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Human Resources Respond to Human Psychology

If you’re a human resources professional you know you have a tough job, one that comes with huge responsibilities. Your decisions impact entire departments, divisions and often the whole organization. Those decisions include setting corporate policy for paid time off, merit increases, education reimbursement, retirement savings and the biggie today – health insurance.

The larger the company the easier it is to forget the individuals who make up the departments, divisions and organization. Never lose sight of this reality; a company is no more than the people who choose to work there. It can be extremely dangerous to focus so much on the big picture that individuals become an after thought. You won’t get emails or phone calls from a department or division but you’ll get LOTS of communication from individuals when decisions come down that are perceived to negatively impact them.

In the highly competitive business environment we’re currently in it’s often necessary to make decisions to reduce costs to keep the organization competitive. What’s an HR professional to do when caught between the proverbial rock and a hard place? This is where human psychology comes into play because human resources respond to human psychology. Sometimes it’s not what you say but how you say it that can make all the difference.

For more than seven decades social psychologists, and more recently behavioral economists, have been studying the decision-making process (science of influence and psychology of persuasion) and they’ve gleaned many insights that can help when it comes to communicating HR decisions.

In psychology there’s something known as the contrast phenomenon which describes the reality that you can change how anyone experiences something by what you present first. Perhaps you’re announcing merit increases will be limited to 3% in the upcoming year. If the national average is only 2% then you’ll want to mention that first because 3% will seem to be a good bit larger by comparison. Here’s how you might approach a conversation with an individual:

Bob, you may not be aware but according to Towers-Watson the industry average for merit increases this year is only 2%. However, because we’re doing well we’re giving 3% across the board. I’m sure you wish it were more but here’s the reality; that’s 50% better than most people are getting in this industry. If we keep doing well thanks to contributions from people like you that additional increase adds up to quite a bit over time and it’s what allows us to attract and retain top talent like you.

Another application of contrast might come up with regard to health care. According to the Kaiser Foundationout of pocket health care costs for employees have risen eight times faster than wages! Citing an organization like Kaiser taps into the principle of authority because people believe information more when it comes from perceived experts. As an HR professional you’ll blow a persuasive opportunity if you don’t weave that into your presentation to employees.  Here’s how you might communicate this change:

You’re all aware that the cost of health care is skyrocketing. In most cases what you pay out of pocket has gone up eight times faster than your wages according to the Kaiser Foundation. We find that unacceptable. While we cannot afford to increase your wages at the same pace that health care costs are rising what we’ve done this year is go with a plan that caps your individual and family deductibles at amounts that are less than half the national average.

Another bit of psychology to remember is scarcity. People are more averse to loss than they are to gaining the same thing. In other words, losing $100 hurts more than the joy of winning or finding $100. Let’s continue on with the previous example:

We could have gone with a higher health care deductible this year and paid you a little more because we saved some money. However, the savings would have barely been noticeable in your bi-weekly pay and the reality is you probably would not set aside that small amount in case you needed it for your deductible. According to our health care provider, by going with the lower deductible many of you will avoid paying thousands more on health care bills this year.

The move from traditional vacation/personal/sick time to paid time off (PTO) which allows employees to use their time off any way they see fit can be tricky. Once PTO is in place, as new employees come to the organization they know what they’re signing up for so it’s not a big deal. However, introducing PTO to an organization can be challenging because of the perception of loss. Let’s say you had three weeks of vacation and five sick days available for a total of potentially 20 days off. The move to PTO might give you 18 days but you can use them however you want. Most employees don’t use all of their sick days and some don’t use all of their vacation days which means the typical worker might have 1-5 more days to use however they’d like under a PTO approach. Here’s how you might share this announcement:

To align ourselves with our competition we’re moving from the traditional time off model to PTO. The reason most competitors are going to PTO is because of the flexibility it gives employees. It’s not escaped our notice that some of you may perceive you’re losing time off. Recognizing that we’ve looked at our stats and less than 8% of you used all of your vacation days, personal days and sick time over the last three years. However, 80% of you used fewer than two days of sick time during that period. What that tells us is the vast majority of you will have more days at your disposal to use however you see fit. Many of you will take extra vacation days and that’s okay because that’s what PTO is for.

