When Food Advocates Tell You What To Serve Your Customers

It was interesting to see Chili's re-rejigger their menu recently, eliminating a number of recently added healthier menu items to focus on the chain's traditional fare of burgers, ribs and fajitas.

Yet again, another well-meaning company, while attempting to "healthify" their menu, discovers their customers never went there for healthy food in the first place. Nobody goes to Chili's for quinoa and kale.

But Chili's recent about-face highlights a risk all companies face: not knowing the difference between what people say they want and what people actually want.

Or to put a finer distinction on it: what people who know what's good for us say they want, and what actual customers want.

Consider food policy experts like Marion Nestle or Michele Simon: both would love it, simply love it, if chains like Chili's and McDonald's were to offer far more "healthier" food options.[1] They've both put extensive public pressure on many of these companies, criticizing their current food offerings and demanding healthy items like salads, fruit, and so on. And even when, say, McDonald's does offer a healthier option, it never satisfies: Nestle and Simon will reliably say the company "hasn't gone far enough."

But here's the problem: Michele Simon and Marion Nestle aren't customers of these chain restaurants. Neither would be caught dead eating at a Chili's, much less McDonald's. Hilariously, Michele Simon even wrote in her book that she only enters fast food joints to use their rest rooms![2]

Which takes us to an interesting question: When a food policy expert campaigns for major menu changes at restaurants they'll never go to, can you come up with any reason--any reason whatsoever--why a company would bother to listen? If a food advocate wants to influence what companies offer their customers, is this really the way to go about it?


READ NEXT: The Consumer Must Be Protected At All Times
And: When It Comes To Banning Soda, Marion Nestle Fights Dirty


Amazon Links: 
Michele Simon's book Appetite for Profit
Marion Nestle's book Food Politics


Footnotes:
[1] Let's set aside for the moment the highly uncomfortable topic of how recent dietary science has turned upside down much of our views about which foods are healthy.

[2] See Appetite For Profit, page 197: "Another survey showed that nearly all U.S. adults, at one time or another (97 percent) eat at fast food restaurants. For those of us (like me) who only see the inside of a fast food joint on long road trips (and even then just to use the restroom), this statistic is a sobering reminder of how the rest of the nation eats."

Money Sundays: On Hindsight Bias, Misremembering, and Why You Should Keep An Investing Journal

This post is VERY off-topic, even for a Money Sundays post. However, it is relevant to the often typical arrogance of experts, policy makers and elites at all levels and in all domains in our society. Feel free to skip it if you'd like.
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Once an event has passed, we tend to believe that we had better knowledge of the outcome before the fact than we really did.
--Michael Mauboussin, More Than You Know

Readers, do any of you remember the name Robert Citron? To municipal bond investors and anyone from southern California, his name is impossible to forget. Citron was the former Treasurer of Orange County, CA and he's (in)famous for singlehandedly blowing up that county's finances.

Citron used residents' tax dollars to speculate in a highly leveraged portfolio of repos and floating rate notes, and his speculations drove the entire county into bankruptcy in 1994. At the time, it was the biggest municipal bankruptcy in US history.

I want to share two quotes from Mr. Citron, both made publicly, shortly before he bankrupted Orange County. First, a quote from his annual report from September 1993:

"We will have level if not lower interest rates through this decade. Certainly, there's nothing in the horizon that would indicate that we will have rising interest rates for a minimum of three years."

In February 1994, just five months later, the Federal Reserve raised rates, exactly what Citron did not expect. But here's what our buddy Citron said immediately afterward:

"The recent increase in rates was not a surprise to us; we expected it and we were prepared for it."

Okay. It is duplicitous enough to act like you "know" where interest rates are going--only charlatans claim this. But it's far worse to misremember what you said so it sounds like you were right when you were wrong all along.

Worst of all, it's astounding to see Citron misremember what he wrote publicly just months before in his County annual report, especially given that he was running a risky, interest rate-sensitive exotic bond porfolio! The arrogance here is staggering.

This is a classic example of hindsight bias. It's a common cognitive error that we all make: we conflate what we know after an unexpected event happens with what we knew before. In Citron's case, he misremembers his own expectations, which allows him, hilariously, to claim he knew all along that interest rates would increase.

