When is cost, a loss? Decoding Richard Thaler’s Misbehaving and Daniel Kahneman’s Thinking Fast & Slow
Misbehaving by Richard Thaler breaks down Behavioral Economics into simple nuggets of psychology and economics as it gives you a stripped-down impact of biases on standard economic theories.Priya Mohan
I know its respectable to say that you love Classic Rock, but on a tough day, secretly headbanging to Katy Perry in the confines of your car feels quite good too. Daniel Kahneman’s Thinking Fast & Slow is my version of Classic Rock and I could have only finished it because of Audible and the lovely Bengaluru traffic that keeps me inside my car for a while.
On the other hand, Misbehaving by Richard Thaler is a respectable ‘Pop’ - easy to digest but definitely elegant in its rendering. The fact that I had read (rather, heard) Thinking Fast & Slow actually added to perspectives I could glean from the other book.
Misbehaving breaks down Behavioural Economics into simple nuggets of psychology and economics. This is an important breakdown as it gives you a stripped-down impact of biases on standard economic theories. If you are one of those who discuss “free markets” over a beer, this book will definitely add a great push to your dialogue.
Why do shoppers hoard just because the said good is on a sale? Why do some retailers only survive on discounted prices? Why do people inherently forget the ‘sunk cost’ concept? This books will give you completely relatable answers to these questions.
One of the statements that stuck with me was, “When is cost, a loss?” This is such a powerful statement!
In situations where there is less data, no right answer and no amount of subjectivity and perceptive values - concepts brought forward in this book - will apply, even if orthogonally.
Let me leave you with a scenario. You just got your bonus. You are rich, at least for the next few months. You pick a super fancy, sit-down restaurant and decide to take your friends for a treat. You have already paid a hefty per person charge for the 14-course meal.
Much to your annoyance, your friends barely get to the sixth course because they are filling themselves up with glasses of wine, which, of course, is a separate charge that you have to pay.
How do you feel? Is the money paid for the meals a cost or a loss to you?
(Edited by Saheli Sen Gupta)