Dan Ariely

How We Pay for Incompetence

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Sometime back I got some plumbing work done. The plumber said the work would take around eight hours or one full day. Once he started working, it took me a couple of hours to figure out that he was basically wasting time and he could easily finish work in four hours.

I confronted him on this and he agreed. The logic he offered for wasting time was very interesting. He said, plumbing was a profession that needed some experience and expertise. He had the necessary experience and expertise and could work faster than the average plumber could. The trouble was whenever he finished worked fast, the customers would dilly dally in paying him, the amount of money, that had been agreed on.

The reason always offered was, “but that hardly took any time”. He found it very difficult to explain to his customers that it barely took any time simply because of his experience and expertise. Hence, over the years, he had come to the conclusion that it simply made more sense to waste time and then get paid the amount that had been agreed on.

Both the customer and the plumber lost out in the process. The plumber by having to waste more time, couldn’t take on more work or he couldn’t spend those extra hours in leisure, if he did not want to work. The customer also had to keep engaging with the plumber for those extra hours. In the process, both of them lost out.

Dan Ariley and Jeff Kreisler discuss a similar story about a locksmith in their book Dollars and Sense—Money Mishaps and How to Avoid Them: “A locksmith once told Dan that when he started his career, he took forever to open a lock, in the process, he often broke it, taking even more time and money to get one properly installed and finish the job… People were happy to pay for all this, and they tipped him well… As he became proficient and opened a lock quickly, without breaking the old lock… customers not only didn’t tip, but they also argued about his fee.”

This is a phenomenon, where we confuse effort and outcome, and in the process award incompetence. Take the case of many people leaving office late, even if they have no work and no reason to hang around. But by hanging around they are just trying to send that signal to their bosses that they are putting in a lot of effort, which hopefully will be rewarded once appraisals come around.

Of course, many bosses confuse this “useless” effort of hanging around, with the employee adding value to the organisation. And once a few employees start doing this in an organisation, almost everyone else has to. In the end, more than rewarding anyone, this just becomes a “nuisance” that everyone needs to follow.

In fact, Dan Ariely carried out a research along with On Amir, on how much would people pay for data recovery. The result was very interesting: “When the data recovery took only a few minutes, willingness to pay was low, but when it took more than a week to recover the same amount of data, people were willing to pay much more. Think about it: They were willing to pay more for the slower service with the same outcome.”

The point being that when effort is more valued than outcome, we end up paying for incompetence. There is a great story about the painter Pablo Picasso, perhaps apocryphal, which shows precisely this. A woman once approached Picasso and asked him to paint her portrait. The painter looked at her, and then with a single stroke, drew her a perfect portrait.

The woman was impressed and told Picasso that he had captured her essence in a single stroke. She asked him: “How much do I owe you?” Picasso asked for $5,000. The woman was aghast. “It only took you a few seconds,” she said. To which Picasso replied: “No, ma’am. It took me an entire life and a few more seconds.”

The column originally appeared in the Bangalore Mirror on Feb 14, 2018.

Why We End Up Buying Things We Normally Wouldn’t

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When I visit a supermarket or a large store to buy grocery, I inevitably end up buying stuff which I wouldn’t otherwise. On some days, it can be products like muffins or a chocolate bar, placed strategically near the billing counter. On other days, it can be a new flavour of ready to eat noodles.

What is happening here? Human beings look at purchasing decisions from the relative value lens. The question is, relative to what.

I buy grocery around once in three weeks. And on most occasions, I end up with a bill of around Rs 4,000-5,000. When I am buying something like a chocolate muffin which costs around Rs 100, it feels like a very small part of the overall bill. (Rs 100 is only 2 per cent of Rs 5,000). It is basically a useless unhealthy purchase, which one can easily buy at an outside bakery for Rs 30-40. But given that it feels like a very small part of the overall price, I simply go ahead and buy it.

