Mini Episode 25 - Why do good companies stay with bad software?

Liam from Albert Park wants to know why bad software is wearing us down.

Dan (00:17):

Hey, hey, hey. What's up? Welcome back to another episode of Bad Decisions, where we try to get to the bottom of your curly questions today. Got a great one. Love this question. Liam from Albert Park. Talk to me. What do you got, Liam?

Liam (00:31):
I just landed my dream job, but their old email system, it's a serious nightmare. Why do great companies stick with bad software?

Dan (00:41):
Uh, seriously, Liam, it's not just you. This absolutely kills me, right? You and I both know that in this day and age, there is no reason to be running old crappy software. Yet everywhere we look, there are businesses held together by a mash of Excel spreadsheets, entire organizations that they're still stuck on Internet Explorer eight and people using Lotus Notes for email. What the actual hell? Yes. Okay. True. There is a small degree of retro chic that comes with running a payroll or workflow management system from the Cold War era, but no amount of retro and no amount of chic can compensate for the daily pain and misery that these systems bring everybody who touches them. So why not change? I mean, after all, nothing's as progressive forward thinking business, more than pivoting, going agile and transforming preferably all at the same time. Change has been preached and praised throughout the ages to improve is the change.

(01:37)
That was Winston Churchill be the change you wish to see in the world? Mcg Gandy, a wise man changes his mind, a full never will. Icelandic proverb, everybody lies about change. That's from me. Cause everybody does. Everybody lies about change because of the status quo bias. So we are told we're meant to love change. We're told we're meant to relish it, to seek it out, to chase it down and roll around in the pure joy of it. But for the most part, having to change is just plain annoying, which is why our status quo bias does such a great job of helping us avoid it. You see, status quo bias refers to our preference to stick with whatever is known, whatever is familiar, whatever maintains the current state of affairs, even if that current state of affairs is not the best state that it could be.

(02:25)
When it comes to the research, it is tough to go past the 1988 experiment from Samuelson and Zack Houser, where participants were asked to imagine their well versed in the financial news and had just inherited a large sum of money from their great uncle, who I'm sure they were very sad to hear, had theoretically just passed away rest in pace. The participants were presented with two scenarios. In the first scenario, they were given the option to invest the money in any way. They liked to cross four different options, a high risk company, a moderate risk company, municipal bonds and treasury bills. In the second scenario, the participants were given the exact same investment options, but were also told that their dead great uncle again, rest in peace, already had a large portion of the portfolio invested in the moderate risk company. Lo and behold, researchers found that when presented with the second scenario, a much greater proportion of participants chose to stick with their late great uncle's strategy and therefore maintain the status quo.

(03:24)
From a rational perspective, this makes no sense at all, especially when we consider that the right investment strategy for an old and now dead uncle is unlikely to be the right investment strategy for our recent inheritance. Nevertheless, the status quo prevailed. Our desire to maintain the status quo is so strong that it overrides the logical possibility or even high likelihood of a better outcome. The status quo bias is in part the reason why many of us live with our parents way longer than we should have. Why we always take the same suboptimal route to work, or while we still own a vastly inferior iPhone seven crack screen and all. When we look at switching software in a commercial setting, it's easy to see why Windows 98 is still getting airplay. The potential upsides for the person driving the change are a little more productivity and nicer interface and some marginal cost savings for the business.

(04:17)
If it all goes well and they get lucky, they might even get a glowing performance review, a small promotion, maybe even a salary bump. However, if things go badly, they will forever be known as the person who brought the entire company to a grinding halt and blew millions of dollars on a catastrophic project that ran 18 months late. They'll be fired, then they'll be broke, then they'll be homeless, then their family will leave them, or because they try to give their colleagues a better browsing experience. So let's just stick with what we've got then. Hey, for brands trying to convince customers to make a big switch, reframe the situation to demonstrate how not changing is actually the biggest risk of all. When they do decide to come across, ensure you've got everything in place to make that switch as smooth and simple as possible. And if you want a really good example of this, check out the next time DocuSign case study on the hardhat website.

(05:10)
But that's just a special treat for you. Liam, I hope that answers your question of why good companies stay with bad software. If you have got a question or an observation about a weird or wonderful human behavior and you would like me to try and get to the bottom of it, please shoot it through. You can get me at askdan@hardhat.com au or hit me up at @danmonheit all over the internet. Believe it or not, ladies and gentlemen, that is it for 2022. Thank you so much for joining me. It has been wild, wonderful, interesting, and entertaining for me, and I hope it's been the same for you. Take care of yourself over the break if you're having one, and I cannot wait to catch you for some more weird and wonderful questions and answers in the new year. Take care.

Mini Episode 24 - Why do we love celebs with dad bods?

Emma from Canberra wants to know why we dread the shred and go jelly for the belly

Dan (00:17):
What's up? Welcome back to another episode of Bad Decisions. I'm your host, Dan Moneheit. Hi from Hardhat, and today we have a question coming to you live, well, not so live. Today we have a question coming to you from Emma in Canberra.

Emma (00:30):
I've seen it more and more in the tabloids, pap shots and social media. It seems that six packs are out. Why do we suddenly love dad bods?

Dan (00:39):

Look, Emma, does it really matter why for once? Can't we just enjoy the simple fact that it is? Cause look, I'm gonna be real with you here as a dad with a bod, I feel like trying to get to the bottom of this is like your kid's trying to get to the bottom of how the tooth fairy works. Like seriously, nothing good can come of this, but ala I have a professional responsibility that I take very, very seriously. And as a professional answerer of these questions, I guess me and my dad, Bo, are gonna be doing this whether we like it or not. So first little bit of background here, just for anybody not living at the bleeding edge of cool the dad, Bo Sported by a celebs like Leo DiCaprio and John Krasinski has become quite the thing. And who am I to complain?

(01:24)
I mean, these guys have got a point. Why hit the gym like you're some sort of freaking Hemsworth when you can achieve similar levels of appeal with some light, double bit of punch, and a smirk that expertly says, Yeah, I know, but also I don't really care. In the largely superficial world of fashion and influence, Dad, bods do seem like an unusual, if not ironic twist. So whether you've got one or you want one, grab your six pack or your six pack, and let's find out why dad bods are a thing. So sitting right in the guts of this question is something called the pratfall effect. Now, the Pratt fall effect is the idea that people who are considered to be highly competent, intelligent, or experts in some way actually become more likable after committing a blunder so long as the blunder is completely unrelated to what they're meant to be experts at.

(02:13)
In 1966, researcher Elliot Aronson in his crew asked groups of university students to listen to a tape recording of a fellow student who they were told was representing their school. In a quiz of academic prowess, the researchers played different recordings, one in which a brilliant student correctly answered 92% of questions, and another in which lousy student fumbled their way to a kind of pathetic 30%. Now, some of the recordings ended at the conclusion of the quiz, while others included a sudden splashing sound and the contestant exclaiming, Oh my God, I spilled coffee all over my suit. From here. The students needed to rate the contestants on a number of attributes. Interestingly, the researchers found that the highly intelligent contestant was considered much more likable when he'd spilled coffee all over himself. Yes, he was smart, but now he was also more relatable. Unfortunately, for Mr.

(03:09)
Mediocre, the opposite was true. Being daft and clumsy was a losing combination. The key to building likability through the Pratfall effect is to stay brilliant at what's important while flaunting imperfections around what's not. I think one of the best examples is things like discount airlines. If you consider Ryan Air, I mean these guys do not joke about the quality of their planes or their pilots, but they do make light of their lack of food service and pretty much any other basic amenities that you might expect from an airplane. It's for this reason. We often find actors more endearing when they're packing a poche midsection. Instead of being out of touch, Lamborghini, driving mega mansion, buying super humans, Dad bods, prove that even big name celebrities can be flawed and lacking motivation just like the rest of us. Q, empathy, relatability, and a whole lot of dad bond directed love in advertising.

(04:02)
Most brands are relentlessly trying to promote the very best versions of themselves, which makes highlighting imperfections a surefire way to stand out. Just remember, exposing your own weaknesses only works if you are already shining brightly in the areas customers expect you to. So there we have it, Emma. That is why we love celebs with dad bods, and you know, who am I to argue? If you are sitting out there listening to this and now remembering do you have a question about a weird or wonderful human behavior that you've observed, shoot it through to me. I'd love to hear it. I'll do my best to answer it. You can get me Dan Monheit or all over the internet. You can email me, ask dan@hardhat.com au. Catch you next time.

Mini Episode 23 - Why do I keep paying for insurance that I never use?

Francis from Carlton wants to know why she feels so unsure about staying insured.

Dan (00:17):
Hey, and welcome back for another episode of Bad Decisions. I'm Dan Moha, co-founder of Hardhat, and today we have a question submitted to us from Francis in Carlton Francis, What you got

Francis (00:29):
After years of paying for monthly car health, life, even pet insurance, I've never had to make a claim. So why do I keep paying for insurance that I never use?

Dan (00:38):
Francis? Francis, Francis, great name by the way. They do say that nothing in life is certain other than death and taxes, but you, my dear friends, seem to have added something else to the mix. All right? And we know it's kind of true. Month after month, the cash just disappears from our bank accounts. Health insurance, when a guy like you never get sick, car insurance went still thanks to Covid. We can't even remember what it's like to fill up the tank. Content insurance when working from home makes it pretty much impossible to get robbed life insurance when you haven't even come close to dying yet. Not even once and on and on and on. It goes without a claim, a benefit, or the need for a safety net anywhere to be seen. So Francis, cancel it. Go on. I dare you. Just live a little.

(01:23)
Why not self-insure? Save all those premiums and just buy a new car or guitar or kidney, if or when the need arises, right? Mm. Didn't think so, right? What if, What if is what we ask ourselves? What if I some crazy chance, a perfect bill of health or flawless driving record takes a magical turn for the worse. We know the likelihood is minuscule and that all those premiums can't possibly make rational financial sense. After all, insurers are pretty good at running profitably, but still we stay month after month payment after payment. The thing that I think is so interesting about this question is that so often in life we choose tangible short term benefits over hazy long term ones. In fact, for those of you paying attention, there is a whole other bias that speaks directly to this Hello temporal discounting. So what is it about insurance then that completely flips the script?

