I recently watched someone using a leaf blower to clear their pavement. As I watched, it struck me what a pointless exercise it was and it crossed my mind that the leaf blower must be one of the most senseless machines yet invented. Continue reading It’s time to do the Mickey Blue (again)
Let’s face it, we’re emotional beings (thankfully). We laugh at comedy and cry at tragedy. We give money more easily to beggars on cold and rainy days, or to mothers with young children than to single men on the side of the road. We buy things on sale (with money we don’t have) even though we don’t need them and yet we dump our investments when the markets go on sale.
Continue reading Emotional beings
On a recent car trip, my daughter insisted on playing some of her music – 2 of the songs on the “hit list” were “Bear necessities” from the Jungle Book and “Hakuna Matata” from The Lion King. When the music finished there was a follow up question from her to me – “what’s your favourite Disney movie, dad?”
I thought about it and decided that “Disney” could now include Pixar and went with “The Incredibles” followed by “Monsters Inc”. And then I asked her. “Jungle book, followed by Lion King” was her reply. Her younger brother concurred.
As I pondered this I realised I had just witnessed a case of what behavioural economists call “anchoring” in practice. In short, anchoring can be described as the human behaviour trait that gives more importance to recent history than to things that happened long ago. This tends to skew our view of things…we all do it and we all need to be aware of it, especially when it comes to our money. For a more precise definition read the bit below by the people that first described the concept, Nobel prize winners Amos Tversky and Daniel Kahneman.
“Anchoring is a particular form of priming effect whereby initial exposure to a number serves as a reference point and influences subsequent judgments about value. The process usually occurs without our awareness (Tversky & Kahneman, 1974), and sometimes it occurs when people’s price perceptions are influenced by reference points. For example, the price of the first house shown to us by an estate agent may serve as an anchor and influence perceptions of houses subsequently presented to us (as relatively cheap or expensive). These effects have also been shown in consumer behavior whereby not only explicit slogans to buy more (e.g. “Buy 18 Snickers bars for your freezer”), but also purchase quantity limits (e.g. “limit of 12 per person”) or ‘expansion anchors’ (e.g. “101 uses!”) can increase purchase quantities (Wansink, Kent, & Hoch, 1998).” https://www.behavioraleconomics.com/mini-encyclopedia-of-be/anchoring-heuristic/
It may be mid-Winter and it may be cold but there is a lot of heat being generated by all the media coverage the Malema is currently getting. Not sure whose agenda it is serving but someone is surely behind it all. In the light of this, there was an excellent interview with Professor Steven Friedman on 567 Cape Talk last night:
“Professor Steven Friedman says while much of the public debate portrays Julius Malema as an immensely powerful figure, all the evidence suggests that he largely does what he is told by senior politicians – and, perhaps, business people in the ANC who may also help him to afford his lifestyle. “Whether Zuma is challenged for the ANC presidency next year will be decided by senior figures who will convey their decision to the league.” Friedman says this may be the most over-cooked story in South African history, and it’s not analysis or commentary it’s hysteria on the part of journalists and political analysts.”
And just before you sound off about him being naive or that he has blinkers on, pause for a second to consider just how emotional and irrational our behaviour as humans often is.
“Did you know that in the aftermath of the Japanese earthquake and subsequent tsunami in March of this year, another event passed largely unnoticed in the western world. It was a mania of epic proportions, yet only lasted a week or two. The Chinese public, in the mistaken belief that eating iodised salt would help to prevent radiation sickness, bought up large quantities of such salt. This together with speculative entrepreneurs buying tons of salt, drove the price up by at least 900% within a matter of days. It took repeated statements from authorities before calm was restored, despite the fact that Beijing is almost 3000km away from the Fukushima nuclear accident. But at the height of the mania, the public even took to buying stocks of soy sauce as a salt replacement.”
Thanks to Atlantic Asset Management for the bit above about the Salt Bubble of 2011