The same stands true for the chocolate bars which supermarkets and large grocery stores tend to stock near their checkout counters. As Dan Ariely and Jeff Kreisler writes in Dollars and Sense: Money Mishaps and How to Avoid Them: “Supermarket checkout queues dare us to resist trashy tabloids and sugary sweets, using the same approach.”

This approach is also at work in hotel rooms where soft drinks which are placed inside the refrigerator in the room, are expensively priced. On a visit to Pune earlier this year, I paid around Rs 100 for a soft drink can which at that point of time was generally priced around Rs 30. My calculation was the same. The per day room rent was around Rs 5,000 and a charge of Rs 100 more wasn’t going to make a significant dent to it. Having said that, I would have never paid Rs 100 for a soft drink can, otherwise.

In fact, the same approach is at work in a restaurant, where soft drinks, water bottles and even bottles of wine, are more expensively priced. In fact, wine in a restaurant costs much more than in a wine shop.

As Ariely and Kreisler write: “It’s logical to pay more for the convenience of wine with dinner – we don’t want to take a bite, then have to run to our car to [take a ] swig… – but it’s also a tribute to relative versus absolute value.”

In all these situations we tend to find value in something, which we otherwise wouldn’t, by comparing it to the overall cost. Marketers make use of this and try to sell us things we wouldn’t have bought otherwise. This plays out almost every time one buys electrical goods like a washing machine or a refrigerator or a television or even a laptop.

The salesman on such occasions always tries to sell us something known as an extended warranty. This is a warranty over and above the one which is offered by the manufacturer of the product that we have bought. It is pretty much useless in most cases given that electrical goods these days tend to function well and rarely go bad.

But the pitch is that now that you are spending so much money, why not spend a little more and get yourself an extended warranty.

This approach is also at play when buying a car. As Ariely and Kreisler write: “Car dealers… know that when we’re spending $25,000, additional purchases, like a $200 CD changer, seem cheap, even inconsequential, in comparison. Would you ever buy a $200 CD changer? Does anyone listen to CDs anymore? No and no. But at just 0.8 per cent of the total purchase price, we hardly shrug.”

The overall point being that marketers are a devious lot and if there is a trick out there they can use to sell more, they are most likely to find it and use it. Beware!

The column originally appeared in the Bangalore Mirror on November 22, 2017.

 

Men wear neck-ties just to fit in

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This is a question I have often asked people but never have got a convincing answer for—why do  men wear neck-ties? Come to think of it, why do men like the idea of an expensively priced piece of cloth, hanging from their necks.

Some people have told me that during winters it just makes their necks feel warm. But large parts of India barely have any winter. In sweaty places, neck-ties can actually lead to a lot of itching.

Some others have told me that it makes them look smart. Really? A piece of cloth hanging from your neck makes you look smart?

An interesting response I got from a friend who loves his neck-ties was that ties are to men what earrings are to women. “On a day I am feeling gloomy I wear a grey coloured tie. On a brighter day a red tie or perhaps that yellow tie with red dots that my wife gave me,” he said.

And still some others have told me that it helps them distinguish between office time and personal time. While they are wearing a tie, it’s office time. But the moment they take it off, the office time is over. From a very rational perspective this doesn’t make much sense, but from a psychological one, perhaps it does.

Several financial market types have told me that wearing a tie makes them look like a professional. When they wear a tie their clients feel that they can be trusted. Like a lot of things that the financial market types say, this basically amounts to nonsense.

These days everyone from a door to door salesmen to those selling credit cards wear ties. Now does that inspire confidence among their prospective customers and lead to higher sales? Not really. Also does wearing a necktie lead to higher intelligence or the ability to think about the organisational problems in a better way?

Perhaps the most honest answer I have got is when people have told me that they wear a tie because they want to fit in. They don’t want to stand out in their organisation for the wrong reason of not wearing a neck-tie. They wear ties because everyone else in their organisation does.

