Shaya Lightman had always considered himself a pretty savvy guy. Then he’d read an article about mental biases, or irrational illusions the brain fools itself with, and he wasn’t so sure anymore. This concern was compounded when he realized he’d been spending 20 minutes per week to save $10 on gasoline. That was the equivalent of him earning $30 an hour, way below what he’d otherwise work for. Seemingly, he was behaving irrationally in pursuit of a small bargain on his fuel.
Did that mean he was making other mental errors too, including some that could inflict damage on a greater scale?
Another Mental Bias
I’ve written before about mental shortcuts that lead us to poor decision-making. In his fascinating book Predictably Irrational, behavioral psychologist Dan Ariely shows how relativity-based decision-making leads us to overpay for expensive items, waste time pursuing silly bargains, or even get fooled into buying the wrong house. Understanding how these biases work may help us recognize when they pop up and allow us to improve our selections. Stronger mental bias awareness can even improve one’s attitude about life and bring much happiness and satisfaction.
Big or Small? It Depends on the Surroundings
“Most people don’t know what they want unless they see it in context,” Ariely says. “Everything is relative,” and we judge the value based on how something compares to other, nearby or related items. As a parable to this point, he displays the Ebbinghaus optical illusion (see picture). Although the dark circles are identical (go ahead, measure them!), our brain tells us that one is larger because it’s surrounded by small circles. Similarly, when deciding whether something is a good buy or worth pursuing, we may misread the obvious.
Figure 1: Ebbinghaus illusion
Source: Ebbinghaus Illusion (Wikimedia Commons)
Businesses can and do exploit this bias for relative thinking. Ariely noticed, for example, that The Economist magazine once offered readers three annual subscription packages: 1. Internet only for $59, 2. print only for $125, and 3. print and internet for $125. Option 2 puzzled him. Wasn’t it obvious that number 3 (print plus internet for $125), was the better choice versus number 2 (print only for $125), since both options were priced the same? You had nothing to lose by opting for option 3 versus option 2, so why did the magazine even offer the second option?
Intrigued, Arielly ran a little study. When a group of college students were presented with the three subscription options, 16 percent said they would prefer the first package (internet access only for $59), zero selected the second (print only for $125), and 84 percent said they’d go for the third (internet and print for $125). But when the professor asked another group of students to choose just between options 1 and 3, not mentioning the print-only option, 68 percent of students “bought” the $59 internet-only package, while just 32 percent opted for the $125 premium print-and-internet bundle. By removing number 2, i.e., the inferior decoy option, sales of the premium number 3 option fell drastically!
Relative Marketing Ploys
Whether this kind of marketing ploy is appropriate is an interesting halachic she’eilah, but be assured that relative pricing and quality positioning are all around you. Offering small, medium, and large sizes in fast food restaurants increases sales. Having multiple brands of laundry detergent on the shelf increases sales. Some real estate brokers will purposely show prospects a few ugly homes to prime them for the house the broker really wants to sell. Setting relative expectations makes the other options pop much more strongly. You may think you aren’t fooled by such simplistic tactics, but like the optical illusion, it’s much harder to combat than you think.
Big Slivers of Tiny Pies
When Shaya drives 10 minutes each way to get less expensive gas, even if it costs him more in time than what he’s gaining, it’s the size of the discount that tricks his brain: 20 percent! Similarly, some may spend an inordinate amount of time pursuing bargain airline tickets and hotels even if the total savings will max at a nominal sum. Attaining potential discounts of 25 percent, 50 percent, or even greater relative bargains can seduce us into spending hours on online research even when the dollars involved are puny.
Versus Small Slivers of Huge Pies
For some, the pleasure of chapping a metziah is indeed worth spending the time, regardless of the economics. But consider the reverse relative effect: not negotiating for or pursuing savings of large sums because they seem relatively small in the context of the overall numbers. When someone is buying, selling, or refinancing a home, for example, and the total sums involved have six or seven zeroes, a couple thousand this way or that way may seem too small to ponder, but for most people, that’s a lot of real money!
The same person who might chase down cheap gas often ignores or minimizes much greater sums that might be saved by gaining tiny discounts on massive expenditures. Negotiating a slightly better mortgage rate or swapping to a slightly less expensive vendor may be worth many thousands, but because the discount represents just a sliver of the total, our brain often pushes us to gloss over it. In commercial real estate transactions, this tendency can reach epic proportions. I’m not saying every detail should be fought over—often that is bad business—but $100,000 is a lot of money to sneeze at, even if the closing involves 10 or 100 million.
Relative Wealth of All Kinds
It’s important to train ourselves to try and see beyond mental illusions to focus on the actual realties, not relative realities. On the larger stage of life, too, we instinctively measure success and abundance relatively. A family in Lakewood with four or five bedrooms may feel deprived, while one in Yerushalayim would feel blessed with a similar arrangement. A millionaire living among billionaires feels quite poor by comparison; if that millionaire moved to a blue-collar town, he’d become much happier by comparison. Happiness and success are relative and depend on one’s state of mind, as reflected in Chazal’s statement “Eizehu ashir hasamei’ach b’chelko.”