Will you still have some disgruntle employees? Sure, and you always will no matter what you say or do. After all, some people are only “happy” when they’re unhappy and others will always look at the downside rather than the potential upside. However, by framing your conversations using your understanding of social psychology and behavioral economics you’ll win over more people in the long run which means dealing with fewer calls and email from employees who don’t like change.

Brian Ahearn, CMCT®, is the Chief Influence Officer at Influence PEOPLE, LLC. His Lynda.com/LinkedIn Learning course, Persuasive Selling, has been viewed nearly 150,000 times! The course teaches you how to ethically engage the psychology of persuasion throughout the sales process. Not watched it yet?  To see what you’ve been missing click here.

Just Because Something Doesn’t Grab You by the Grey Matter Doesn’t Mean It Doesn’t Matter

Because I spend so much time studying and teaching persuasion certain things catch my attention more than the average person. But, just because something doesn’t grab you by the grey matter doesn’t mean it doesn’t matter. What I’m saying is this; even when something doesn’t register in your conscious, if it hits your subconscious it can still have a big, big impact on your behavior.

The genesis of this post was an Arby’s commercial I noticed this past weekend. The spokesperson said, “Now at Arby’s, you can get 30 gyros for $90. Or, for those who aren’t trying to cater a Greek family reunion, they’re two for $6.” Click here to watch the commercial.

You might be thinking, “Big deal, gyros are $3 in either case.” While that’s true, what you don’t realize is that Arby’s positioning makes you more likely to buy some gyros. Why? Because of the psychological phenomenon known as contrast.

The contrast phenomenon highlights the fact that you can change how someone experiences something by what you present immediately before making your ultimate request.

Here is an example from Robert Cialdini’s New York Times best-selling book Presuasion. He cites the story of a friend who, before presenting a $75,000 contract told the prospective client, “As you can tell, I’m not going to be able to charge you a million dollars for this.” The client agreed and didn’t flinch at the $75,000 fee. This friend of Cialdini’s said such an approach almost always takes price off the table as an objection. Why? Because compared to a million dollars $75,000 seems much smaller than if it were presented outright with no other context.

Imagine for a moment that same individual saying, “I’d love to only charge you $1 (in a joking tone) but I have to ask for $75,000.” Compared to $1 the fee seems very high and it creates a completely different impression. I know an approach like this would lead to far fewer signed contracts than mentioning a million dollars first.

Let’s go back to Arby’s. It’s not too likely that anyone will spend $90 on 30 gyros but mentioning this makes buying two for just $6 seem much better. What if Arby’s tried to be funny and said, “One-third of a gyro for $1 but we know you’re hungry so why not get two for $6?” With that approach $6 seems like a lot more than $1 so it’s a sure bet their sales would not be nearly as good compared to the approach they’re currently going with.

I point this out to help you in two ways. First, sometimes people focus more on being funny and engaging when they try to get people to take action but only end up hurting their chances when they make the wrong comparison.

Second, what comes first matters. When you want to make your best offer shine, think about a comparison that will do that for you then make sure you position that comparison before you make your ultimate ask. Think $1 million vs. $75,0000, not $1 vs. $75,000.

A strategic approach as I’ve outlined may not grab someone by the grey matter (focused attention) but that doesn’t mean it doesn’t matter because the approach still registers in the subconscious where 85%-95% of all decision making happens.

Brian Ahearn, CMCT®, is the Chief Influence Officer at Influence PEOPLE, LLC and Learning Director for State Auto Insurance. His Lynda.com/LinkedIn Learning course, Persuasive Selling, has been viewed nearly 150,000 times! If you’ve not watched it yet click here to see what you’ve been missing. The course will teach you how to ethically engage the psychology of persuasion throughout the sales process.

Fear of Missing Out and the Black Friday Madness

Black Friday, one of the biggest shopping day of the year, is just days away. This year, Friday, November 24th, will be the unofficial start of the Christmas season. Throngs of people will make their way to malls all across the country hoping to get some of the best deals on holiday gifts.