(02:16)
Well, I'm glad you asked because the thing that flips the script is something called zero risk bias. The zero risk bias describes how irrationally strong preference for situations that have absolute certainty. So by and large, we prefer options that eliminate one type of risk completely, even if that increases the total risk that we're exposed to. In other words, we love a sure thing, even if objectively speaking, the sure thing is not the best thing for us. Research conducted by Z Hower, cited by Cardman and Fisi 1979, asked participants to imagine they were playing a game of Russian roulette at good times, right, with the option of paying for individual bullets to be removed from the cylinder of the game. Now, what is irrational, but also entirely unsurprising is that participants who are willing to pay far more to have the final bullet removed to certain life than they were to have the third or fourth last bullet removed, even though the reduction in risk is identical for the removal of each bullet.

(03:12)
Now, one of the biggest benefits of succumb to the zero risk bias is the joy we get from having one less thing to worry about in a world of seemingly endless things to worry about. It is not surprising that we will pay a premium to have one such thing scratched entirely off our lists, which is exactly what happens when we pay our insurance premiums. Sure, we know in our heart of heart that we'll probably never make a claim, but the peace of mind is almost value enough when it comes to selling. Reducing risk is always a good strategy, but if we can remove it entirely, you know, make something zero risk, we will enjoy disproportionate returns. It's no wonder that risk eliminating sales techniques like the money back guarantee that free trial and the post-purchase price match have been around for as long as sales people have to make the most of zero risk bias.

(04:00)
Brands can look for ways to remove risk completely from the product itself. So guaranteed pesticide free to remove risk from the way the product is purchased. You know, cancel any time or remove risk from the outcome that customers are using the product to create. So perfect pancakes or cheaper phone bills, guaranteed. Cause let's be real. Nobody with Tom Cruise likes risky business except you, Francis. And hopefully now you are somebody that likes risky business and has had the question about insurance answered. If you are sitting there thinking about a weird and wonderful human behavior that you've observed, shoot it through to me and I will do my best to answer it. You can hear me up all over the internet at dad mon height, or get me by email and ask Dan Hard hat dot comu. See you next time.

Mini Episode 22 - Why did my pay rise buzz wear off so quickly?

Jenny from Sandringham wants to why her pay rise has left her feeling flat.

Dan: (00”17)
Welcome to The Bad Decisions Podcast. We are tackling life's big and beautiful questions. I'm your host, Dan Monheit, co-founder of Creative Agency Hardhat, and today we have a cracker of a question. This one comes to us courtesy of Jenny from the Block, also known as sandham.

Jenny: (00:34)
A few months ago, I was so excited to hear I was getting a raise, but now I'm already thinking about when I will get the next one. Why did my pay rise buzz wear off so quickly?

Dan: (00:45)
Ah, Jenny, Jenny, Jenny. Look, we have, we have all been there, right? We know what it's like four months. You have pined over what that little bit of extra dosh will do for your happiness. You've imagined that lax restaurant you'll be able to dine at how that magnificent new watch will look on your wrist and how much sweeter that red wine will taste when you're not paying it off in four equal installments. Yet here you are, right post payday 8% richer, but certainly not feeling 8% happier,

Dan: (01:24)
So first thoughts. I mean, I go to the great philosopher, notorious BIG, and he had a lot to say on this know mo money, mo problems and all of that stuff, but maybe there's more to it. I mean, maybe you just don't have the pallet for that fancy Shiraz that you thought you did, or maybe that's sour taste that the back of your mouth is actually just a behavioral bias trying to get your attention . Well, what do you know? There it is behind door number three. It is a behavioral bias and it is something called the focusing illusion. Now, the focusing illusion, this is a super powerful bias. It refers to our tendency to concentrate on a single aspect of our lives or a particular decision to the exclusion of all others. Danny Kahneman, who I'm sure you know by now, the Nobel laureate and unofficial godfather of all things behavioral economics, explains it simply as follows.

Dan: (02:11)
Nothing in life is as important as you think it is while you are thinking about it. I think that's what's repeating, right? Nothing in life is as important as you think it is while you are thinking about it. In other words, whatever you happen to be focusing on has a funny way of becoming the most important thing to consider. So let's cut to the research. In 1978, Brickman Coats and Janov Borman compared the happiness of lottery winners with the happiness of paraplegics and quadriplegics caused by accidents. Both groups were asked to write how happy they are now, how happy they were before winning the lottery or before the accident, and how happy they expected to be in a couple of years from now. Now, it's fair to assume that those who won the lottery would end up far happier than those who'd suffered debilitating injuries, but my friend, you'd assume wrong, millions, richer or physically poorer.

Dan: (03:01)
The researchers found that both groups had a similar outlook on current and future happiness. While focusing on money or one's physical condition makes them feel critically important in the moment, the impact from a major change in either actually dissipates over time as we adapt to our new reality. See, it's worth remembering that paraplegics aren't paraplegics full time. Sometimes they're just people enjoying a meal or reading the newspaper or basking in the sunshine or catching up with friends, and it's exactly the same for millionaires too commercially. We see the focusing illusion at play everywhere. It explains to how the constant talk about airfare prices has got us all feeling travel obsessed. Why a yogurt that suddenly claims to be high in protein magically finds its way into our shopping trolleys and why singles can long to be coupled and vice versa. It is so tempting and so very, very human to believe that there's just one little thing between us and total happiness when in reality it's what we choose to focus on that makes all the difference.

Dan: (04:00)
Whoa, Jenny, sorry to just go all Dr. Phil, Life coach on you, let's bring this back to the Benjamins. Of course, it was a great day when you received that pay rise and from the way you asked questions, Jenny, I bet you really deserved it, but let's be real. We know our attention spans are short and once get that damn pay rise got crossed off your list, it was onto the next thing, wasn't it? And there's no doubt that whatever that next thing is will absolutely, positively, definitely make you happy from here until the end of time. So you go get it, girl. For brands, the focusing illusion provides an opportunity to align what we're selling with what's top of mind for consumers in any product, there are hundreds, if not thousands of details. A customer could focus on identifying what's most important or better yet helping customers decide.

Dan: (04:45)
What's most important will put you in the box seat when it comes time to buy. So there you have it, Jenny. I hope that helps you understand why that pay rise buzz wore off so quickly. But just remember, even if the buzz has gone down, the actual bank balance has gone up. So you should still be very happy and very proud of yourself. Go buy yourself, something nice. If you are listening to this thinking about a weird or wonderful question about human behavior, please shoot it through to me and I would love to try and give you an answer. The best way to find me is all over the internet at Dan Monheit or on all the email you can get me askdan@hardhat.com.au catch you next time.

Mini Episode 21 - Why have I stopped (compulsively) checking my investments?

Jonathan from Lightsview wants to know why he's suddenly less invested in investing

Dan: (00:18)
And welcome to another episode of bad decisions. We're still rolling through this mini episode format, trying to get to the bottom of your weird and wonderful questions about interesting human behaviours. Today's question comes to us from Jonathan in Lightsview.

Jonathan: (00:32)
I used to look at my stocks every day, but now I only check them once a week. I've even hidden the app on my phone. Why have I stopped checking my investments?

Dan: (00:40)
Oh, this one, this one feels real Jonathan, especially this week. Uh, but Hey, let's, let's talk about it. Right? So the day trading slash commodity trading slash cryptocurrency trading game, you know, it is a wild ride Jono, but you already knew that didn't you, you and the 9 million other Aussie investors who truly understand the thrill of the short, the rush of an exotic derivative or the pure unadulterated joy of using your ledger to buy NFT with ether no wonder you've been hitting refresh like a sneaker head on drop day until now, of course see how things are different that folder on your home screen. The one that got all the action in the last 12 months, eh, it's looking a little lonely now, isn't it sure. You're probably just too busy to check where things are at these days. So maybe you've realised that logging in at the wrong time can jinx your balance, which is totally possible, but you know what else is possible?

Dan: (01:27)
It's possible that the smoke alarm batteries will magically recharge themselves, that your sore tooth will fix itself. And that at some point, that weird smell will just kind of go away. Right? Well, let's dig a little deeper today. We are talking about the ostrich effect, which refers to our tendency to avoid negative information. Instead of facing the facts we choose instead to bury our heads in the sand, which fun fact OSTs don't actually do by pretending that the information doesn't exist, we get to hide from the fall out of any bad news and avoid all those unpleasant icky feelings. We fight so hard to keep at bay. The seminal ostrich effect study comes from Carlson Stein and CEPI in 2009, as the world entered a deep financial crisis, the teams did out to study how often investors check the health of their portfolios over a four year period.

Dan: (02:!4)
The researchers found that daily logins were consistently and significantly higher following good news. The market's gone up pre compared to bad news. The market's gone down, Ooh, rationally having the most up to date information, no matter how good or bad helps us make better financial decisions. Emotionally though, it's a different story. Why get reminded about the 150 grand you lost before breakfast? If you don't really have to be for product and services that customers would rather ignore think financial counseling, weight, loss products, prepaid funeral services. You can look at ways to demonstrate how avoiding the issue will actually be far more problematic than confronting it beyond this brands can reframe negatives as positives, removing the I factor and improving permissibility. So think about the impact of switching out guidance through bankruptcy, with achieving financial independence, same service, completely different feeling. No ostrichs required. So there you have a Jonathan that is at least my take on why you have stopped compulsively, checking your investments. Uh, but chin up, they say it's a long game hanging in there. And if you feel like it flick me some Bitcoin, if you don't wanna flick me some Bitcoin, the other thing you can send my way is your questions about weird and wonderful human behaviors. If you've seen something and would like to know what is driving it, shoot it through to me. You can get me all over the internet at Dan Monheit or via email askdan@hardhat.com catch you on the next one.

Mini Episode 20 - Why don’t waiters just write down my order?

Katrina from East Gardens wants to know why waiters love to wait to complete your order

Dan: (00:19)
Welcome back to bad decisions. Is it back maybe just welcome to bad decisions, either way. I'm your host, Dan Monheit co-founder of Hardhat, and we are here to tackle your weird and wonderful questions about human behavior. Today's question comes to us from Katrina, from East gardens.

Katrina: (00:34)
So I was out for dinner with some friends last night, and a few of us had alterations to our order. One of us has no dairy, another one got extra cheese. Um, and then there's a vegetarian and I noticed that the waiter didn't jot anything down. So my question is why don't waiters just jot down orders.

Dan: (00:51)
Ah, yes, the old I'll just remember it trick. We all know that sense of anxiety. We feel when our waiter decides to take mental notes, just like they're on the podium of the world memory championships, rather than just doing the job and writing down the orders with that little pencil on that little pad of paper. Just like that. Our enjoyment for the evening now rests solely on their ability to remember Aunt Pam's finicky and frankly, unnecessary modification to the stir fry. Or there was uncle Jerry or uncle Gary who wanted the satay sauce on the side, not allergic just a preference. I hear you Katrina. I mean, why show off surely it is in everybody's best interest to just go with old faithful pen and paper, maybe an iPad. Hell, you could use a, a tablet and a chisel for all. I care, just please write it down.