Fortunately for us, we had his original prediction in print, so we know what he actually expected, and we can see that he misremembered his prediction. We had his original prediction in print. Hang on to that thought: we'll return to it shortly.

Within a few months, Citron's exotic bond portfolio--a deeply risky portfolio he had no business running at all, and certainly not with taxpayer funds--blew up. It spontaneously put the entire county into bankrupcty. Thanks to Citron's arrogance and hindsight bias, 3,000 public employees lost their jobs and the county cut budgets across all services for years to come.

Worst of all, county taxpayers are still holding the bag: they get to make extra tax payments of some $76 million per year until 2027.

So, why am I talking about this? Because in personal finance, we are all mini-Robert Citrons. We are all consistently guilty of hindsight bias. It's one of the most common cognitive errors in investing.

Granted, in our personal investing, we can't detonate entire municipalities. Thank goodness. But we can and do hurt ourselves and our families when we make prediction errors, misremember those predictions, and then fail to learn from them.

So how do we avoid overconfident decision-making, and how do we make sure that we learn from our investing mistakes rather than misremember them? How do we protect ourselves from our inner Robert Citron?

The solution is laughably easy: keep an investment journal. And use it to document the reasons behind any investment action you take.

Here's how I do it: I use a simple spiral notebook, and whenever I buy or sell a stock, index fund, ETF, or make any changes to my overall investment portfolio, I simply write down four or five bullet points on what I intend to do and why.

And when I buy any individual stock, I make sure I write a short two- or three-sentence thesis on why I want to own the company, what it does, and, most importantly, at what prices I would buy more.

One more idea: you can use your investing notebook to keep a running list of stocks, funds or ETFs that catch your eye and that might be worthy of buying under the right conditions (and yes, of course, you'll jot down 2-3 sentences on what those specific conditions would be so that later you don't misremember them!). This is a convenient way to keep a stable of potential new investment ideas.

The whole point of keeping an investing journal is to subvert hindsight bias. Your brain has a subtle but powerful desire to conflate prior predictions with new information. It wants that wonderful feeling that it knew all along. Writing down your thinking at the time of prediction preserves it, inoculating it from misremembrance.

You'll see: in the future, there will be some disruption--affecting a stock you own, a fund you've chosen or the overall investment environment--and that disruption will impact your thinking and cause it to become unmoored. At these moments, it's priceless to be able to bring yourself back to the actual documented reasons why you bought a stock or a fund. With properly moored thinking, you can actually check to see if your thesis was correct or incorrect and why. You'll be able to learn from your mistakes rather than misremember them. And you'll have a concrete plan for what you should do when an exogenous event or an unexpected market selloff occurs.

In contrast, if you merely keep your reasons in your head, you are guaranteed to misremember them. What's worse, the key problem with hindsight bias and misremembering--as with most cognitive errors--is that we really, truly, honestly believe we don't do it. We are all mini-Robert Citrons. An investing journal is just a simple device to help protect us from ourselves.

Remember Robert Citron. Note your investment decisions and the thinking behind them in your investing notebook so you won't do what he did.

Some of the ideas in this post came from Michael Mauboussin's book More Than You Know, Hersh Shefrin's book Beyond Greed and Fear, and Nicholas Taleb's book Antifragile. For further reading on Orange Country's bankruptcy see Robert Citron's Wikipedia page for useful additional context.

Read Next: Money Sundays: Is Looking For Tax-Efficient Investments Icky? Or Intelligent?





How can I support Casual Kitchen?
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The Tragic Tale of Peat Village: A Natural Resource Fable

It was Ireland, during the 11th Century, in a tiny little community called Peat Village.

Peat Village was nothing special, just a tiny village on the edge of a huge peat bog. People there lived very simply back then, and life in this forlorn little village was at best brutish and short. Average life expectancy was 24 years, disease was rampant, and famine and hunger were constant realities.

One day in Peat Village a villager stumbled onto a significant discovery. The peat from the bog next to the village could be used as a fuel! Yes, it was a dirty fuel--it was awfully smoky when it burned--and of course it had to be harvested, treated and dried before it would really burn well, but without a doubt it could be used as a serviceable fuel. And there was so much of it! This villager began using peat to heat his home, his food and his water. In the following years, he and his family enjoyed a meaningfully improved standard of living.