It’s not too much of a stretch to say people will act like crazed fans at a football game or soccer match. The news will show us scenes of people fighting over items, shoving each other out of the way to get to the hottest toys and trampling one another the moment stores open.

So much for the season of giving and the spirit of joy!

What causes normal people will do some very abnormal things in hopes of getting the best deal? Why would someone stand in line for hours waiting for a store to open when they could visit that same store any day of the week? And why to people forego sleep, getting up hours earlier than they have to on their day off? Fear of missing out.

Fear of missing out taps into scarcity, the psychological principle of influence that tells us people value things more when they’re rare or appear to be less available. Scarcity can be triggered by time constraints and competition for a limited number of items.

Black Friday naturally taps into time constraints because it only happens one day each year. Forego this shopping day and you might miss the best deals of the season! But then again, you might not have missed out because sales only seem to better as Christmas approaches and retailers look to unload the last of their holiday merchandise.

Nonetheless, over the years the lure of Black Friday has increased dramatically and retailers have taken advantage of the popularity of Black Friday by opening stores earlier and earlier each year. Some stores will open at midnight because Thanksgiving will be over and it will officially be Friday. If you don’t get there at midnight you might just miss out on some time sensitive deals!

When we hear the word “competition” we often think of athletic endeavors but competition isn’t limited to the sports arena. No, when it comes to shopping competition is alive and well, and retailers play on it in a big way.

Here’s how the competition part of scarcity works – no longer is it good enough to just get to a store because if you are not there when the store opens they might run out of the thing you wanted most. Limited availability is different than limited time so while you might have all day Friday to shop, certain items marked “While Supplies Last” or “Limited Availability” might be gone by the time you arrive at 5 AM or 6 AM. Can’t let that happen now, can you?

It’s amazes me that people respond as they do because little Johnny probably doesn’t remember that great toy you got him three years ago. You know, the one you stood in line at the mall at 4 AM to get? And sweet Sally probably can’t tell you which American Girl doll you got her when she was eight years old but it’s a good thing you stood in line for several hours to pay for it.

Here’s another eye opener. People will say, “But I saved $200!” Saving money is great but many of those same people wouldn’t drive across town to save $200 on a car because a $200 savings on a $20,000 car by comparison isn’t worth the extra time and effort.

So, they spend four hours negotiating a car deal, could go across town and maybe spend another four hours to save $200, but they don’t. Sure, it’s an eight-hour investment but many of those same people will spend more than 12 hours at the mall just to save $200.

I’m not telling you not to shop. I know for some people, Black Friday shopping has become as much a holiday tradition as Thanksgiving, getting a Christmas tree or sending holiday cards. But I challenge you to consider if it’s really worth all the hassle – the lost sleep, extra time at the mall, fighting traffic, searching for a parking space, the disappointment when someone bought the last item you wanted, etc. Take a moment to ask yourself, “Would I normally respond this way? Do I want to respond this way?” Then decide what you want to do.

If you know you’re going to give into the madness then I’ll help you save some time by sharing with you the Black Friday web site. Go to this site to get a sneak peek at some of the deals that will be out there. Before all the holiday madness starts I want to wish you and your loved ones a very Happy Thanksgiving and a safe time no matter what you decide to do.

Brian Ahearn, CMCT®, is the Chief Influence Officer at InfluencePEOPLE. His Lynda.com course, Persuasive Selling, has been viewed more than 100,000 times! Have you seen it yet? Watch it to learn how to ethically engage the psychology of persuasion throughout the sales process.

Eyes Wide Shut

Sometimes we see but we don’t see and sometimes we hear but we don’t hear. What I mean is this; whatever stimuli we take in doesn’t always register in our conscious thought. Despite that, subconsciously many things we’re not aware of impact our decisions and actions.

As you might expect, my wife Jane is pretty good at persuasion having heard me talk about it and having read my writing for more than a decade. She’s put her knowledge to good use and gets her way with me quite often so I thought I’d share a couple of examples.