Dan: (01:35)
Right. But what if we're wrong? What if we just aren't trying to impress us at all? You know what, if you have ever found yourself distracted in a, uh, intimate moment because you left washing the machine, then listen on or don't. This bias actually works either way because we are talking about the Zeigarnik effect. The Zeigarnik effect describes how we remember incomplete interrupted or unresolved tasks more easily than those. We finished starting a task that we are interested in, brings this overwhelming desire to complete it. That desire stays with us right until we do so, and then disappears. So in 1927, Boom Zeigarnik an iconic Lithuanian psychologist. And of course our heuristics namesake ran an experiment to test how easily children could recall the details of task work. Two separate groups were left to work on a series of puzzles and basic maths problems. One group was interrupted midway through while the other was allowed to complete what they were working on after an hour away from their activities, the children were asked if they remembered what they'd done while 12% of the completed group recall their tasks.

Dan: (02:38)
This figure jumped to 80% for the interrupted group. The incomplete tasks were still ticking away in the minds of group two. When we start and then complete the task, we're rewarded with a dopamine hit and an accompanying sense of satisfaction. When instead a task goes unfinished, we're left, motivated and invested in keeping it top of mind in the hope of completing it and cashing it on that reward a little bit later. And that's where our hospitality friends come in. As it turns out, Bloom also observed that wait staff could remember complex and nuanced food orders while they were still outstanding. But as soon as the plates were cleared and the bill was paid, the orders vanished from memory storing the orders of customers in working memory makes it easy to provide good customer service as well as keep tabs on who still needs to pay brands conduced as a organic effect by skipping the whole story instead, consider providing just enough to hook your audience safe in the knowledge that you'll come back and close a loop down the track, think cryptic headlines in complete catch phrases or ending it all with a…

See what I did there. All right. Katrina. I hope that answers your question on why waiters. Don't just write down your order, but between you and I, I also think they're just trying to show off a little bit if you are not Katrina, but have also observed a weird or wonderful human behavior that you would like me to get to the bottom of shoot it through to me. You can get me on email askdan@hardhat.com.au or all over the internet at Dan Monehit. Catch you next time.

Mini Episode 19 - Why is it 11:11 every time I look at my watch?

Ross from Holland Park wants to know if his watch is broken or if it's a sign from above.

Dan: (00:16)
What's up everybody. It's Dan Monheit here with a fresh episode of the bad decisions podcast. You know, uh, we're still doing the mini formats here, where we are tackling weird and wonderful questions. Today. We have an absolute belter. This is coming to us from Ross in Holland park, but I'm not gonna lie. This could just as easily have come to us from my wife in Melbourne, Ross, what you got

Ross: (00:36)
My girlfriend was telling me that how seeing certain numbers can mean there's new opportunities on the horizon. At first. I thought it was ridiculous, but then I started wondering if it's a sign. Why every time I look at my watch, it's 1111.

Dan: (00:49)
Why, why, why? Uh, you know, we like tackling the big questions here and there is none bigger than why it is 11, 11. Every time you look at your watch right now, there is a wonderful saying that even a broken clock is right twice a day, but I'm assuming that you, my dear friend, Ross are more of a digital watch and maybe even a Velcro wallet kind of guy, no disrespect. Now it is very tough to go past this 11, 11 phenomena. And before getting your question, I didn't even realize this was such a big thing. And then I saw the question I jumped on the internet and oh my goodness, I was not ready for this. The web is filled with a multitude of perfectly reasonable explanations, including the, and I quote synchronicity of the universe or suspicious signs, the opening of opportunity portals and the presence of spirits.

Dan: (01:34)
Ah, thank you, internet, to be fair. This 11, 11 phenomena may not be for everyone, but every one of us is subject to our own little belief about things happening far more often than they actually should. So for some of us, it is a perfectly timed 40 weeks, 40 hour sale. A just when we were planning to go out and buy a new bed for others, it is everyone on Instagram being pregnant or in Europe or being pregnant in Europe or the timely arrival of this podcast. Whenever you are contemplating life's biggest questions. So what is going on here or watch is going on here, if you will. Let's let's take a look. So what does at play here today? Ross is something called the confirmation bias. Now confirmation bias describes our tendency to seek out and upright information that supports any of our existing beliefs while undervaluing, discrediting, ignoring, not even rating avoiding anything that runs counter the more emotional or deeply held the belief.

Dan: (02:28)
The more susceptible we seem to be to the confirmation bias. So one of the most famous studies about confirmation bias was carried out by Lord Ross and LEPA in 1979. And this provided us with a very, very clear striking demonstration of confirmation bias in action. The researchers gathered two opposing groups of students, one who were pro capital punishment, believing it to be an effective deterrent of crime and the other against believing. It had no effect at all. Each of the highly opinionated groups were asked to review two studies. One of these studies contained strong irrefutable evidence in support of capital punishment's impact on crime reduction while the other contained equally strong evidence against it, low and behold, the students in favor of capital punishment found the material that supported their stance to be highly credible. While regarding the other study, as entirely unconvincing, the students who held the opposite views found the same, but in reverse, when the students were finally asked to restate their views in light of the new evidence that they just reviewed, both groups doubled down on their initial beliefs, pro punishment.

Dan: (03:29)
If that's what you would call them were adamant about its ability to reduce crime. While the anti punishment is remains staunchly unconvinced. Now it's worth remembering the two groups reviewed identical studies. The thing is as humans, we love being right, and you know what two other things we really love are conserving mental energy and appearing consistent to others. Both of which are compromised when we change our worldview, confirmation bias explains how we enthusiastically click the first Google result that backs our argument and why it feels like Facebook is listening to us. But come on how many ads for products you weren't just talking about? Did you mindlessly scroll pass without noticing? There is no doubt that we check our clocks watches and phones dozens, if not hundreds of times a day. And with every peak, I'm sorry to say the odds of it being 11, 11 remain up poultry one in 722 or one in 1,440.

Dan: (04:19)
If you run military time, like I do where confirmation bias kicks in is in us, not noticing any other time, quite so much. And how could we with all of that gorgeous symmetry and wish granting magic wrapped up in the wondrous 11, 11, unless you're a brand that's fresh to market is, but guaranteed that buyers will already have some preconceived perceptions about who you are and what you stand for. So instead of battling up hill, trying to change people's minds, you should look for ways to lean into it and dial up what they already believe to be true. Yes, this might take some reinterpreting or a little creative license, but the truth is almost always the best place to start. And if you need some creative inspiration, Volkswagens think small and Avis is wear. Number two are classic examples. On the other hand, if the aspirations for the brand are completely at odds with what the masses already believe, then either strap yourself in for a long, expensive transformational journey ahead or consider acquiring partnering, or spitting up a new brand for a fresh start. Instead. Exactly like Toyota did with Lexus back in 1989. So that is it for today. Ross, I hope that answers your question of why it is 11, 11, or at least why it feels like 11, 11. Every time you look at your watch, if you like Ross have been wondering about weird and wonderful observations of human behavior in life, please shoot 'em through and I will do my best to answer them. You can get me at Dan Monheit all over the internet, or shoot me through a old school askdan@hardhat.com.au. Catch you next time.

Dan: (06:04)
So watch up with that. it's so good.

Mini Episode 18 - Why does everyone think they're great drivers?

Marcie from Docklands wants to know why we we're all racing laps like Ricciardo.

Dan: (00:17))
What's up and welcome back to another episode of bad decisions. I'm your host, Dan Monheit co-founder of Hardhat. And if you're listening, you probably know the deal by now, this week's question submitted from Marcie in Docklands, Marcie, what you got

Marcie: (00:30)
This morning on my drive to work. I got cut off twice and saw someone run through a red light without even noticing why does everyone think they're such great drivers?

Dan: (00:40)
All right, come on, Marcie. This is an easy one. It's a, because they are

Dan: (00:46)
Okay. No, but for real look in my experience, there really are only two types of drivers in the world. There are those who think that they're better than everyone else and the 20 or so professional formula, one drivers who went up to around 75 million bucks a year, driving a car around a track with no traffic lights and no need to park, who probably are slightly better than everybody else. While little confidence can go a long way. My own confidence in year 10 mathematics. Thank you very much. Mr. Wosy tells me that we can't all be above drivers now, can we Marcie as we all know too well, the world is littered with these experts. You know, I mean, there's Becky from accounts who watched one episode of Q and a, and is now the leading thinker on Australia's foreign trade policy. You probably have like a friend's brother, Phil who played 11 games of football in high school.

Dan: (01:28)
And he is adamant he could do a better job coaching the doggies this season. And of course the worst and also best of them, Lawrence. And I do love you dear Lawrence, but everyone's got a Lawrence in their life who took a three hour wine appreciation course in 2009. And is now everyone's resident sommelier, you know, my family's not even immune my gorgeous son. Uh, all of nine years old is convinced that he's gonna make the NBA given that he's and I quote you already the third best shooter in his class. Right? And I believe in you, boy, I believe in you. So let's sit down Marciebuckle up and get ready for a ride on the humility highway. Because what we are looking at today is the Dunin Kruger effect. Now the Dunin Kruger effect states that people with low levels of proficiency tend to overestimate their ability to perform a task.

Dan: (02:13)
At the same time, those who are highly proficient, tend to sell themselves short. So the theory goes that when you're completely new at something, you suck so bad that you don't even realize all the different ways that you suck. And then as you get better and better, you start to recognize how much more there actually is to know causing you to feel that in reality, you know, pretty much nothing at all. So research conducted in 2003 by the Dunning and the Kruger are students who recently finished an exam to rate how well they thought they did in comparison to their peers, by mapping the students, actual scores against how well they thought they'd fed that in Kruger made a discovery. The students who bombed the test generally overestimated their ability compared to others. While the star students with top marks, massively underestimated how well they'd done, essentially, the less they knew, the more confident they were.

Dan: (03:00)
You can see how this is gonna end badly, right? In today's world of vigorous online debates, the Dunning Kruger effect is what keeps the idiots loud and proud while the experts sit back, observe, stay quiet and wonder if they really know enough to offer an opinion. When it comes to driving, we all know enough to be dangerous, especially early on it. Doesn't take long to get the hang of things, right? If you remember, it's like this pedal is go, that pedal is stop. You turn the wheel a little bit. Don't forget to check the mirrors. And you're pretty much driving, especially if you grow up playing Daytona like I did. In reality, though, we barely scratch the surface of what it takes to be a truly proficient driver. Add in a little torrential rain, some tram tracks, a hook turn, and a reverse parallel park on a steep incline.

