foods and pass on similar poor habits. 

Either way, the basic formula seems pretty simple - if you want to lose weight, reduce your consumption.  Thinking like a behavioral economist, maybe there are small nudges we can give or help people put on themselves that will reduce consumption. It could be something as simple as a poster that reminds them that x amount of people in their community have food insecurity.  

Nudge and Ethics

The authors of Nudge do a great job of using behavioral economics to influence people's behavior.  They say that we cannot not influence behavior, because every way we word a question, organize a menu, and so forth is an influence in itself.  So, they argue, if you have to make a decision either way, why not use your newly-discovered toolbox full of nudges for the greater good? 

This position surprised me.  Previously, I was absolutely against a higher vertical power making decisions for those below them, "for their own good."  I thought, how could anyone make a better decision for someone than that person could themselves? But this semester, I've been second-guessing myself.  

I am in another class on development economics (I swear...this is related.).  We're reading a book called Poor Economics by Banerjee and Duflo (The Economist's Book of the Year in 2011). One of the author's main points in the book is that the poor remain poor because they have a lot more decisions to make than we do, and many of them are the important decisions "nobody should have to make."  For example, we in the USA don't have to really think about getting access to clean water.  We can get water from a tap and (with relatively high assurance) be confident that we won't get some terrible disease from it.  So, in many ways, a lot of the important "basic human right" decisions we don't have to make.

And thank goodness! If you had to spend every day filtering your water - think of the opportunity costs!  

So, how many of those "important decisions" should be made for us?   Who decides what is important enough?  

I think that the whole point behind their "paternalistic libertarianim" (two words that, quite frankly, seem too contradictory to be included in the same sentence). Nudge says the people should still absolutely be able to make their own decisions; no one is forcing them.  It's more a suggestion, than an actual rule. 

They certianly make a good case for showing us that these nudges will work.  But how far to take them....well that could change from person to person.  Welcome to the wonderful world of policy makers.

Relative Rationalizing

Ahhh relativity. One of the most confusing - but important - topics you can go down the rabbit hole on.  Everything is relative.  A salary of $50,000 may sound like nothing to you, but it may be quite appealing to me.  But you may be comparing it to your (or your neighbor's, or you brother's, it doesn't really matter) current salary that's in the six-digit range.  But for me, I'm comparing it to my current lack of a salary.  That't pretty great. 

Here's another example.  When contemplating the purchase of a $25 pen, the majority of people would drive to another store 15 minutes away to save $7. When contemplating the purchase of a $455 suit, the majority of people would not drive to another store 15 minutes away to save $7.  The amount saved and time involved are the same, but people behave differently. 

As my Dad would tell me many times during my childhood, "It's all what you compare it to."   

How does that relate to marketing and consumer behavior?  Well, here's an example to answer just that.  

When Williams-Sonoma introduced bread machines, sales were slow. When they added a "deluxe" version that was 50% more expensive, and the machines they started flying off the shelves.  The smart marketers used the "deluxe" version as a base of relativity.  Now the first bread machine appeared to be a bargain! 

So the takeaway for marketers is make your customer think a certain way by providing a base to compare something to.   And the takeaway for us as consumer is - know what you value.  Watch out for relative thinking. 

Stereotypes

One thing behavioral economists and psychologist can (more or less) agree on is that the mind get's what it expects.  Previously held expectations can cloud our rational judgement. 

What about stereotypes, you ask?  

Well, the same principle applies.  We react differently based on the stereotypes we have of others. Is that good or bad?  Tricky question, but my best answer is that it depends. 

But interestingly enough, we react differently based on stereotypes about ourselves as well. 


It's a terrible fact, but some people will often perform worse on exams if they are asked to specify their race or gender beforehand.  In one experiment on Asian-American women conducted by researchers Shin, Pittinsky and Ambady, one group was given a math test, and asked questions related to their gender.  The other group was given the same test, and given questions related to their race.  The latter did better on the exams than the former did.   

Other tests have shown that African-Americans perform significantly worse on exams when asked to specify their race.

So I wonder, how much of these stereotypes are used in marketing?  Probably much more than we realize. Advertisers may want to convey a certain message that is better communicated through one type of people than another - and that is okay, as long as it does no harm. 
It is just one way they can work on their relationship with the customer.  
  
But apparently sometimes these stereotypes can do harm to people's opinions of themselves, and if that is the case, that is wrong.  We should not be putting people down.  

Maximizers - as Irrational as We are Led to Believe?

"The majority of people want more control in their lives, but the majority of people want simpler lives" - Barry Schwartz in The Paradox of Choice

Welcome my friends to the consumer's paradox.  Let's just hope you're not a maximizer. 

Upon reading the first few pages of Barry Schwartz's the Paradox of Choice I started to become overwhelmed.  The entire first chapter is dedicated to all the decisions we have to make in our daily life.  I quickly became aware that I am a "maximizer".  

Let's back up.  What's the difference between a maximizer and a satisficer anyway?  

The maximizer are just that - they are only happy if they get the beset option out there.  They will spend hours researching all different options to make sure the one they end up choosing is the indeed best.  According to Schwartz (a satisficer) "The goal of a maximizer leads to a dissatisfied life."

Satisficers are the other way around.  They are okay with the first pair of jeans they try on, and see no value in spending all that time researching the options.  They can move on after making a decision, unlike a maximizer who would most likely lose their enjoyment in a decision once they find out there was a better one out there.  Generally (or so Schwartz preaches) satisficers lead a happier life.     

Should Schwartz have his way - the maximizers in the world would spend less time making decisions and more time making the important decisions.  Perhaps my view is skewed (because at my core I am a maximizer), but I think his view of maximizers is a bit naive and....well biased.

I have an acquaintance who lives in Pasadena, California.  He is a full time lawyer by day, and a jazz guitarist by night.  He has perhaps the most sophisticated taste I know in the things of music, food, and drinks.  Schwartz would argue that my friend wastes too much time every time he wants a cup of coffee.  He'll go out of his way to get a simple cup of coffee, through doing intense research before evening going out his door.  Schwartz preaches that my friend should just be fine enough with a simple drip coffee at Starbucks.  But I've seen first hand the amount of joy my friend gets when he tastes that cup of coffee.  Regardless is the coffee is indeed better (or just better because of his expectations), he LOVES that cup.  And he'll be the first to admit it - he can't be happy with a Starbucks drip coffee.  He just can't.  

Thinking economically, my friend is perfectly maximizing and behaving rationally.  It would be irrational of us who are fine with a Starbucks drip coffee to force our tastes on him, because our way is better.  Some people are fine with Starbucks.  Some are not.  And that's OK.