Many years ago she asked if she could go to Scotland to play golf with my stepmom Jo because it was Jo’s 65th birthday. I said no because if Jane went to Scotland I wanted to go with her and the timing wasn’t right. Just to clarify, if we make it over there she wants to play golf and I want to drink Scotch.

Upon hearing no she asked, “Then would you mind if I go to Florida for a week to play golf with Jo?” I told her that was fine. Sometime later Jane confessed that she never really wanted to go to Scotland but she knew asking for that would make a yes to the week in Florida come much easier. Touché!

Jane effectively used contrast because asking for Florida after Scotland seemed like a small thing by comparison. She also leveraged reciprocity because she stepped in with a more reasonable request immediately upon hearing no. Both are excellent uses of psychology of persuasion.

One other time that comes to mind was a simple question I asked Jane. I’m not always the most perceptive husband but occasionally I notice things. One day I innocently asked her, “Is that a new coat?” She replied, “I got this last year.” End of discussion.

At later date she told me the coat was new. She reminded me I’d asked her that question in January then told me she’d bought the coat in December. Technically her answer was right, she bought it the year before. She answered the question without really answering my question. Touché once again!

I share these stories because even though I teach people about the psychology of persuasion I don’t always “see” how people are trying to persuade me. When I focus I see more than most people however I’m not always focused because that can be mentally tiring. Now consider that most people have very little understanding about the psychology of persuasion let alone the mental focus needed to understand how they’re being influenced. This is a big reason so much persuasion happens at the subconscious level.

Whenever someone is trying to persuade you, especially if there’s a lot at stake, step back from the situation, take a deep breath and focus on what you’re being asked as well as how you’re being asked. Doing so might help you go from eyes wide shut to eyes wide open so you can make the best-informed decision.

What Are You Gonna Do When the Bear Comes for You?

There’s an old joke that goes something like this:

Two hikers are walking through the woods when suddenly a bear jumps out from behind a bush and starts towards the frightened hikers. Instinctively both start running for their lives, but then suddenly one of them stops and begins to put on running shoes in place of his hiking boots. His friend says, “What are you doing? You can’t outrun a bear!” He replies, “I don’t have to outrun the bear; I only have to outrun you!”

The story is a classic example of “Compared to what?” All too often we fall into the familiar, the comfortable, and the easy when it may not be the right thing to do. In this story what do you need to do? Easy, try to outrun the bear! But a master persuader knows that’s the wrong comparison. The master persuader knows to outrun the other person is the right comparison because the bear will be satisfied one it catches one of the two hikers. Your goal is to be the one that’s not caught.

This may be a silly, and slightly gruesome example, but it reveals the need to make the right comparison if you want to succeed. When you make the wrong comparison you waste time and energy. Here’s an example that might hit closer to home – sales.

My wife Jane has a golf buddy who also happens to be the sales manager at a BMW dealership in town. He said the toughest sale is the guy who owns a Honda and can finally afford a BMW because making the jump from a Honda to a BMW is steep and the pain of paying is significant.

Trying to sell someone on the benefits of a BMW over a Honda is the wrong comparison to make. If the typical buyer considers the price tag, cost to insure and maintain, gas mileage, etc., they would be hard pressed to choose the BMW over the Honda. But do people who can afford a BMW place more weight on those factors or the prestige of owning a BMW? I think it’s the latter.

The smart salesman will congratulate the prospective buyer on his great taste and good fortune. From that point forward the comparison has to be the BMW versus other luxury automobiles like Mercedes or Audi. Do you see the point here? Too much focus on the move from Honda to BMW might make some car buyers hesitant. It would be like trying to run from the bear – a waste of time and energy that might not end well. It would be much easier to assume the prospective car buyer will want some kind of luxury car so making those comparisons is like putting on running shoes.

Next time you have to make a comparison to drive home your point don’t settle for the familiar, comfortable, or easy, because that may not lead you to the comparison that helps you get to “Yes.”

Last Year We Lost $3.77 Billion, However…

“Last year we lost $3.77 billion” was the message Warren Buffett had to personally deliver to Berkshire Hathaway shareholders at the 2002 annual meeting. What’s a CEO to do with news that’s as bad as that?

