Mind over Money Flashcards
KLF band
- KLF band renamed themselves The K Foundation.
- They decided to be artists.
- They wanted to burn 1 million pounds, which was the money they had left from their band.
- People were upset with them.
- They were surprised people were cross with them
- People said they could’ve done good things with the money
- This is an illustration of what high strong emotions which destroying money can bring
Study on people put in an fMRI scanner and shown a video of somebody tearing up money and see how people react
- They see which parts of the brain are activated
- The part of the brain activated was the part associated with tool use. Does this show money is a tool.
- People also said they founded it painful
- When looking at the brain and money, reward system is activated if they are given chocolate or if you tell people they can have chocolate late.
- Money is a future reward and reacts in the same was as giving somebody something immediately.
What does money allow us to do
- money commodifies trust. It allows us to trade between strangers across the world. In its physical form it has more of an effect on us.
- Every society which has a currency hasn’t gone back on that currency because it is so useful
Studies done on dwell time- how much cash stays in your wallet before you spend it
- Found that people hold on to their new notes even though theres no difference.
- Studies have also show people spent more pound coins then pound notes.
- 75% of people in the US want to keep dollar bills and not move to coins
What do people overestimate when it comes to money?
Lea 1981
People over estimate the physical property of a coin because we believe they have this value
Who is more likely to overestimate the size of the coin?
Children living in slums in Boston compared to children living in houses. Found the poorer the children, the more they over estimated the size of the coin.
2001 study in supermarket:
- If they asked people how much they spent, people who paid by card were much less likely to know how much they spent compared to people who paid in cash.
- They also found people are more likely to buy unhealthy food if they paid by card
- Also found that people are prepared to spend more if it’s on a card because it feels more painful to pay with cash
Mistakes people make
auction, driving and lottery examples
- If you ask most people, they will tell you they are good a spotting a good deal but they’re not really. In a real life auction, people will bid more after an expensive item. People were influenced by the price paid before that s completely irrelevant to what they are going to buy.
- People will drive much further to get £20 to get off £50 then they would from £1000. However, all those £20 are the same and it’s worth doing both
- If someone wins the lottery- 20 one week and 55 the next week. they get more pleased reseparately than if they got 75 in one. Sometimes were not that rational about the instant decisions we make about money
Rudy Kernowan- wine study
- Was a wine buyer in the early 2000s
- He was very successful
- He was young, sociable and generous. People would say he’s the new star on the wine marked
- Turns out what he would do was take people out to nice restaurant and order the really expensive bottles. Then he would ask the restaurant to sell him the bottles the next day. Then it turned out that what he was doing was the art squad of the fBI they found in his kitchen sink with all these tops he had taken off bottles and labels he took of bottles and soaked them in tea. He was getting fine wine and fulling it a third and then filling up the rest with cheap wine. He was faking loads of vintage wine that wasn’t vintage wine and they were sold for a fortune.
- After most of the wine was dumped but some of them they auctioned. People knew they were fake but people wanted to buy the fake wine
- For wine tasting they had bottles of wine between 5 and 90. Wine experts could usually tell.
- In fMRI scanner, if people were told the wine was expensive, the reward part of their brain was activated more
Ibuprofen vs neurofen: Braithwate and cooper
- people put their arm in an ice bucket and took a pain killer
- people thought the nurofen was more effective- they could cope better with the pain suggesting it had a placebo effect on them
All you can eat buffet study
People who paid more enjoyed it more and felt less full after suggesting they didn’t over eat
Compromising effect- John Lewis example
Imagine you are buying a new arm chair on John lewis.
* one is £249
* one is £549-649
* one is £1149
Displaying three is known as the compromising effect- if you have three, twice as many people go for the mid priced item. This is because people think the cheap is too cheap and expensive is too expensive, so limits the disadvantages.
What is loss aversion?
Had losses more than gains
A loss is twice as powerful than a gain
Monkeys displaying loss aversion
Study were man is giving monkey a token
* Man on left has 2 grapes for the monkey and man on the right has 3 grapes.
* Man on the left starts with two and then adds 1, on the right they don’t add one and sometimes they take it away
* Monkeys will learn to just go to the man on the left because they hate loss.
Anchoring
How we get distracted by a totally irrelevant number
