How You Decide If Something Is Expensive |
Human beings are fascinating creatures. Our belief in our own rationality is patently absurd. Poker players will tell you that if you can't spot the sucker at the table, it's probably you. Similarly, it's obvious when someone else is a hypocrite, yet we are usually blind to our own blindness.
What qualifies in our minds when our mouths pronounce the word "expensive" shifts with every purchase. Our judgments are influenced by the situation, the urgency, the values with which we were raised, and most importantly our subconscious financial anchors. These are scales and spectrums developed over a lifetime, from what we witnessed our parents complain about to the current salaries of our former college roommates.
Comparison is the thief of joy and we are masters at it.
Behavioral economists such as Daniel Kahneman, Amos Tversky, Richard Thaler, and Dan Ariely have documented the foibles of human financial reasoning: we judge prices by comparing them with hidden benchmarks and creating contextual stories that we tell ourselves.
Let's talk about our annual iPhone rituals: we upgrade perfectly good iPhones for indiscernible speed improvement and marginally better photos, justifying the trade-in cost in terms of supposed higher individual productivity. Yet that same money could fund practical and essential purchases that lack the same dopamine spikes. Or think about Taylor Swift........