I have thought about this issue considerably and come to the conclusion that companies which do not want their employees to do much thinking and carry out the same set of activities over and over again are the ones where the tie-wearing culture prevails (like in banking). Any company or organisation which is trying to innovate and do something new, or make real time decisions, will not insist on its employees wearing ties.

Take the case of the British Medical Association, the professional body for 1,70,000 doctors in United Kingdom. Their dress code policy states very clearly that it is a poor practice to wear neck-ties when providing patient care. Also, bacteria tend to accumulate on ties.

Jonathan Wells writing in The Telegraph newspaper (published in the United Kingdom) points out that innovative companies like Google, Facebook, Ikea and Amazon have banned their employees from wearing neck-ties. In fact, the Facebook chief executive officer Mark Zuckerberg wears t-shirts to even black-tie events.

This further buttresses my point that those who wear neck-ties are just attempting to fit in. In fact, behavioural economist and psychologist Dan Ariely talks about this in Behavioural Economics Saved my Dog. He writes that many professional meetings require a dress code. He on the other hand likes to feel comfortable while giving lectures and so wears what he calls an Indian shirt (he perhaps means what we call a kurta).

And he explains this as follows: “I reckoned that as long as I am wearing clothes from a different culture, no one who is politically correct (and this includes almost everyone in the West) could complain that I’m underdressed. After all, any such critic would be offending the whole subcontinent.” And if Ariely is wearing a kurta he doesn’t have to wear a neck-tie.

It’s a pity that this won’t work in India.

(Vivek Kaul is the author of the Easy Money trilogy. He can be reached at [email protected])

The column originally appeared in the Bangalore Mirror on February 28, 2016

Why Facebook does not have a dislike button

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A few days back a couple I am friends with on Facebook ‘announced’ the arrival of their child into the world, on Facebook. The ‘announcement’ read like a press release and seemed more like an announcement of a new ‘product launch’ than the arrival of a new baby.

When I was cribbing about this to a friend, she asked, how else could they have done it? “They could have just said, we became parents,” I replied.
This wasn’t the only case. In the past I have seen couples ‘announce’ their weddings, their ‘engagements’ and even their ‘honeymoons’ on Facebook, making it sound more like a new ‘joint venture’ between two companies than the coming together of two individuals.

In fact, one Facebook friend even uploaded extremely intimate pictures of his week-long honeymoon on a daily basis and marked it with headings like Day 1, Day 2, Day 3 and so on. This led me to comment that we live in an era where we see honeymoon updates of people whose weddings we don’t attend.

Honestly, it is at moments like these when I really wish Facebook had a dislike button as well. The trouble with Facebook is that you can only like something, but the moment you do not like something, there is no way you can go about expressing it immediately. While one can always write a comment, but that needs some mental effort, which is not always forthcoming when one is Facebooking.

So the question is why does Facebook only have a like button? As Dan Ariely writes in Behavioural Economics Saved My Dog: “Facebook “Like” button is much more than a way for us to react to other people. It is a social-coordination mechanism that tells us how we can, and should respond. It subtly gives us instruction on what is OK (and not OK) to post and it gently tell us how we can and can’t behave on Facebook.”

And why does Facebook not have a dislike or a hate button? As Ariely  explains: “Adding buttons such as “Dislike” or  “Hate” would  change our mindset when we read different posts; it would prompt us to have more negative reactions and I suspect that very quickly it would destroy this social network’s positive atmosphere.”

This explains why Facebook does not have dislike or a hate button. While the atmosphere does turn nasty on Facebook once in a while, on the whole it has a positive atmosphere. In fact, Ariely even suggests that “for what it’s worth my preference would be to add a button for “Love”.”

This is something that Twitter did recently wherein they added a heart button which signifies “like”. Earlier this used to be called the “favourite” button.

Anyone who has used Twitter extensively would know that the medium has a very negative atmosphere on the whole unlike Facebook. It’s a medium where you have many people fighting, criticising, abusing and misleading, all the time.