I first learned about this in the summer of 2004 when Robert Cialdini was a guest speaker at several State Auto agency partner meetings. As Cialdini talked about influence and how to frame a message he shared the Buffett story with us.

As many of you know, Warren Buffett is one of the richest men in the world and Berkshire Hathaway has recovered quite nicely from its disastrous 2001. Nonetheless, having to tell shareholders their company value decreased by nearly $4 billion (6.2% in total value) was not something Buffet looked forward to. Fortunately he and his long time partner Charlie Munger were huge fans of Robert Cialdini and his work on ethical influence.

Let me lay the groundwork for how Buffet delivered his message: From 1965 through 2001, the overall gain in “annual percentage change in per share book value” of the S&P 500 was 4,742%. Not bad! Over the same time period Berkshire Hathaway’s gain was 194,938%!! Yes, you read that correctly, 194,938! (Click here to see the 2001 report). Put another way, if you had invested $1 in the S&P 500 in 1965 it would have been worth $48 by 2001. However, that same $1 invested in Berkshire Hathaway would have been worth $1,950 by the end of 2001. Wow!

So how did Buffett address shareholders? Paraphrasing, he said the following:

“Last year the value of your company went down by $3.77 billion. However, I’d like to remind you that the management team that’s been in place at Berkshire Hathaway for the past 36 years has outperformed the S&P 500 by more than 190,000%.”

Unbelievable! You’re left not focused on the company loss but rather the incredible long-term success of Berkshire Hathaway. What if Buffett had said this?

“I’d like to remind you that the management team that’s been in place at Berkshire for the past 36 years has outperformed the S&P 500 by more than 190,000%. However, last year the value of your company went down by $3.77 billion.”

Ugh! You can feel the difference. Now you’re focused on the loss, not the incredible long-term success of the management team.

I hope you realize the words and facts are the same in both cases. What Buffett realized, and few people pay attention to, is this: people remember what comes after transitional words like “but” and “however.” You know it’s true because you just felt the difference.

If you want to be a master persuader you have to understand this truism and always be conscious of what you want your audience to remember. There are times you want them focused on the negative to prompt action and there are times you want them focused on the positive. How you order the information makes all the difference.

The next time you have to deliver good and bad news think about what you want the audience to remember. Then think about the comparisons that will make your message shine. Last, be sure to order the information correctly. Following these three tips might not make you the next Warren Buffett but they can make you much more persuasive than you are today. Who knows, that might be your first step towards Buffett-like success!

The Right Comparison Can Make All the Difference in Persuasion

Have you ever run five miles? That’s not easy to do if you’re not in shape. How about this — have you ever walked five miles? That’s not as hard as running but can be taxing depending on your fitness level. Do you think it would be more tiring to walk in 70, 80, or maybe 90 degree weather? Throw on top of that playing a round of golf over four hours and it would be pretty tiring for just about anyone.

In 2001, golfer Casey Martin challenged the PGA Tour rule that prohibited golfers from using a cart on the tour. His challenge arose because of a rare blood disorder that caused circulation problems in his legs. Part of the PGA contention was that walking causes fatigue and is therefore an intrinsic part of the game. Casey Marti’s legal team disagreed. From The PGA Tour, Inc. v. Martin Supreme Court case in 2001:
“The District Court credited the testimony of a professor in physiology and expert on fatigue, who calculated the calories expended in walking a golf course (about five miles) to be approximately 500 calories ‘nutritionally … less than a Big Mac.’”

Walking the golf course burns fewer calories than a Big Mac? All of a sudden it doesn’t seem like such a monumental activity. Think about this for a moment; if Casey Martin’s legal team had simply cited 500 calories, the point would not have been as impacting. I’m sure everyone on the court could visualize a Big Mac. Martin eventually won the case.

Sometimes the right comparison can make all the difference when it comes to persuasion. Just using numbers doesn’t always work because they don’t always register for many people. Here are two more great examples of effective comparison points that led to change.

