Mini Episode 1 - Why do we keep the boxes from expensive shoes and handbags?

Carli from Melbourne gets us rolling with a listener question that's way too close to home.

Dan:                             00:17                Hey, and welcome to Bad Decisions, mini episode one. I am Dan Monheit co-founder of Hardhat. And if you've just come off listening to the previous episode that we did with Mel, you'll know she's off doing things far more important than recording podcasts, having a baby. Go with that, Mel. So I'm going to try and tide us over, and instead of recording new episodes about new heuristics, I'm going to start working my way through the backlog of amazing questions that we have received over the years about why people do some of the weird and wonderful things that they do. So the first question that we are going to look at as part of this mini ep series comes from Carli in Melbourne.

Carli:                            00:55                Hey, Dan, calling from Melbourne here. I thought it was just something I do, but I've noticed my friends have done this as well. The other day, I bought a pair of shoes, and when they arrived, I loved them and put the box in a closet along with 10 other boxes that have been there, collecting dust. I don't know why I do this. I'm probably never going to use it again. And I've realized I do this with a bunch of other products as well. I'm wondering why.

Dan:                             01:17                Such a good question. And this one is real close to home for me as both a sneaker enthusiast and the husband of a shoe and handbag enthusiast. I'm sure that at least 50% of my mortgage payments each month are just going to cover the cost of storing empty boxes from luxury goods. So this is a great one for us to dive into.

Dan:                             01:37                As I think about it, this probably extends beyond just luxury goods. So when I was younger, I remember like in share houses, people used to hang on to all of the old alcohol bottles from expensive whiskeys or champagnes that they drunk. I remember about the same time in my life. People used to collect the old bottles from the aftershaves and perfumes, even though there was nothing left in them. They didn't want to throw out the bottles. And I guess more recently there seems to be a global habit of hanging on to all of our old iPhone boxes even though we know we are never going to need them again, for some reason, we just cannot bear to throw them out. So it is weird that we would hang on to these things, especially when we know that objectively the value is basically zero.

Dan:                             02:20                So the thing that explains that I think explains a lot of this weird and wonderful behavior is a concept called the halo effect. And the halo effect is all around the idea that as humans, we have a tendency to take an initial impression of a person, product, service, brand. And we take that initial impression, and we apply it to the entire being. It's like why as children, we get told not to judge books by their cover because inherently that's what we do. Reading the whole book is long, boring, time-consuming. It's much quicker to just see the cover, make a call, and get on with your life most of the time. But obviously, this can lead us astray.

Dan:                             02:58                So if we think about some of the research behind this, and the first real piece of research done into the halo effect was done by a guy named Edward Thorndike in the 1920s. And what Thorndike and his team of researchers did was I went to the military, and in the military, they asked commanding officers to rate their subordinates on a series of attributes, including their character, their physical strength, their leadership, and their intelligence. And I think what's interesting about doing this in the military is that there's a natural, maybe not a natural, a forced separation between the commanding officers and their soldiers. So they know who each other are, but they don't know each other particularly well, which I feel is a good approximation for most people with most brands. You know what it is, but you don't know it particularly well.

Dan:                             03:44                Anyway, what they found after the commanding officers filled in their reviews and handed the results in was something that is both obvious, but also very, very interesting. What they found was disproportionately high correlations between positive attributes and disproportionately high correlations between negative attributes. So if a soldier was rated really well on one thing, they were probably rated really well on most things. If they were rated poorly on a thing, they were more than likely to be poorly rated on most things. Now, some of these things make sense. So you would imagine that leadership and intelligence should track together. A smarter person is probably a better leader. But someone's physical characteristics and their character or physical characteristics and their intelligence should really have nothing to do with one another, but they still seem to be tracking side by side of whether people were rated well or not well on those attributes. And from this, Thorndike and his team concluded that we tend to take that initial impression and apply it universally.

Dan:                             04:47                Now, the halo effect goes to explain a lot of other weird and wonderful pieces of research that have been conducted, where we tend to assume that tall people are more competent at their jobs, which perhaps in the NBA is correct, but, really anywhere else, it makes no difference. The halo effect is why Ferrari can sell ballpoint pens for $370. It is why good-looking people tend to do better in our legal system than less good-looking people because we judge books by their covers, and we get on with our lives. Now, there are lots of other wonderful brand examples of this.

Dan:                             05:19                Sometimes the halo is set from the top. It's set from the founder of the business. So the gentleman who founded IKEA, his name is Ingvar Kamprad. He, unfortunately, died a couple of years ago, but before he died, he was written up in one of the rich lists as being, I think, the eighth richest man in the world with a net worth of around $60 billion. And you know, what is amazing about this guy is that if you knew one thing about him, it's that he found that he founded IKEA. If you knew a second thing about him, it would probably be that he insisted on driving a 20-year-old beat-up Volvo, that he always flew economy, that he almost exclusively shopped in thrift stores and at markets. He was just a massive tight ass. Now, this might sound like crazy behavior for somebody that's worth $60 billion. But when you have a business built around sharp pricing, that halo of frugality shines all the way down.

Dan:                             06:08                Luxury brands use the halo effect incredibly well. And I guess, what they do, really core to their being, is they take the halo from their hero or their flagship product. So that piece of jewelry that you're actually buying from Tiffany & Co, and they managed to extend the shine of that halo to the tissue paper that wraps it up, to the box that it sits in, to the bag that it goes home into, the ribbon that ties the bag handles together. It sometimes even extends the retail experience to the perceived fanciness of the people serving us. And even the way we feel about their advertising. If the core product is beautiful and luxurious enough, they seem to be able to stretch that halo to everything else that it touches. And the rational attempting to be rational part of our brain says, "well, look, if you've just paid $520 for this silver pendant, which was clearly worth it, otherwise you wouldn't have paid it. Surely the tissue paper and the box and the bag must be worth something. So we'd better not throw them out".

Dan:                             07:06                So for brands, really, the idea is to remember that first impressions count. And whether that first impression is a website, a piece of content on social media, or in-store interaction, remember that people will judge you by it. So if we're going to be judged by our cover, let's make sure the cover is hot. Thank you so much for your question, Carly. Hopefully, that goes some way to answering why people hang on to the boxes from expensive bags and jewelry. If you've got a question for me that you would love to hear answered, you can hit me up on social media. I'm @DanMonheit. You can find me on LinkedIn, or you can email me at AskDan@hardhat.com.au. And if I've piqued your interest in halo effect, make sure you go back and check out episode 21 of the regular Bad Decisions podcast. We'll be back with another one of these in a couple of weeks. So stay safe, and I'll see you then.