Tuesday, October 1, 2019

Bronze Medals are Better than Silver

Too often comparisons taint our view of our situation. The very wealthy among us are looking at wealthier people and then don’t feel so wealthy. The handsome and beautiful among us are comparing themselves to the super-beautiful and super-handsome that are the only ones we see if the popular media channels.

Give your employees bonuses and they’ll be happy until they find out that someone else got more than they did.

Turns out reference point bias is a form of cognitive bias that can make us happy or not. In a recent podcast, this question is posed: would you rather have $50K or $100K income? Without any context, almost everyone answers $100K. If the question is qualified with context, most people choose the lesser amount. Here’s the context: Would you rather have $50K income in a town where everyone else makes $25K or $100K income and live in a town where everyone else makes $200K? In other words, would you rather be the richest person in town or the poorest?

A similar reference point bias happens in sports. Dr. Laurie Santos and others have looked at Olympic athletes and discovered that Silver medal winners are less happy than Bronze winners. Both look one place-standing away: the second place athlete looks at the winner and thinks ‘if only...’ or ‘it should have been me’; meanwhile the third place athlete doesn’t look at the winner or the 2nd place finisher, but instead looks at the 4th place finisher and think ‘wow, I got a medal!’. In fact, it seems that the ‘depression’ of taking 2nd can shorten our life.

Silver medalists, #2 businesses and others just behind the winners or market dominators shouldn’t base their (low) esteem on the fact that they are the ‘first losers’ or their view of the lead dog never changes. They should base their (high) esteem that they’re in the race and haven’t crashed, never qualified, went bankrupt...and that they have enough market share to survive and thrive more than the pack/herd that’s fallen even further behind.

Tuesday, September 24, 2019

Loan Bailout or Give-Away Bailout?

At the end of President G.W. Bush’s term, the Big 3 US automakers got loans from and sold equity to the US Government for $80.7 billion dollars. The loans were paid back, but “we” lost money when the stake in the automakers was sold. The loss was just over $10 billion.

And a lot of Republican legislators cried foul over the bailout.

Here we are 10 years later, and it’s not because of economic troubles that another bailout is being given. The US government induced this problem: the agricultural industries are being hit hard because of tariffs and retaliatory tariffs started in 2017. So far, the ‘bailout’ moneys have totaled $28 billion, and more promised in 2020. Some have reported losing 75% per acre. Others 33%. It seems most farmers are hoping for markets to be opened rather than bailouts.