In Chip and Dan Heath’s best selling book Made to Stick, a story is shared about how unhealthy a medium-sized buttered popcorn was in the mid ‘90s. Trying to persuade movie theaters to change was going nowhere despite the fact that the popcorn had 37 grams of unsaturated fat. It didn’t register just how unhealthy that was until it was eventually pointed out how buttered popcorn compared to other foods. Did you know you’d get that much unsaturated fat (37 grams) if you ate bacon and eggs for breakfast, a Big Mac with large fries and Coke for lunch, and then had a steak and loaded potato for dinner…all in the same day! None of those meals is healthy but eating all three the same day with any consistency would eventually lead to obesity. That’s how much fat those who ate the medium-sized buttered popcorn were getting in the mid-90s. Thankfully theaters eventually changed their ways.

McDonald’s coffee case is noted in WilliamPoundstone’s book Priceless. You may recall an elderly woman severely burned herself when she spilled a piping hot cup of McDonald’s coffee on her lap. It led to an eight-day hospital stay for the 79 year-old woman. She won a $2.86 million dollar settlement. While that may seem outrageous, it only came after McDonald’s refused to settle for $20,000. Her lawyer took it to trial and didn’t ask for nearly $3 million. Instead he asked for one or two days of McDonald’s revenue from the sale of coffee. That doesn’t sound so bad except revenue was $1.35 million per day!

One last example came from the late Steve Jobs. He introduced the first iPod, which he pulled out from the front pocket of his jeans, saying, “A thousand songs in you pocket.” Wow, that amounted to more songs than most people had in their entire CD collections!  I doubt Jobs would have been nearly as effective if he’d have said, “10 gigabytes in your pocket.” Even techies wouldn’t be as moved by that as they were when he announced 1,000 songs.

Next time you’re going to attempt to persuade someone, or a group of people, think about the comparisons you would normally make. Then take a moment to consider other possible comparisons that are naturally available. It could be calories versus real food, money or objects money can buy, or songs versus gigabytes. Put the comparison in terms most people can grasp and you’ll have a much better chance for persuasion success.

Sometimes It’s All about What You SAID

I grew up playing football. From the time I was eight years old until I was 18, every year was all about football. Unfortunately I wasn’t naturally big, strong, or fast. As a junior in high school I played outside linebacker at a strapping five foot nine inches tall and weight of 155 lbs., soaking wet.

Then something happened between my junior and senior year. I was taught to lift weights the right way by some power lifters and the difference was amazing! I put on 20 lbs. in just three months and by the time the next season rolled around, I was 30 lbs. heavier than the year before. It made a HUGE difference on the field.

Something my teammates and I were taught during those lifting sessions was the SAID principle. SAID stood for Specific Adaptation to Imposed Demands. What that means in layman’s terms is simply this – you get what you train for. Here are some examples:

  • If you lift heavy weights for low reps you get bigger and much stronger.
  • If you lift lighter weights for higher reps you get a little stronger and more defined (cut).
  • If you practice running in short hard bursts your ability to sprint will get better.
  • If you run at an easy pace for a long time you tend to become a better distance runner.

I think it’s obvious running long slow distances won’t help you get really fast in the 40-yard dash and lifting lighter weights will never make you as big and strong as people who lift massive amounts of weight. You get what you train for.

This philosophy applies to business skills as well. When you work on a particular skill you tend to improve that skill. However, if you don’t work on the skills required in your business you’ll only improve marginally.

For example, walking gives some physical benefit but nothing like running distance or working on sprinting. So why do with think because we use our ears every day we’re getting better at listening? Just because we ask people questions on a daily basis does that necessarily make us good at questioning.

Persuasion is an everyday skill. According to Aristotle persuasion is the art of getting someone to do something they wouldn’t ordinarily do if you didn’t ask. Each of us asks others to do things every day but does that make us good at the skill of persuasion? Having studied the topic for more than a dozen years and working with countless people over that time I can tell you with certainty it doesn’t make you better.

People and companies – some very smart people and very good companies – make basic mistakes routinely. In nearly every case small changes could make big differences. For example take a look at the screen shot from my Starbucks app. Notice anything?