Dan: (03:41)
And we'll soon find out what's what, as advertising sales and marketing folk, we're often pitching to people whose confidence to competence ratio is way out of whack when confronted with a premature expert to somebody really on, in their journey, who kind of thinks they know it, all the plays to slowly, gently, respectfully offer guidance and information that will help them realize there might be more to consider here than they'd realized. So you might do that by offering a personal anecdote, you know, like, oh, well let me tell you, ask me way too much on my first bike or throwing them an open ended question. Like, so what style of cycling is your go to things like these are your best weapon for building trust and sitting the foundations for a mutually beneficial long term relationship. On the other hand, if you're talking to the chronically under confident, those people who actually are highly proficient, but just constantly doubt themselves, what you can do is offer reassurance and bridges between what they know they know and where you want them to go.

Dan: (04:34)
So, you know, you could say, look, if you can count to eight, you can learn the harmonica, helping prospects realize that they've already got the skills, the knowledge and the ability to take the next step can have them heading for the checkout with confidence. So that is all for this week. Marcie, hopefully that shines a light on why everybody thinks they're a great driver and look, I'm sure you actually legitimately really and truly are, but it's good to know that not everybody else is. So if you have got other questions about weird and wonderful human behaviours that you have observed, please shoot 'em through to me. You can hit me up at askdan@hardhat.com.au or all over the internet at Dan Monheit. We'll catch you next time.

Mini Episode 17 - Why do smart people believe in dumb horoscopes?

Millie from Coogee wants to know why we can't help but look into the crystal ball.

Dan: (00:17)
Welcome to another episode of bad decisions. I'm your host, Dan Monheit co-founder of creative agency hardhat. And today we have a ripping question from Millie in Coogee.

Millie: (00:27)
One of my friends checks her daily horoscope every morning, letting it guide her every decision for the day. I think she'd rather take advice from her horoscope than any of her friends. Why does smart people believe in dumb horoscopes?

Dan: (00:39)
That is a wonderful, thoughtful, insightful question, milli and the rise of Pluto suggested the answer is just around the corner. Along with an event that will prompt you to reassess a close relationship and a major life decision that will require you to trust your gut. But in all seriousness, who doesn't love a horoscope, a poem reading, maybe even an aura audit. If you are happy to find yourself in Byron bay, especially when they all tell us how close we are to financial freedom, everlasting love and discovering our true purpose in this large lonely world. The funny thing is the same science that proves horoscopes are bullshit. Also explains why so many people even really, really, really smart ones still believe in them. So join me, my Taurian adventurer, as we embark on a great journey upon which enlightenment and a true spiritual awakening are all but guaranteed first stop.

Dan: (01:29)
And if I'm honest, the only stop on our journey is at the bottom effect. The bottom effect describes our tendency to believe that personality descriptions are tailored specifically to us, even though they are in fact vague. And in reality could apply to virtually anybody in 1948, psychologists Bertram four handed out, especially devised questionnaire to his students. This is amazing. Wait, wait for this. Right. The students were told to complete the questionnaire honestly, and were promised a personalized sketch or description of their personality type in return for a collected, the completed questionnaires and returned the following week with personalized sketches for each and every one of his students upon receiving their sketches or descriptions. Each student was asked to provide a rating from zero, which was poor all the way up to five, which was spot on in regard to how accurately the sketch described them. The average accuracy rating was 4.3, which is rather incredible when you consider that each student received the exact same sketch, which as you might imagine for had assembled from a new stand astrology book the night before, as it turns out, almost anything can apply to almost anyone horoscopes Claire Voyance and which Harry Potter character are. You tests all play into our curiosity and our vanity. Holy

Speaker 3: (02:45)
Cricket, your Harry Potter, you're Harry Potter,

Dan: (02:48)
The deliberate vagueness leaves room for us to insert our own meaning and relevance, helping universal statements about being self critical falling short of our potential or seeking securities seem truly personal. These descriptions tend to be considered even more believable when they're you never believe it positive and come from a perceived authority, such as a widely circulated newspaper or a mystical woman, surrounded by crystals and candles in a velvet carnival tent. The Barnum effect is a powerful tool for getting people to self-identify. As prospective customers, brands can use this by highlighting product truths that actually flatter the audience. So if you make running apparel, you might run a line that says running gear for people who know that bad conditions are only ever a state of mind, right? You see how people would be like, oh, that's totally me, right? Or another thing they can do is hero particular audience segment.

Dan: (03:34)
So this isn't just any peanut butter. This is peanut butter for dads who want the best for their kids. It's like, Hey, I'm a dad like that. Anyway, if you like the sound of this, and you're a smart marketer, like all smart marketers you'll know what to do from here. Just trust your gut. So there we have it Millie, I hope that answers your question of why smart people believe dumb horoscopes. And if you've got any further questions or queries about weird and wonderful human behaviours that you've seen in the world, shoot 'em through to me. You can get me at Dan Monheit all over the internet, or if you wanna use your old email, you can get me at askdan@hardhat.com AU. And now as I look deep into my crystal ball, I see you downloading a future podcast episode with a yellow logo letters, B and D in the icon until then take care and trust your instincts.

Mini Episode 16 - Why do groups of adults argue over who gets to pay the bill?

Gerard from Cremorne wants to know why the gloves have to come off when the cheque arrives?

Dan: (00:17)
Welcome to bad decisions. Still rolling through many episodes. I'm your host, Dan Monheit from creative agency hardhat. Today. We have a killer question. This one comes to us from my good man, Gerard. What you got for us

Gerard: (00:31)
Last night, I was out for dinner with friends. And when it came to paying a bill, we did that classic, awkward back and forward dance with the cheque. No, I'll pay it. No, no, let me, why do groups of adults argue over? Who gets to pay the bill?

Dan: (00:45)
Gerard, if, if I'm gonna be honest with you, this one plagues me all the time and obviously, you know, part of it is because we're petty and we're irrational, but you already knew that, right? Cuz you listened to the show. See the thing is it does not seem to matter if we are out with childhood friends. If we are at a meal with our extended family, or even if we're out with our celebrity crush, hi, Delli, I'm talking to you when it comes time to pay the bill. Everybody is a bloody hero. So this is odd, right? Especially when you consider in the world of behavioral science, how much we also seem to love the idea of free insisting that we're the ones that pick up the tab despite being chronically underpaid, which of course everybody is chronically over mortgaged, which of course everybody is and chronically in the presence of some other big shot who is also desperately insisting that they pay the bill is first class lunacy.

Dan: (01:30)
So yes, our egos absolutely play a part. But if you're listening to this podcast, you know, there's gotta be more to it. And there is so let's do this Gerard, because when it comes to human behavior, not making any logical, rational or economic sense, feeling bad about spending $0 on a delicious meal is about as crazy as it gets. What we're talking about here is the reciprocity bias and this is our deep seeded need to reciprocate the acts of good faith. Others have shown to us. You see, we have this innate desire to return favors, pay back debts and treat others well who have done the same thing to us. If we don't do this, it leaves us with this feeling of being indebted, which for most of us is like pretty icky and uncomfortable in 2006 David Stroms and his team conducted an experiment in New York city restaurants seeking out ways to increase the tips paid to waitstaff.

Dan: (02:20)
So while all patrons were provided with a great meal, fantastic atmosphere, lovely surface. When it came time to pack it up, some groups of diners were given the check while others were given the check, plus a piece of chocolate in an attempt to sweeten the deal in an act of reciprocity. Those who were given the chocolates tipped almost 20% more than those who received a standalone bill and believe it or not. If the waiter took the time to then walk around the table and offer each of the diners the chance to choose one of their own chocolates, the tips went up a further 18%, which is bananas. Clearly none of these diners worked in procurement or certainly on any procurement department that I've had interactions with. If a person goes out of their way to do something nice for us, you know, like letting us choose our favorite chocolate, we can't help, but feel indebted.

Dan: (03:04)
And that indebtedness is like a burning sensation that only goes away. Once we square the ledger, letting someone else pay for our coffee or our meal is essentially signing up for a dose of torture until such time as we can return the favor. Reciprocity bias explains why we tend to buy at least one bottle of wine after a full cellar door experience. Why we give a few dollars to the Basco who we've just watched perform or why we love buying the first round on a Friday night out? Sure. They're all nice things to do. But more importantly, they let us avoid that inner dread of owing. Other people's stuff. Reciprocity buyers can be a super powerful motivator for consumers, but brands need to be really, really careful with how they approach it. Because for reciprocity buyers to work a brand's offer must be forthcoming and unexpected without directly asking for anything in return.

Dan: (03:50)
So think about things like free samples, bonus add-ons and complimentary training or workshops for bonus points. The more personalised the give the better. So sending customized offers or gifts or offering up personalised introductions in a B2B sense, can all have customers feeling like it might just be time for them to get the next round. So there you have it, Gerard, that is why groups of adults cannot help, but argue over who gets to pay the bill when they go out. If you've got any further questions on weird and wonderful human behaviors that you've observed, please shoot 'em through to me. You can get askdan@hardhat.com or at Dan Moheit All over the internet. We're back in a couple of weeks with our next mini episode until then take care and do something nice for somebody. They might just owe you one.

Mini Episode 15 - Why do these things always happen to me?

Elliot from Preston wants to know why he’s always such a disaster.

Dan: (00:17)
Welcome to bad decisions. I'm your host, Dan Monheit and I'm still rolling through many episodes as we wait for Dr. Mel to come back into action today, uh, in our list of weird and wonderful questions about human behavior. We have, sometimes happy, sometimes sad, always interesting question from our different Elliot, uh, depressed and Elliot. What you got?

Elliot: (00:38)
This morning? I spilled my coffee, missed my train and stepped in gum. I couldn't help, but think why do these things always happen to me?

Dan: (00:50)
Oh, Elliot. Oh my dear friend, Elliot, because life is cruel. We all know life is cruel. I mean, you know, we've all been there, right? I'm sure you remember that time. You worked so hard to impress your new girlfriend's parents in that super fancy restaurant, five courses over three hours, and nobody thought to mention the poppyseed jammed between your two front teeth or what about that time? You tripped up the stairs into your boss, or when you dropped that massive tray of drinks at the Christmas party, or when you spent an entire day, including multiple new business meetings, blissfully unaware of your wide open fly, or the infamous ketchup stain incident. Shall I go on now, look with a run like that. It is so easy to conclude that the world is conspiring against you, but is it, is it conspiring against all of us?

