Laurie Santos, "The Origins of Irrationality."
I'm at my 35th Yale Reunion where I just heard a great lecture by Laurie Santos of the Psychology Department - her work is described in a Smithsonian article, Thinking Like a Monkey. She studies "stupid cognition" to find out where it comes from.
The lecture blurb read:
People regularly make decisions that are blatantly irrational and that systematically lead to less money, worse outcomes, and reduced overall happiness... many classic human errors - our aversion to financial losses, our tendency to rationalize past decisions, and so on - are a lot older than we might expect.Like 35 million years old, the approximate date when we may have split from the monkeys who share our biases.
She found it very easy to teach monkeys to use "money" - giving them wallets with twelve small metal washers they could exchange for food. Watching video of monkeys, with full wallets, excitedly waiting for the "market" (two lab guys in colored shirts with treats that they would exchange for washers) to open, what a riot.
She talked a mile a minute and some of the take-away points were:
- We are fixated on our reference points - the status quo - and accustom ourselves very swiftly to improvements in our status quo but agonize over slight down-turns. New "stuff" quickly sets a new reference point. Her quote, from Edgar Watson Howe: "Nothing is wonderful once you get used to it." So you think new stuff will be wonderful, but it isn't wonderful for long - though you'll be annoyed if you subsequently lose it.
- We are governed by loss aversion - we hate losing more than we like winning.
- Something you own already seems more important/valuable to you than to other people. She called this the "Endowment Factor." People can't bear to part with their houses at the current market value, for instance, since only a few years ago they were seemingly worth more. However, people are often not willing to buy at the inflated value you put on your own possessions...
- She thinks you'll be happier spending your money on experiences, which do not "re-set your reference points."
- She recommends combining losses, since each one hurts so much (I certainly would rather write one big check than a lot of little ones), but splitting up your gains - don't do all your shopping on one day, you'll enjoy one purchase at a time much more.
- Alpha male monkeys make riskier choices than other monkeys.
- The monkey equivalent of a Ferrari is a fruit rollup with marshmallow fluff inside.