 In psychology there’s something we call the contrast phenomenon. What you experience first will impact what you experience next. When Starbucks puts “No Tip” first then $0.50 they make $1.00 and $2.00 seem much bigger by comparison. I have no doubt if they reversed the order the average tip would be much higher because after debating about the $2.00 tip, $1.00 doesn’t seem like too much. Not everyone will give more but enough will that baristas would do much better after giving their friendly service.

I’ve seen this same mistake made by organizations raising money via donations. Starting with $5 on the donation form then going to $10, $25, $50, etc., will never be as effective as starting with the highest number then going lower.

I could share many more examples but I think you get the picture. As I stated in the opening, doing something routinely doesn’t necessarily make you better at it. Taking time to focus on a skill to get better at it, like a golfer who practices consistently, will help you improve much faster and more efficiently. This is why everyone should take time to learn about the psychology of persuasion. Doing so will help your professional success and personal happiness. Did you hear what I SAID?

 

Anchors Aweigh on You More than You Realize

The human mind is a fascinating creation. With it we move, breathe, consciously decide what to do and subconsciously do things with little knowledge of why or how we do them. With the help of our five senses, our brains help us make sense of the world around us. Despite its wonder our brains can be easily tricked. Consider the following:

The Placebo Effect – Many studies show when people believe they’re taking medicine their conditions improve just as if they took the actual medicine.

Magicians – These clever folks use their understanding of how the mind works to fool audience members into believing objects miraculously appear and disappear. I saw it with my own eyes!

Physical Comparisons – Have you ever gone to pick up something anticipating it was heavy and suddenly it felt light? Or perhaps you went to pick up something you assumed was light and it felt heavy. Ten pounds is ten pounds but sometimes ten pounds feels heavy and sometimes it feels light.

Sales – We’ve all bought things on sale feeling we got a great deal because we saved a certain percentage or dollar amount off of the list price. That good deal doesn’t seem so good when someone else announces they got the same item for even less that we paid!

There’s something that impacts us every day, which we give very little thought to and yet it makes a big difference in how we perceive things and the decisions we ultimately make. What I’m referring to are anchors but not the kind dropped over the side of a ship into the water. In psychology, according to Amos Tversky and Nobel Prize winner Daniel Kahneman, an anchor is “an initial value that serves as a benchmark or starting point for an unknown quantity.”

There are many things in life that we can’t accurately put a value on. For example let’s consider a house. A four bedroom, two and a half bath house with 3,000 square feet, a wooden deck, family room, dining room, kitchen and den might go for $250,000 in a small Midwestern town. The exact same home on an equivalent sized lot in Southern California might go for more than $500,000.

You might be thinking it’s because the market dictates a higher price in California than in the Midwest. No dispute there but the point would be this – the value you put on the home would be dictated in large part by the other values you learn about (the anchors).

Consider this experiment from Tversky and Kahneman.  A wheel with numbers 1-100 is spun and is set to “randomly” stop on either 10 or 65. Let’s say it stopped on 10. Participants were then asked if the percentage of African nations in the United Nations is higher or lower than 10%. Next they were asked to make their best guess on the actual percentage. Those who saw the wheel stop at 65 were asked if the percentage of African nations in the United Nations is higher or lower than 65%. Then they were asked to guess the actual percentage.

For most people, estimating the percentage of African nations in the U.N. is nothing more than a guess. However, those who saw the wheel stop at 10 guessed 25% of the African nations were in the U.N., but for those who saw it stop on 65 the average guess was 45! That’s quite a difference. Each group was heavily influenced by the anchor they were exposed to before making their educated guess.

So what does this have to do with you and me? Think about all the things we’ve encountered over time with little or no thought about how the value was determined other than market forces:

Long distance charges – I remember when 25 cents a minute was a bargain. When charges were dropped to 10 cents we couldn’t believe it! Now it’s practically free on a per minute basis.

Newspapers – Some people still pay to get the weekly and/or weekend edition of their favorite newspaper. Others go online and see the same stories…for free! You could argue the online version is more valuable because it’s portable, updated multiple times and day and doesn’t create any waste.

Movies – We used to drive to Blockbuster and pay $8-$10 to rent two or three movies for the weekend. Now many of us watch nearly unlimited movies and shows on Netflix for just $8 a month.