Dan: (01:35)
Yes. Maybe you did commit some seriously heinous act in a previous life. Dear Elliot, or maybe, maybe my friend. You just have a healthy dose of self confidence, read narcissism and a falling victim to a very, very common mental bias. What do you reckon? Well, let me tell you you're about to meet something called the spotlight effect. The spotlight effect refer to the way we consistently and considerably overestimate how much attention other people are paying to us. So while we may believe that a faux pa a missing shirt button or a massive spill crossing the street has made a significant impact on those around us. Chances are they hardly gave it a second thought why you might ask because they're too busy thinking about themselves. Now the term spotlight effect was first coined by Medvec and Syvitski in 2000 after completing an experiment designed to destroy the street cred of any self-respecting college student, this experiment had a really simple setup. What they decided to do was create a situation where a subject would do something sure. To make them feel really embarrassed in front of a crowd. So how did they create this embarrassing situation you might ask? Well, the research participants were instructed to walk into a crowded classroom, wearing a bright yellow t-shirt featuring the bold enlarge face of the one. The only the inevitable Barry Manalow

Dan: (02:58)
For students, but also poor Barry. Now on average, the subject predicted that 50% of people in the room would see the shirt and take notice of them. In reality, only 25% of their classmates actually notice what they were wearing, which is a full half of what they had expected. Now, what this pretty simple, but pretty interesting experiment tells us is that we overestimate, in fact, we double how much attention we think people are paying to us. And in many ways, this makes complete sense, right? Because as far as our brains are concerned, we are the center of the universe, right? We are the hero protagonist in this blockbuster movie that is all of our own making. So of course it seems like things happen to us more than they happen to anyone else. And of course it seems like everyone else is always gonna notice when they do.

Dan: (03:40)
And they would, if it weren't for their own blockbuster movies playing out in their own heads at the exact same time for brands, the lessons here are simple and powerful. Firstly, if our customers or prospective customers believe that they are all starring in their own show, right? If they are the center of their own universe, who are we to tell them otherwise, right? We should play into the idea that our product service business or brand will help them stand out or fit in when all eyes are on them. Secondly, and I think this is more important than ever, right? We need to redefine brave, right? There's a lot of talk in our industry about doing brave work, brave campaigns, brave coms. Now, if the science tells us that a bright yellow Barry Manalow, t-shirt only gets half the attention. We think it will. Then how much harder should we be pushing our next edgy campaign?

Dan: (04:29)
Right. And I would say it is safe to say at least 100% further than we think we should. So that's it for today, Elliot, I hope that answers your question and you can, uh, you know, feel a little happier about how things go from here. Uh, if you have got questions, thoughts, feelings, queries on weird and wonderful human behaviours that you would just like to understand a little more, you can send 'em through to me, uh, I'm all over the internet at Dan Monheit, or you can email me at askdan@hardhat.com.au. We'll be back in a couple of weeks from now with another mini episode until then look after yourself. And if you really do think everybody's looking at you, who am I to tell you otherwise, miss out.

Mini Episode 14 - Why does everyone remember Kodak as a failure?

Nicole from Chatswood wants to know why the Kodak moment was one worth forgetting?

Dan : (00:18)
Welcome to bad decisions. I'm your host Dan Monheit from Hardhat. And you know how this works today. We have got a cracker of a question from Nicole in Chatswood, Nicole, what you got,

Nicole: (00:27)
Hey Dan, the other day, I bought a disposable camera for my long weekend away, which got me thinking, why does everyone remember Kodak as such a failure?

Dan : (00:35)
Well, because it was okay. Let's be honest. That's a little bit unfair because before it was a failure, Kodak was a lot of other things too. See, while today doing a Kodak is shorthand for a company failing to evolve fast enough at various points in the past, it could have just as easily meant being one of the largest and most successful companies in the world completely and utterly dominating a category or actively seeking to disrupt oneself to innovation.

Speaker 3: (01:01)
50 years ago, Kodak was the third largest company in the whole of America. In 1976, Kodak held 85% of the entire camera market. And 90% of the film market, the digital camera was invented by Steven Sassan a Kodak engineer in 1975

Dan : (01:21)
Numbers aside, Kodak also had a tremendous cultural impact right across the globe Kodak moments even today are how we describe those emotional high points of our lives. And that's to say nothing of that universal giddy moment of anticipation. If you're old enough that came with picking up a part of newly developed photos in a bright yellow envelope from our local chemist or Photoshop. Yeah. Before it's spectacular bankruptcy in 2012, Kodak was everything we think about apple, Google and Amazon today. So why don't we remember any of the good stuff, in fact, why don't we remember most things? Cause when you consider everything we experience our day-to-day lives. The vast majority of it, pretty much just evaporates as soon as the moment has passed. So what do we remember? Well, according to the aptly named peak end rule, it's the emotional highs and lows as well as the endings that make all the difference.

Dan : (02:13)
In other words, not all parts of an experience are created equal when it comes to shaping our memories in a study by Carmen and Schreiber back in 2000 participants were asked to listen to audio tracks, comprised of irritating sounds of varying loudness and frequency. At the end of the track, participants were asked to rate the overall annoyance of what they just heard now, rather than answers being correlated to the track's average level of annoyance. The answers were far more in line with the peak levels of annoyance, as well as how the tracks ended. This perspective helps us understand how a terrible flight home can ruin an otherwise wonderful holiday. Why a beautiful brunch can be tainted by a surprise surcharge on the bill and why despite decades of steady success. The only thing any of us remember of Kodak is a big stinking failure. So while many of us are diligently working to create outstanding end to end customer experience for the brands we represent, we would actually do well to remember that we should be shooting for outstanding memories of those experiences instead after all it is the memory, not the experience that drives our customers likelihood to talk about repeat or recommend the experience to others.

Dan : (03:23)
So if we are going for memories, we should focus on creating one or two emotional high points really late in an experience while ensuring that nothing else is diabolical along the way hand saving their biggest hit for the Encore and the wonderful tradition of lolli bags at the end of kids, parties are both perfect examples of bringing the peak end rule and outstanding memories to life. So if nothing else ask yourself, what's your lollie bag gonna be? So there you have it, Nicole, that is why everybody remembers Kodak as a failure, despite their incredible years of success. If you have got a question that you've always wondered about, perhaps an observation into a weird or wonderful human behavior, shoot it through to me. I would love to hear it and I will do my best to answer it. In an upcoming episode, you can get me all over the internet at Dan Moheit, or you can send me an email, just shoot it through to askdan@hardhat.com.au. That is all for this episode. And I will catch in a couple of weeks, peace out.

Mini Episode 13 - Why did I buy so many pairs of sweatpants?

Holly from Brighton wants to know why counting her sweats has got her sweating.

Dan: (00:18)
Welcome to bad decisions. I know you guys are waiting to hear the dulcet tones of Dr. Mel, and I can assure you, she is just around the corner, but for now you're still just me answering your weird and wonderful questions about human behavior. And today we have an absolute classic. This comes to us from Holly in Brighton. Holly, what you got for us?

Holly: (00:38)
Hi, Dan. I was just in the middle of moving and I'm going through my closet and I've just realized that I have way too many pairs of sweatpants. I don't know where they've come from. I swear I only had a few and really only use a couple now, but now I'm thinking about all the shopping sprees that I've had in the last year, and I've just got too many, and now I have to dump them all. Why did I buy so many pair of sweatpants?

Dan: (01:03)
Oh, Holly, look let me just start by going on the record here and saying, I don't really see the problem. I mean, I'm looking at my own wardrobe. I see 11 pairs of almost identical sweatpants that I bought over the course of 2020. And I take joy knowing that these are now a key part of the estate that my lucky kids will one day inherit. So I don't know what the problem is. However, let's see if we can get to the bottom of it anyway. Right? There is no question that each purchase seemed like a good idea at the time, right? Same goes for my wine subscription, my razor subscription, my stock subscription, my bacon subscription, my underwear subscription and my online yoga Pilates meditation subscription. Also, my eyebrow ring from 1998 and also the Green Day tattoo on the small of my back.

Dan: (1:45)
Not really, but you kind of get it. But that's enough about me, Holly, let's talk about you. Why did you buy all of those sweatpants and why does today Holly, seem somewhat less thrilled about it than lockdown Holly who bought them all in the first place? Well, the answer is because lockdown Holly was suffering from projection bias, like we all do all the time. Projection bias is our tendency to assume that our future selves will have the exact same set of tastes, preferences and priorities that our current selves do. See, it turns out that the difficulty we have feeling empathy towards others, also annoyingly extends to our future selves. A shortcoming that Carnegie Mellon University psychologist, George Loewenstein labeled the intra personal empathy gap. In a series of like pretty interesting experiments, Loewenstein, contrasted people's predictions about how much they would be affected by a major life change.

Dan: (02:32)
So something like moving to a different climate, winning the lottery, becoming a paraplegic. So he contrasted that with data from people who had actually experienced those life changes. What Loewenstein found was that people consistently and significantly overestimated the impact that these changes would have on their happiness. And a really big part of that is because they couldn't imagine experiencing these changes in any context, other than the one they were already in. If it's warm outside, we can't imagine ever not wanting a pool or a convertible. If we are starving while we shop, we know what happens, right? We end up loading up our supermarket trollies, like we will be eating for Australia for the next week straight. If we've been working from home in sweats for months on end, it also seems unfathomable that we will ever slip back into a suit or heels, or a suit and heels, or whatever takes your fancy, right?

Dan: (03:19)
So we better buy some more trackie dacks. This lack of foresight can have major consequences, as we fail to appreciate that today's enthusiasm towards a monthly wine subscription, an overpriced handbag, or even an edgy neck tattoo, may not be matched by our future selves, who ultimately inherit the results of all of these decisions.

Dan: (03:37)
For brands, the projection bias provides a golden opportunity to capitalize on motivation in the moment. So this could be as simple as offering to book a follow up visit or service immediately after the first one, adding recurring payments or bulk buy options or going pedal to the metal on media when conditions are absolutely perfect. People will make all sorts of decisions. Many of them long term, and many of them bad, based on the assumption that they will always feel exactly as they do, right here, right now. So, Holly, I know that doesn't really help your track pants situation, but at least, hopefully you have now some understanding of why you did it and maybe it will stop you burdening, future Holly, with more terrible purchases that today Holly wants. To everybody else out there who a question about a weird or wonderful human behavior that they've witnessed maybe in others, maybe in themselves, please send it through to me.