Others in Peat Village caught on to the idea of using peat as a fuel, and they began heating their food, water and homes too. Their standard of living also increased. It wasn't long before everyone in Peat Village was burning peat, and as this little community's living standards improved, things changed irrevocably for the better: disease became just a little less rampant, food became a just little more plentiful, and life expectancy became just a little bit longer. Life became a little less brutish and short.

However, there was a very intelligent villager living in Peat Village who began to worry. He wondered about the longer-term consequences if everyone in Peat Village continued to use peat to heat their homes and their food and water. He started to worry about what would happen if Peat Village ran out of peat.

And he was right to worry about this. It was clear--to the point of obviousness--that there was a limited supply of peat. Yet each year, villagers used more and more of it. What would happen when, inevitably, all the peat was used up?

The other villagers considered this nothing more than scaremongering. Some laughed. But this very intelligent villager was absolutely certain he was right. He could see the writing on the wall. After all, when the supply of a resource is fixed and demand is growing, it is only a matter of time before that resource runs out. It could be years, it could be decades, but the logic was inescapable: at some point--probably soon--Peat Village would run completely out of peat.

Clearly, this would be an unmitigated disaster for the Peat Village community. "Peak Peat" was coming, and with it would come a total collapse in the peat-based economy.

Our scaremonger friend traveled throughout Peat Village to spread the word. He created a list of rules and recommendations for peat conservation for all the residents to follow so they could avoid, or at least postpone, the inevitable Peak Peat catastrophe. He encouraged villages to use peat only when absolutely necessary, if at all. He got into many debates with villagers who didn't agree with him. After all, the villagers wanted to keep their heated homes and heated food. These things improved their quality of life and their standard of living. And some of the villagers thought it was silly to just leave the peat sitting there in the bog completely unused when it had brought about such improvements in their community. Finally, the villagers said, it will be a long time before we use up all of our peat. In the meantime perhaps we will discover another fuel source to replace it.

But our scaremonger friend didn't think very much of the intelligence of these villagers. He considered them unsophisticated and naive, and he mocked them by calling them "deniers." He told them they already achieved significant improvements in their standard of living, and it would be impossible (and not to mention irresponsible) to maintain their current living standards in the post-Peak Peat era.

There was another vaguely bothersome thing about this scaremonger villager. It a small thing, but bothersome nonetheless: since he traveled so much throughout Peat Village, he didn't exactly follow all of the peat conservation rules he set down for all the other villagers. When he stayed at inns and homes across the village, he would often enjoy peat fires and peat-heated food. He reduced his peat use slightly in his own home, but because he was so successful speaking, writing and teaching about Peak Peat, his thatched hut was one of the largest in the entire village. It took quite a bit of peat just to heat a small portion of his house! But in any case, he told himself, his personal use wasn't all that important. What was more important was that he get out the word about Peak Peat and the coming catastrophe that would inevitably follow.

Centuries later (our scaremonger friend lived for a very long time, you see), a new and revolutionary fuel came along. It was called "coal." Coal was hundreds of times more efficient than peat, far cleaner, and in every sense a superior energy source. In Coal County, which wasn't very far from Peat Village, homes and industries switched over to this new and advanced fuel. As a result, Coal County began to enjoy a significantly improved standard of living.

But not tiny Peat Village. They were still busy preparing for Peak Peat: conserving peat as much as they could, shivering over their tiny peat fires, huddling around their half-warmed meals, and earnestly following the rules and guidelines as they were told. Their standard of living hadn't increased at all for centuries, and their community never developed sufficient scientific or engineering expertise nor any extra economic capacity to make use of a newfangled energy source like coal.

In the meantime, our scaremonger friend continued traveling widely, spending the passing centuries getting the word out on the coming collapse of the peat-based economy. Since he’d already fully convinced everyone in Peat Village of his views (what few remaining "deniers" there were had been totally ostracized by the community), he often found himself traveling into Coal County to give speeches on Peak Peat. Sadly, he couldn't find many people in Coal County who were interested in conserving peat, as hard as he tried. Peak Peat just didn't seem to be a priority there.