In each instance what we paid and what we felt was a good deal, or bad deal, was impacted by the anchor because it served as a comparison point.

There are some things we can’t change and have little room to barter on. That’s why most Internet plans are in the ballpark of one another. But when it comes to things like buying homes and cars you should recognize your purchase price will be heavily impacted by a list price for a home or the MSRP (manufacturer’s suggested retail price) for a new car. You would do well to do some research beforehand and go into those situations with your own anchor to start bidding from. And remember this tidbit for negotiations; the person who puts out the first number sets the anchor and most of the time the negotiated price will be close to that number. Don’t let a good deal get aweigh from you.

 

Donald Trump’s mASS appeal

Donald Trump has struck a nerve with the Republican Party, the media, and many Americans. You might say he has mASS appeal. He’s brash, offensive and unapologetic. The Republican Party knows he holds the key to their possible victory or defeat in the 2016 election should he choose to run as a third party candidate. The media cannot try any harder to discredit him and his poll numbers only rise. Many Americans find him offensive but because he resonates with so many, he has to be take seriously as seen by his #1 standing going into and after the first primary debate.

I must confess, when Trump announced his candidacy and made the remarks he did about illegal Mexican immigrants being rapists and murders, I was shocked. I posted on Facebook that Fox News and anyone else who took him seriously after those comments would lose all credibility. I was wrong.

Love him or hate him there’s no denying he’s having an impact on the Republican primary and might do the same in the general election if he remains a strong presence but doesn’t win over the establishment as the nominee.

So why is “The Donald” commanding so much attention? I have a theory. In recent years there have been many television shows which have captivated American audiences such as Breaking Bad, Sons of Anarchy, Dexter, and Mad Men to name just a few. If you’ve seen these shows then you know you find yourself rooting for the bad guy.

In Breaking Bad, the lead character is Walter White, an unassuming high school chemistry teacher who begins to churn out crystal meth after he gets lung cancer. He does so to provide for his family and despite his downward spiral you root for him.

Jax Teller is the lead in Sons of Anarchy. He wants to follow his late father’s ideas to get his motorcycle gang out of drugs and guns. As he manipulates and kills, you still find yourself pulling for him because his ultimate desire is good.

Dexter is the lead in the show by the same name. He’s a serial killer who has learned to confine his psychopathic nature to only killing bad people, the kind that most people feel deep in their heart deserve the death penalty for their heinous crimes. You not only pull for Dexter you actually come to like him.

Much less psychopathic and not a killer, Don Draper is the lead in Mad Men. The ad man is a womanizer and heavy drinker with a past he tries to hide because it could land him in jail. You see a good side of Don shine every now and then and consequently you pull for him despite his character flaws.

In each show we don’t root for the bad guys because we agree with their antics but something about each stands out – we know who they are. We know they’re bad but each really does want something better for himself, his family and friends. By contrast, so many “good” people they come in contact with aren’t actually good and viewers find themselves repelled by their false veneers. In real life think about Tiger Woods, Lance Armstrong and many others who appeared to be good people until the truth was found out. It’s a classic case of the contrast phenomenon.

When it comes to politicians very few people truly believe any of them have our (Americans) best interest at heart. We’ve seen enough scandal (infidelity, drugs, bribes, etc.) that we see them all as having the false veneer covering a desire for power. We wonder when the next politician will fall because it’s only a matter of time.

With Donald what you see is what you get. When asked how he can disavow politicians who take large contributions after he’s made those political contributions, he’s candid when he says (my paraphrase) – “I know how the system works and paying money got me favors I would need down the road. But, I have so much money I can’t be bought.” That resonates with people because it’s truthful.

When the media attacks him and he corrects them for taking something out of context people love that because the media so often appears to look for ways to build up people then tear them down.

When Trump said McCain wasn’t a war hero because he was captured you’d have thought that would be the end. But it wasn’t and his numbers surged despite the media going after it from every angle.

In the end Donald Trump simply continues to be Donald Trump. Some people will love him and some will hate him but at least you know what you’re getting and I believe that’s his mASS appeal.