Dan: (04:27)
You can get me at Dan Monheit around most of the internet or on the old fashioned email at askdan@hardhat.com.au. It's been a lot of fun. Hope you guys enjoyed and looking forward to tackling the next one of these with you in a couple of weeks from now. Take care.

Mini Episode 12 - Why do I keep paying for a gym membership I never use?

Richard from Annandale wants to know why his wallets getting a bigger work out than his gym membership

Dan: (0:17)
Welcome to Bad Decisions. It is good to be back, 2022. We are still in mini episode format, but I have on very good authority that Dr. Mel will be returning to the fray very, very soon. In the meantime, we have a few more of your curly, wonderful, interesting questions to answer. And today's comes to us courtesy of Richard, or dare I say Richo, from Annendale. What you got, Rich?

Richard: (00:40)
Hey, Dan. The other day I was regrettably looking through my bank statements and I was confused about this cost that kept coming. And then I noticed it was my gym membership and I haven't been there in so, so long, but instead of calling them up to quit, I just haven't got around to it. So I was wondering, why do I keep paying for this gym membership that I'm never using?

Dan: (1:01)
Oh, Richo, my man, I feel you. And, I too, have asked myself on occasion, how did it come to this? I mean, what once was this enthusiastic commitment to a better body, a better life, a better you is now nothing more than a monthly reminder on the credit card statement of just how far we have fallen. But, chin up, mate. Honestly, it's happened to the best of us and it might not be a gym membership. Maybe it's that Foxtail package you signed up for in 2007. Maybe it's the dentist that you can't stand, but also can't break up with, or maybe just that weird tendency to just say, "Sure" whenever we're offered expensive sparkling mineral water when we sit down at a restaurant. Of course, none of these choices really make any sense, especially when, in the moment of making them, the better course of action is very, very easy for us to see.

Dan: (1:50)
See, the thing we're dealing with here is really powerful. It is something called the default bias. The default bias describes our tendency to just accept preset or default courses of action rather than carefully weighing up all of the options available to us. The reason that defaults are so powerful is because, fundamentally, we are busy and when it comes to making decisions, we are lazy, right? We make thousands and thousands of decisions every day and if we stop to consider each one of them in the detail that they deserve, we would honestly never make it past breakfast. One of the most interesting real world examples of just how powerful default options can be comes to us from the world of organ donations. Now, as you may or may not know, many European countries, so places like Austria, Belgium, France, Hungary, Poland, Portugal, these guys are the rock stars of the organ donation world.

Dan: (02:42)
Their organ donation rates are 98% percent or higher. And, in fact, in some of these places, they're actually at about a hundred percent. In Australia, by contrast, our organ donation rates are a horrific, embarrassing, terrible 33%. And that is despite almost three quarters of us actually being in favor of donating our organs once we die. The difference is not in the people. The differences in the process. You see, in Austria, Belgium, France, Hungary, Poland, Portugal, as soon as you get your driver's license, you are now an organ donor unless you specifically decide to opt out. So in these countries, donating is the default. In Australia, it is the other way around, right? The default is we're out unless we specifically decide to opt in. And this tiny difference, the small difference in the way that this choice has been architected, has created a tremendous tragic gap in how many lives are saved each year.

Dan: (03:39)
Because of their power, the default options we provide for a meeting time, a serving size, a contract end date, or a life-altering medical procedure can often have far greater implications than we ever could imagine. Like throwing away thousands and thousands of dollars on a month-to-month gym membership that we know, in reality, we will never actually use. For brands, there are so many ways to leverage the default bias. So they can do it in thinking about how they suggest or recommend different options for key decisions that customers need to make, giving people really easy ways to reorder their last purchase, suggesting that this belt might go with that bag, offering people fancy mineral water to start, right? All of these things are options that people are likely to say yes to just because it's too hard to think about what we should be doing instead.

Dan: 04:26)
So, Richo, I hope that answers your question on why you cannot cancel your gym membership. If it is anything like the last time I tried to get out of a gym membership, which was back in the early 2000s, you are going to need to fax them a letter suggesting why you want to get out of it, then attend a meeting between 10:00 AM and 10:14 AM on a weekday and plead your case for why they should let you out of this deal.

Dan: (04:47)
So hopefully it is easier than that these days. If not, the other alternative is you could just start going and your body will thank you. The other thing. Not your body, but somebody else's body might thank you for, is becoming an organ donor and if you are in Australia or really anywhere in the world, I highly recommend you do that. It only takes a minute and can make a huge difference. If you've got any questions about the weird and wonderful things you've observed in human behavior, feel free to send them through all over the Internet at Dan Monheit or you can get me on email at askdan@hardhat.com.au. We'll see you next time.

Mini Episode 11 - Why do people stay in jobs they hate?

Amanda from Paddington wants to know why it’s so hard for ‘her friend’ to quit her joyless job.

Dan: 00:17 Welcome to Bad Decisions, mini episode 11. I'm your host, Dan Monheit from Hard Hat, and if you've made it this far, you know why we're here. So let's just go to the question for this week.

Amanda: 00:26 Hi, Dan. It's Amanda from Paddington here. I have a friend who complains about her job every day and it got me thinking, why do people stay in the jobs they hate?

Dan: 00:35 Oh, Amanda from Paddington. Definitely just asking for a friend. Though you do sound very happy on the call. So maybe it's not you at all. To be honest, the last 18 months have definitely caused a lot of people to have a good, hard look inside themselves and wonder what on earth am I doing? And to be honest, I'm old enough to remember all the way back to the Y2K bug, right 99 to 2000 where that was I think the last major time that so many people actually paused to consider what on earth we are meant to be doing without fleeting existence on this spinning rock in the middle of space, right? And asking ourselves all sorts of hard questions, like why we are still working for old stink breath in the corner office. So of course there's a very pragmatic reasons why good people stay in bad jobs or people stay in jobs that they hate.

Dan: 01:18 So we have life pressures. We have kids and mortgages and school fees and all of that sort of stuff, which is kind of boring, but very, very real. But I dare say for many of us, there is a sobering reality that really, if we really, really wanted to, we would have the complete freedom to change our careers or at least change our jobs this very second if we chose to. So why don't we? Why don't more people quit bad jobs or quit bad relationships, or at the very least quit bad shows on Netflix? What we're dealing with here is the behavioral bias known as the sunk cost fallacy. Now sunk cost refers to any money, effort, time, basically anything that we have already paid or invested that we can't get back that makes us behave in a counterproductive or counterintuitive way. So you might have heard the old saying of throwing good money after bad.

Dan: 02:03 That is the epitome of the sunk cost fallacy, right? And put really simply sunk cost fallacy is our innate desire to want to follow through on what we've already invested in in the past, even if objectively, it makes no sense for us to do so. Now what's really annoying about the sunk cost fallacy is the more we invest in something, the greater the sunk cost becomes, making it harder and harder to just walk away. Crazier still is the way that sunk cost fallacy causes us to plow ahead so as not to have wasted our past and in doing so, bizarrely actually causes us to waste our future, which is the only thing that we still have control over.

Dan: 02:39 A study by Arkansas BloomBoard back in 1985 proposes scenario for students who are going on a ski trip. In this scenario, the subjects had purchased a hundred dollar ski pass for a weekend trip to Michigan. Not bad. As well as a $50 ski pass for a trip to Wisconsin, which objectively speaking, they would have found much more enjoyable than Michigan. Unfortunately, and we've all been here, without realizing it, they actually booked the trips on the exact same date, meaning they could only go to one. Now rationally, this is an absolute no brainer. Of course, you choose Wisconsin. You know it is going to be more enjoyable, right?

Dan: 03:12 And especially when you consider the fact that both tickets have already been paid for non-refundable in the past, sunk. However, only 46% of people chose Wisconsin with the majority actually choosing the more expensive trip to Michigan. So essentially 54% of subjects made a decision based on how much they'd already spent in the past, not based on how much fun they would be having in the future. So bringing it back to people staying in jobs that they hate, while we may dream of flipping our careers of opening a cafe of going back to university or finally leaving a job that pays really well, but ultimately makes us very, very sad, we tend to stay because of the three-year degree we did back in 2007 and all of the time, the energy, the effort, the emotion that we have invested to get to this point in our career.

Dan: 03:58 The sunk cost fallacy has this uncanny ability to bind us to our current situation even when it is clearly not working out the way we hoped it would. For brands, the sunk cost fallacy can be a major driver of conversion. If we can get customers to make small investments early on in the process, the cost of walking away can quickly become a major motivator for them to stay on board. So offering things like free trials or helping customers import all of their data from a previous system into a new one can be perfect ways to start. So I hope that answers your question of why people stay in jobs they hate, Amanda, and I hope you, I mean, your friend can really ask themselves the big questions and end up happy, because you sound like a really lovely person.

Dan: 04:40. I'd love of you to end up doing something that you enjoy. So that is all for this week. If you have questions that you would like answered, you can hit me up all over the internet at Dan Monheit, or email me at askdan@hardhat.com.au. We'll be back in a couple of weeks with more answers to your weird and wonderful questions about why we do the things that we do. Until then, take care, and I'll catch you next time.

Mini Episode 10 - Why aren’t we shopped out by Boxing Day?

Lauren from Prahran wants to know why people still shop after Christmas drops.

Dan: 00:18 Hey and welcome to Bad Decisions, mini episode 10. I'm your host, Dan Monheit from Hardhat and we are using these mini episode formats to tackle your weird and wonderful questions. Today's question comes from Lauren in Prahran and it could not have arrived at a better time. Lauren, what you got for us?

Lauren: 00:35 Hey, Dan. It's Lauren. Love the show by the way. So my question is, after Christmas and everything, why aren't we shopped out by Boxing Day?

Dan: 00:46 Lauren, Lauren, Lauren. This is a super insightful question. Right. This is on par with you know when you go out for a really big meal and you are completely stuffed and then they're like, "Would anybody like dessert?" And you're like, yes, please, I totally have room for dessert. It seems like that is what's happening here. I got to tell you that as an impartial observer, growing up as a Jewish kid and all, this whole thing around Christmas and Boxing Day has always seemed very, very strange to me. Because if you look at this from the outside, as I tended to, the lead up to it all looks insane. By the time December 25 rolls around, most people have already spent days or weeks or months plowing time and energy and effort into finding perfect gifts for those closest to them. I'm talking friends, family, teachers, colleagues, coaches.

