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.

13th Jul 2019
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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.


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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)




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