Other than births and marriages, people also announce the deaths of their loved ones on Facebook. Now this is a tricky situation. Often such ‘announcements’ are accompanied by a very emotional write-up, which as a reader you may want to like, but then how do you like a post announcing someone’s death? This doesn’t stop people from liking posts which announce deaths of individuals as well.

As Mark Zuckerberg chairman and chief executive of Facebook said sometime late last year: “Not every moment is a good moment, right? And if you are sharing something that is sad, whether it’s something in current events like the refugee crisis that touches you or if a family member passed away, then it might not feel comfortable to Like that post.”

“What [users] really want is the ability to express empathy. Not every moment is a good moment,” he added.

I for one am waiting for some sort of an empathy button. Maybe a hug button to start with. How about you, dear reader?

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared in the Bangalore Mirror on February 10, 2016

Why bosses suck

Around ten days back, I met a cousin who is doing her MBA from a premier business school in the country. She has just finished her summer training and was rather disappointed with her boss (aren’t we all?).

My cousin, of course, goes back to her MBA course and hence, does not need to deal with her now former boss, on a daily basis. But everybody is not as lucky. In fact, time and again research has shown that “people quit their bosses and not their jobs”.

And the tragedy is that most organisations do not address this issue at all. Also, if you are honest enough to highlight this fact in your exit interview, chances are you won’t get hired back by the company in the days to come, if a such situation arises at all.

So the question to ask is why do bosses suck? Many years back, Laurence J. Peter came up with the Peter’s Principle, which essentially states that every person rises to his or her level of incompetence in an organisational hierarchy. So good software coders do not always make for good project managers, once they are promoted. Good teachers do not make for good principals. Good breaking news reporters do not make for good editors. And good batsmen do not always make for a great captain.

This happens primarily because individuals get promoted up the hierarchy on the basis of how good they are at their current job. But once they have been promoted the skill-set required to handle their next job maybe totally different. And they may not have that skill-set at all. This lack of competence creates a problem for those who report to them.

What this means is that everyone is not suited for being promoted up the hierarchy. Nevertheless, people need to be promoted. As Dan Ariely, an Israeli American professor of psychology and behavioural economics, writes in his new book Irrationally Yours: “[The] feeling of progress is very important to our well-being and it provides gratification, self-esteem, and recognition from our peers.” And this feeling of progress comes when people are promoted.

One way companies have tried to tackle the “feeling of progress” is by creating more layers in the hierarchy, where an individual gets promoted, gets a new designation, perhaps more money, but is essentially doing the same thing.

As Ariely puts it: “Widespread recognition of the need for progress explains why so many companies have invented titles and intermediate positions for management types (officer executive,… vice president, senior vice president, deputy CEO, etc.)…Companies want their employees to feel that they are making progress and moving ahead even when these steps are not very meaningful…Most companies across all positions, have a list of titles that give all employees the feeling that we are moving ahead on this treadmill.”

The trouble is that this game of “inventing titles” has not done anything to solve the basic problem of individuals rising to their level of incompetence in a hierarchy. In fact, research shows that incompetent bosses know that they are “incompetent” and this makes them aggressive and a “pain in the ass” for the individuals who report to them.

As Nathanael J. Fast and Serena Chen write in a research paper titled When the Boss Feels Inadequate: “A lack of perceived personal competence may foster aggression among the powerful. We base this idea on the notion that power increases the degree to which individuals feel that they need to be competent—both in order to hold onto their power and to fulfil the demands and expectations that come with their high-power roles.”

The researchers further state that: “Power holders who perceive themselves as personally incompetent might display aggression.” And that’s why bosses continue and will continue to suck. Further, organisations not do anything about it.

(Vivek Kaul is the author of the Easy Money trilogy. He can be reached at [email protected])

The column originally appeared on Bangalore Mirror on June 10, 2015