Dan: 01:35 When I grew up, I even remember the garbos getting six packs of beer left out for them. And the thing is, just as the craziness cranks up to the final crescendo, we get this mad sprint to the finish with shopping centers open 24 hours, online retailers going crazy with super express delivery options and every service station in the country, loading up their front counters with whatever last minute gifts they can muster. If you ever want a USB powered fan or a really cool pair of reflective sunglasses, do not hold back, just hit your local servo. So this is all in the lead up and then just when I imagine everyone is about to fall into a giant retail fatigue induced heap, we miraculously see this second wind to end all second winds with millions of us rushing straight back out to the shops.

Audio effect: 02:21 Gear up for Boxing Day at-

Audio effect: 02:22 25% off store wide sale this Boxing Day.

Audio effect: 02:25 Savings this boxing day. Achieve long term hair removal results.

Audio effect: 02:28 60% off sale. Don't miss out.

Dan: 02:31 What the actual? Is what you might ask, is in fact what you did ask and it seems that to me, the actual has a lot to do with something called the licensing effect. A cognitive bias that refers to our core desire to maintain balance between our indulgent and our virtual selves. Essentially it's the... Because I did X, I really deserve Y mentality. So psychologically we work on this internalized bargaining system. As our mind tries to constantly evaluate and offset our positive acts against our negative ones and vice versa. To demonstrate let me just go to some research real quickly here. A study by [Wen Bin Chiou 00:03:05] in 2011, looked at the impact that a small virtuous act could have on people's subsequent choices. So what they did in this experiment is they brought a number of participants in, randomly split them into two groups, gave one a multivitamin each morning and a second group didn't get the multivitamin.

Dan: 03:22 The group that received the multivitamins ended up being way more susceptible to a wide variety of bad decisions, including smoking, drinking to excess, turning away from healthy activities like walking and yoga, simply because they felt that the multivitamin that they had in the morning was countering the effects of all of these bad things. Similar studies have found that energy efficient lights get left on more. People that buy more water efficient washing machines tend to use them more often and none of us need a research paper to know that if we do a really good gym workout in the morning, we are far more susceptible to smashing a cheeseburger with fries and dessert for lunch, because we deserve of it. Which brings us all the way back to December 26, after all that effort, shopping for everybody else in our lives the unofficial festival of licensing effect aka Boxing Day has become the 24 hour period where we turn our attention and generosity squarely inwards.

Dan: 04:15 It is the day for treating ourselves with all of the goodies that Santa didn't quite get around to bring us this year, and we will battle crazy car parks, packed escalators and credit card wear out just to make it happen. For brands, the big opportunity here is to look for instances where you can be the trade, knowing that this year, especially this year, people are coming off a long period of virtuousness and looking for any way that they can reward themselves for a really big, really tough year. If you are on the more virtuous side, the thing you can do is look for people who have just treated themselves, knowing that it is only a matter of time before they want to offset the treats and get themselves back up to equilibrium. So, Lauren, I hope that answers your question on why we are not shopped out by Boxing Day. I hope you have a great time buying wonderful gifts for all of your friends and family and then for yourself and I look forward to answering your next question in a couple of weeks from now. See you.

Mini Episode 9 - Why do people pay so much for diamonds?

Jeremy from Kooyong wants to know why people are willing to cough up big for carats.

Dan: 00:17 Welcome to Mini Bad Decisions mini-episode nine. I'm your host Dan Monheit, and today we have a cracking question from Jeremy in Kooyong.

Jeremy: 00:24 Hey, Dan, Jeremy from Kooyong, my question to you is why do diamonds cost so much? Why do you have to pay thousands for an engagement ring?

Background song: 00:30 Diamonds are forever. They won't leave in the night, have no fear that they might desert me.

Dan: 00:45 There are so many reasons to spend big money on diamonds. I mean, one is because you run a manufacturing business that needs to cut very, very hard materials with very, very high degrees of precision. But other than that, most people spending big money on diamonds are doing it because they're essentially batshit crazy, right? So just as you suspected Jeremy, showing out thousands of dollars for small pieces of rock makes absolutely no objective, pragmatic, rational sense at all.

Background song: 01:10 A kiss on the hand, may be quite continental, but diamonds are a girl's best friend.

Dan: 01:20 Thankfully, we can point to one of the greatest demand-generating advertising campaigns ever produced to shine a light on what is going on here. Back in the 1940s, which I don't think many or any of us were around to remember, we were thoroughly and simultaneously convinced that diamonds were both a girl's best friend and also forever. Making them clearly the only appropriate gift to represent our undying love. Now, as widespread and effective as these campaigns were in cranking up demand, they are only half of the story behind our willingness to cough up very, very big, for very, very small pieces of shiny rock. You see, sky-high demand is a great place to start, but to truly push prices beyond the stratosphere, we need to limit supply too. How much do we need to limit it? The more, the better. What's at play here with something called scarcity bias?

Dan: 02:09 And this causes us to assume that something is more valuable simply because it is in short supply, high demand, or only available within a limited timeframe. This bias has been demonstrated in a wide array of experiments. The most interesting and delicious of which was inducted by [inaudible 00:02:25] and his team in 1975, this experiment saw 200 undergrad students taste and rate identical cookies that they believed were either limited or abundant in supply. Cookies believed to be unlimited supply were rated as significantly more likable and more attractive than those believed to be in abundance. More strikingly and more excitingly for a guy like me, participants were willing to pay 11% more for the cookies they believed were in short supply than for the cookies they believed were abundant, even though they were the exact same cookies. Now, short supply is sometimes the result of a natural limitation. So yes, there can really only be one top floor in an apartment building or one front row at a concert, but more often than not in the modern world that we live in scarcity is the result of some sort of artificial constraint.

Dan: 03:12 So Nike decided to only produce 150 pairs of pigeon dunks resulting in camp outs, riots, and 4000% markups on eBay. But when it comes to artificially limit supply, the absolute gold, or should I say the diamond standard is De Beers. The international corporation that effectively created and control the global diamond market. Over the last 130 years, De Beers managed to extract or buy the vast majority of the world's diamonds, which are stockpiled in heavily guarded vaults. From here, the company releases just enough diamonds every year to meet demand, ensuring that there is almost never a surplus keeping prices sky-high. The diamonds of forever line has also done a wonderful job of keeping pesky secondhand diamonds off the market. For brands dealing with products in rare supply, the best thing to do is look for tactful ways to play up the exclusivity and pride of ownership, knowing that we are always craving what we're told we can't have.

Dan: 04:07 If you are in a category like I'm sure most of us are where in reality, there isn't much scarcity and we are in fact, dealing with abundance. What we need to do is consider ways of reframing what we offer to make it more scarce, more limited, time-based offers ‘only 200 units available’, right? Anything we can do to make our product more diamond than rock. So that's it for today, Jeremy, I hope that answers your question of why people are paying so much for diamonds. If you have other questions or observations about weird and wonderful human behaviors, please shoot them through to me at askdonathardhat.com or you can hit me up all over the internet at Dan Monheit. I hope you're enjoying our mini-episodes and Mel and baby Layla, I know you guys are listening and I love the feedback you're sending through. I hope I'm doing you proud and I look forward to catching up with you all in the next installment. Peace out.

Mini Episode 8 - Why is there a $140 option at my local car wash?

Dustin in Fairfield wants to know why people splash out more than $100 for suds and water.

Dan: 00:17 Welcome to Bad Decisions, Mini Episode eight. I'm your host, Dan Monheit. And today's question is from Dustin in Fairfield.

Dustin: 00:25 Hi, Dan. Dustin here from Fairfield. Love the show. Keep the episodes coming. I've got one for you. So I went to get my car washed at my local the other week, and I saw an option for a deluxe, $140 wash. And I just thought, "Who actually wants that? Why is it even an option?" Can you get your thoughts?

Dan: 00:44 First of all, great question. And there absolutely is a customer base for the $140 car wash. Let's just be very clear here. If you are a professional hitman, if you are a fishmonger, if you clean septic tanks for a living, this is the wash that is going to let you be your best self, get your shine on. And I get it.

Dan: 01:02 But surely, it's a reasonable question. Could there really be enough other people out there who would consider $140 to be a reasonable price to pay to have their car washed, to even justify having it on the sign?

Dan: 01:16 And I guess it's the same kind of question for those $6,000 barbecues or the $950 Cab Sauv that you see at the top of a wine list. And basically the whole category of first-class flying. Who on earth is buying this crap? Because sure as hell nobody I know.

Dan: 01:30 And the reality is maybe nobody is buying this stuff. And actually, it doesn't even matter because of a really interesting heuristic known as anchoring.

Dan: 01:40 Anchoring refers to our tendency to depend far too heavily on the first piece of information we receive and subsequently weigh all other pieces of information against the first one.

Dan: 01:52 So the first research done into anchoring was done in 1974, by some very familiar names by now, Kahneman and Tversky. And what these guys wanted to do was really determine how powerful and how pervasive this idea of anchoring was.

Dan: 02:05 In fact, they wanted to stretch it so far that they decided to see if they could take an anchor from one category and stretch it into another completely unrelated one. So hang with me here because this all sounds a bit wild. It's going to come right back to car washing in a minute, stay with me.

Dan: 02:19 So what these guys did is they set up a roulette wheel, which was rigged to only land on number 10 and number 65. Now, if I had managed to build a roulette wheel that did that, I would probably use it for better things than scientific research. But anyway, these are very admirable guys, what we call mentors.

Dan: 02:36 So they decided to use this wonderful roulette wheel to help us all learn a little bit more about how pricing works. So they had this wheel, it stops on 10, it stops at 65.

Dan: 02:45 They got a bunch of subjects to come through and have a spin on the wheel. They would then see which number it landed on, either 10 or 65. And they would then be asked to guess the percentage of African countries in the United Nations, which it's pretty safe to assume most people would not know that off the top of their head.

Dan: 03:05 What the researchers found was that when the roulette wheel landed on 10, the average guess people made was 25%. When the roulette wheel landed on 65, the average guess was 45%. Even though the roulette wheel and the number of African countries in the United Nations have nothing to do with each other, what is very, very clear is that the result of one anchored their answer for the other.

Dan: 03:27 It's like when our brain receives a question it doesn't know the answer to, it digs around. It says, "Do we have any numbers here about African countries in the UN?" "No." "Do we have any numbers at all? Has anybody seen a number recently?" And some other part of our brand says, "Yes, I just saw the number 10." And it's like, "Well, 10 sounds a bit low. Let's go with 25."

Dan: 03:45 You can see how this happens. Now, we are especially fallible to anchoring, like most biases, when we're making decisions that are infrequent, that are under pressure, or that are in categories where we really don't have very much knowledge. And car washing basically ticks all three of those boxes.

