SD#24: Choice, the false compromise fallacy and investing
June 26, 2022
Hi friends,
Welcome to another edition of Seven Dawns, your weekly newsletter on marketing, productivity, psychology and more.
Our seven ideas this week:
1. (Marketing) The biggest mistake marketers make is believing choice is a good thing. It isn’t Consumers don’t want more choice, but to be more confident in the choices presented. A while back psychologist Barry Schwartz gave a Ted Talk on choice. In Schwartz’s estimation, choice has made us not freer but more paralyzed, not happier but more dissatisfied. He summarised the negative effects of more choice under two paradigms: analysis paralysis and buyer’s remorse.The most famous and possibly the first study that pointed to the adverse effects of choice was in 2000. The subject was jam. Researchers found that a lot more people purchased jam when fewer options were available. Since then, other studies have supported this phenomenon, with subjects ranging from chocolates to 401(k) plans. Most have supported the notion that more options debilitate consumer decision-making. CXL |
2. (Psychology) How much should you criticise other people? In private conversation, not in public discourse. And not to their faces but rather behind their back. And with at least a modest amount of meanness, not talking about criticizing their ideas. Here are some reasons not to criticize other people: 1. “Complain less” is one of the very best pieces of wisdom. That is positively correlated with criticizing other people less, though it is not identical either. 2. If you criticize X to Y, Y wonders whether you criticize him to others as well. This problem can increase to the extent your criticism is biting and on the mark. 3. Criticizing others is a form of “devalue and dismiss,” and that tends to make criticizing people stupider. 4. If X criticizes Y, it may get back to Y and Y will resent X and perhaps retaliate. 5. Under some moral theories, X is harming Y if X criticizes Y, Y doesn’t find out, and Y faces no practical penalties from that criticism. Tyler Cowen in Margin Revolution |
3. (Investing) How to stay calm while markets are crashing Here’s Jesse Livermore, arguably the greatest trader in Wall Street history: “There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.” This is how to not panic. You know history. You understand the risks. And, most importantly, you know yourself. Then you let the chips fall where they may. You don’t obsess over the headlines. You don’t try to predict the future. You enjoy your life. You go out with friends and family. You make cherished memories. You laugh. You cry. You remember that things like this happen. And you remember that they will happen again. Nick Maggiulli in Of Dollars and Data |
4. (Marketing) Advertising pulsing or always on? The advertising budget can be spent evenly over time or in ‘pulses’ of a certain frequency, length and predictability. The review by Vakratsas and Naik (2007) shows that early studies consistently find that even advertising spend is better, consistent with Sasieni’s (1971) result that no pulsing schedule can outperform the even schedule. However, copy wearout and repetition wearout imply that pulsing is best. Interestingly, following HBG’s advice implies both wearouts are unlikely to apply: Advertising mostly moves light users, which are unlikely to pay attention to the ad in the first place, let alone get annoyed by it. The budget should maximize reach, so a frequency of 1 means no repetition wearout. Testing How Brands Grow |
5. (Psychology) The false compromise fallacy: why the middle ground is not always the best Picture this: you are having a debate with a colleague regarding the best next steps for a complex project. You both have been presenting your arguments, the tone is friendly, but you cannot seem to agree on the best way forward. So you decide to find a middle ground. Sounds reasonable enough, right? Well, it’s often a very bad idea, and it has a name: the false compromise fallacy. When it’s hard to find a resolution, it can be tempting to search for the middle ground to resolve the conflict. By making us abandon the search for the most suitable resolution, the false compromise fallacy can lead to misleading conclusions and poor decision-making at work and in your personal life. Ness Labs |
6. (Happiness) Does being a millionaire make you happy? There are 140,000 Americans who earn more than $1.58 million per year. They are the richest 0.1%. The researchers found that the typical rich American is the owner of an unsexy regional business such as auto repair shops, gas stations and business equipment contractors. Does being a millionaire make them happy? A study of thousands of millionaires led by researchers at Harvard Business School did find a gain in happiness that kicks in when people’s net worth rises above $8 million. But the effect was small: A net worth of $8 million offers a boost of happiness that is roughly half as large as the happiness boost from being married. New York Times |
7. (Career) Advice to graduates and young people – be monk warriors The legendary Prof Scott Galloway on his advice to young people: “Be mentally and physically … warriors. Lift heavy weights and run long distances, in the gym and in your mind. Many tasks you’ll be asked to perform early in your career will be tedious. Don’t do what you are asked to do, but what you are capable of doing. Think of it as boot camp before being sent to battle, as there are millions of other warriors fighting to win the same regions of prosperity. Get strong, really strong. You should be able to walk into a room and believe you could overpower, outrun, or outlast every person in the room.” I strongly recommend reading the full piece from Scott here |
Fun things to click on:
Who we spend time with as we grow older. Burnout Index – a 10-question survey that will tell you how close you are to burnout, and what your risk level is for exhaustion, self inefficacy, cynicism and depersonalisation. Reverse-order all Google search results so that you see the oldest webpages first.
Thanks for reading! If you have any learnings you’d like to share with me, or disagree with any of the ones above then do drop me a message.
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Speak soon,
Tom