Dan: 04:03 We don't do it all that often. You are under pressure because you have like four seconds from when the attendant comes over and asks, "What do you want?" And there's not a whole lot of info about what the difference between all of these washes are.

Dan: 04:13 So in these four seconds that we get to decide what we want, we look up, we see $140. We think, "That's crazy. I would not spend $140 washing my car. But hey, that silver option for $60, it looks pretty reasonable." Doesn't it?

Dan: 04:27 And we've got to admit that if $60 was the top price point, we would be far less likely to pick it because we've been anchored at the platinum at $140.

Dan: 04:35 So what we see here is the $140 car wash is not really designed to sell $140 car washes. It is designed to make us all feel much better about buying $60 car washes, much like the $6,000 barbecues and the $950 bottles of wine.

Dan: 04:50 For brands, the key takeaway here is to be really cognizant of the anchors that exist in the categories that we operate in. We can then price relative to the anchors that already exist or think about how we can be brave, step up, and create new categories and anchors of our own much like Red Bull, Grill’d and Cirque du Soleil of I have done.

Dan: 05:08 And the cool thing is if you do manage to go out and create something new, you get to aim high, knowing that the first price that you set is what everything else is going to be built around.

Dan: 05:17 So there you have it, Dustin. I hope I not only answered your question about the $140 car washes but also I hope that Fairfield continues to treat you well.

Dan: 05:25 If you've got any other questions about the weird and wonderful observations you've made about human behavior that you'd like me to unpick or demystify, shoot them through to askdan@hardhat.com.au or you can get me all over the internet at Dan Monheit. I'll catch you next time. Peace out.

Mini Episode 7 - Why do people pay $7 for toast at a cafe?

Lydia in Claremont wants to know why cafes can charge big bucks for a little bread.

Dan: 00:00 Welcome to Bad Decisions mini episode seven. I'm Dan Monheit, your host, and we are using this mini episode format while Mel is off with her young child to get to the end of the long list of weird and wonderful questions you've sent us about human behaviors.

Dan: 00:32 I guess maybe the questions aren't so weird and wonderful, so much as the behaviors are. Anyway, today's question is from Lydia. Lydia, what you got for us?

Lydia: 00:40 Hey Dan, it's Lydia from Claremont here. I've been back at the office for a little bit now, and this morning me and my workmate popped into the cafe a few doors down for a coffee. I was a little bit hungry too, so I wanted a bite. $7 for plain toast? A bit painful.

Dan: 00:56 I tell you what, $7 for toast in a cafe does feel very, very full-on. This is one of those things where even in the moment of ordering it, you kind of see the insanity of it, right? So some of the bad decisions we make, it's not till the days or weeks afterwards that we sort of reflect on it and we think, "What the hell did I do that for?" But this is one of those ones where as you are ordering it and you're looking at the menu and you see toast with condiments, $7, you're like, "I know that $7 is enough to buy the entire loaf of bread and pay for all of the electricity I need to toast all of it. This is just madness." But we go and do it anyway, right?

Dan: 01:32 When I think about the exceptionally long list of things that humans do that demonstrate that we are bat shit crazy, cafe toast has to be somewhere right up there near the top. Definitely top three, maybe even number one.

Dan: 01:45 If we want to get to the bottom of what's going on here, we need to look no further than the bias or the heuristic of mental accounting, which refers to our tendency to treat money differently, even though all money is basically the same. A 1984 study by behavioral economics legends, [inaudible 00:02:02], identified three factors that influence how we think, feel about and spend money.

Dan: 02:09 The first is where the money comes from. Really the key insight on this one is that money that's considered a windfall. So unanticipated money, money that comes from a win from a one-time bonus, from a tax return, from a government grant, from an envelope from Auntie June, right? That sort of money seems to be counted really differently as money that we just earn in our normal course of living and working, and as a result tends to be spent way more freely.

Dan: 02:35 I think if anybody here has had a great night on the blackjack tables and then gone and bought some ridiculous gear down at the casino, you know exactly me what this feels like. This is spending house money. You also know why there are so many jewelry stores at the casino.

Dan: 02:50 The second factor that influences how we regard money is the mental buckets that we tend to put things into. So again even though all money is basically the same, we tend to have these kind of separate areas that we put it in. So, we get our paycheck and we might decide that we're going to carve off $70 every week for our holiday fund, and $120 for groceries and $50 for our weekly petrol budget. So, we tend to do weird and irrational things to keep ourselves within those constraints of those buckets that we set up.

Dan: 03:20 The third factor sort of ties in a little bit to the second, and that is category limits that we seem to place on things. These really are kind of subjective arbitrary numbers that we decide is an acceptable price to pay for anything from a car to a shirt, to shot a vodka out at a nightclub.

Dan: 03:41 It's weird when you catch yourself in the middle of one of these category limits being breached. So, you might be shopping online and you see some wonderful bedsheets that cost $240 and they come with free shipping and you think, "That is perfect, I'm going to order those. They're going to be great." At the same time, you might see the identical bedsheets for $190, but you need to pay $50 for shipping, right? Same $240, and think, "That is outrageous. I'm not paying $50 for shipping, shipping's meant to be free," right? Now logical, rational people would realize that the $240 to get the bedsheets to you is the same, but these category limits cause us to consider those two options very, very differently.

Dan: 04:16 So it is behind here, door number three, that we really find the answer to our cafe toast conundrum, and that while $7 feels like a lot in the slice of toasted bread at home category, $7 by comparison is a small price to pay for the fun or the luxury of enjoying a cafe breakfast with family and friends.

Dan: 04:37 So for brands, really the key takeaways here are to, number one, if you can look for windfall spenders, right? Look for people who are spending money that they otherwise weren't planning to get. So this might be ramping up your advertising around tax return time, setting yourself up at a casino, or maybe trolling the newspaper to find recent inheritees of giant sums of wealth.

Dan: 04:59 If that is not possible or practical for you, the other thing you can think about is what is the category that you are finding yourself in, and how might you be able to stretch or break that to get people to think differently about the right price to pay for what you're selling? Because at the end of the day, who wants to be selling $3 loaves of bread when $7 slices are all the rage?

Dan: 05:18. So Lydia, I hope that answers your question on why cafes are charging, and probably better, why people are paying $7 for a slice of toast. If you have got any other weird and wonderful questions about the things that we do, please send them through to me at askdan@hardhat.com.au, or you can find me all over the internet at Dan Monheit. See you for the next installment in a couple of weeks. Peace out.

Mini Episode 6 - Why won’t anyone pay me what my car is actually worth?

Sophia in Glenelg wants to know why nobody seems willing to 'pay the cost to be the boss' of her "really awesome little Mazda".

Dan: 00:17 Hey, and welcome to Bad Decisions. Mini episode six, I'm your host, Dan Monheit. And if you're new to this format of the show, this is where I do my best to get to the bottom of your wild and wonderful questions about why we do the things that we do. Today's question is from Sophia. What do you got for us?

Sophia: 00:35 Hey, Dan, Sophia here tuning in from not so sunny, Glen Elk. So I've been working from home for a while now and with what I've been doing, I've realized that I don't really need my car anymore. So I've been trying to sell it. It's a really awesome little Mazda, but nobody wants to pay what it's actually worth. I mean, what I'm pretty sure it's worth. Got any ideas?

Dan: 00:55 All right. So, so Sophia, let me just start here by saying, I really do. I feel you on this. I've had my heart broken so many times selling things from my first Jeep Wrangler to a as new iPhone 11 to my never dropped, never crashed, never raced carbon foam road pie. It doesn't seem to matter what it is. The process is the same, right? We come to the, to the tough decision that it's time for us to part ways. We then go and spend hours doing the research. We crop the photos. We write the spectacular copy. We decided on a fair and reasonable price. We put it up on whatever our website of choice is. And then nothing. You know, if we're lucky, we might get to waste a couple of hours with some tie kickers, maybe even get our egos bruised with a couple of offensive today only.

Dan: 01:47 Cash only, low ball offers, but at the end of the day, nothing ever really seems to go to plan what is going on here? I think what's going on here is something called the endowment effect. Which is our tendency to believe that something is worth more simply because we own it, right? We think we're pretty awesome. If we own this thing, it must be worth quite a bit. Right? And what that means is that whatever we think something is worth, is precisely that what we think something is worth. There's a bunch of research done into the endowment effect through the mid 1990s, by the dream team of Conaman Niche and Thaler. And they ran a series of experiments that took a really similar format. What they would typically do was go into a university lecture, randomly split the room into two groups, assign one group as the buyers and the other group as the sellers. Though, then give half of the room as sort of inanimate objects.

Dan: 02:39 So it might've been a pen or in the example, I'm going to talk to you about today. It was a mug, right? So half of the room gets mugs. The other half of the room gets bupkis. Right now, they get to hang onto the mugs for a little bit of time. And then they go and survey the students to the students who have received the mugs. They are asked, what is the minimum price you would accept to part with that mug that you now have in your possession? To the group that didn't get the mugs they will ask, what is the maximum price you would pay to obtain one of those shiny mugs that your lucky colleagues received that you didn't? What they consistently found was that the price people wanted to receive in exchange for their mug was around twice as high as what people were willing to pay to get one.

Dan: 03:23 So in one particular example, the average highest buy price was $4.20. In the same study, the lowest average sell price was $8.40, right? A two to one ratio. We value something twice as much simply because we've owned it. Now, this makes sense from an evolutionary perspective, I guess for most of human history, most resources were scarce or difficult or dangerous to come by. So valuing or protecting what we have undoubtedly kept us safer for longer. And while today, most things are not that scarce and not that dangerous to get, you know, we live in a wonderful world of abundance. That the bias of wanting to overvalue, what is ours seems to have endured. And that is why nobody's willing to pay you precisely what you think your car is worth, right? Because they don't own it yet. You do. I guess for brands, the key takeaway here is to try and make it easier for people to feel like something is theirs before it really is.

Dan: 04:18 So this could come from things like free trials, test drives, light versions, co-design whatever it is. Just know that if you can get somebody to feel like this is already theirs, walking away from the opportunity to buy it is going to feel far more painful and be far more difficult than if it never felt like it was theirs in the first place. So I hope that answered your question, Sophia. I hope you get a cracking price for that car of yours and you put the money to good use haggling, somebody else down on something else that they clearly think is worth way more than it is. And if you guys got any more questions about the weird and wonderful things that we do, please shoot them through to either ask dan@hothat.com that I, you, or you can find me on the internet at them on hot. It's been real, and we'll see you for the next question in a couple of weeks. See ya.