One day, however, after giving yet another sparsely attended speech in Coal County, our very intelligent villager stumbled onto a brilliant insight: The supply of coal had to be limited too!

Once again, he could clearly see the inescapable logic: when the supply of a resource is fixed and demand is growing, it is only a matter of time before that resource runs out. It could be years, it could be decades, but the logic was inevitable: at some point--probably soon--Coal County would run out of coal. This would be an unmitigated disaster. A collapse in the coal-based economy was coming, and coming soon.

And he was right to worry about this. It was clear--to the point of obviousness--that there was a limited supply of coal. And yet every year more and more people were burning more and more of it. What would happen when, inevitably, all of it would get used up? Peak Coal was coming. Anyone who doubted so was clearly a denier.

Our scaremonger friend began traveling even more widely (even using coal-based modes of transportation) in order to get the word out. He created a list of rules and recommendations for coal conservation for the residents of Coal County to follow so they could avoid, or at least postpone, the inevitable Peak Coal catastrophe.

By this time, he hardly ever visited his friends back in Peat Village any more. With all of his important work on coal conservation, there was just no time.

Another century or two passed. Coal began to be replaced by a new and even better energy source called "oil." It was far more efficient than coal, hundreds of times less polluting, and all around an infinitely more flexible and useful fuel. In fact, it was such a superior fuel that throughout Oil Nation (which was just few days' journey by coal-powered steamship from Coal County) most homes and industries quickly switched over to this advanced fuel. As a result, Oil Nation enjoyed a much improved standard of living.

The residents of Coal County, however, were still preparing for Peak Coal: conserving as much coal as they could, huddling over their modest coal fires, and earnestly following the rules and guidelines set down by our scaremongering friend, just as they were told. Sadly, however, their standard of living hadn't increased at all for several generations, and needless to say, their community never developed the scientific expertise nor the extra economic capacity to make use of a newfangled energy source like oil.

Our scaremonger friend continued to travel widely, often using coal- and even oil-based energy to the extent he needed to. After all, spreading the coal conservation message was far more important than following a few minor rules, you see.

Interestingly, by this time, he never used peat-based energy at all. Why would he use such a laughably primitive fuel source, especially with such important work to do?

One fine day, while he was speaking to a mostly empty auditorium in Oil Nation (oddly enough, there wasn't very much interest in Peak Coal there), he hit on yet another truth. Admittedly it was a somewhat derivative truth, but it was staggering in its implications: the supply of oil had to be limited!

Once again, he could clearly see the inescapable logic: when the supply of a resource is fixed and demand is growing, it is only a matter of time before that resource runs out. It could be years, it could be decades, but the logic was inevitable: at some point--probably soon--Oil Nation would run out of oil. This would be an unmitigated disaster. A collapse in the oil-based economy was coming. And coming soon.

It was clear--to the point of obviousness--that there was a limited supply of oil, yet every year, more and more people used more and more of it. What would happen when, inevitably, it was all used up? Peak Oil was coming. Anyone who doubted it was a denier.

Our scaremonger friend redoubled his efforts. There was important work to do! He created a list of rules and recommendations for oil conservation for all Oil Nation citizens to follow, so they could avoid, or at least postpone, a Peak Oil catastrophe. He began traveling even more widely, all over Oil Nation and beyond, and his utterly logical and inescapable conclusions became so widely accepted and respected that he began receiving invitations to speak internationally at major conferences like Davos and the World Economic Forum. He became one of the world's wealthy elites, sharing his important and far-seeing knowledge through books, speeches and media appearances.

Needless to say, he never visited Coal County any more. His work on Peak Oil was far too important.

And of course, by this time we'd all but forgotten about the people of Peat Village.


How can I support Casual Kitchen?
Easy. Do all your shopping at Amazon.com via the links on this site! You can also link to me or subscribe to my RSS feed. Finally, consider sharing this article, or any other article you particularly enjoyed here, to Facebook, Twitter (follow me @danielckoontz!) or to bookmarking sites like reddit, digg or stumbleupon. I'm deeply grateful to my readers for their ongoing support.

Four Incredibly Useful Books on Fallacy and Cognitive Bias

Readers, this is a somewhat off-topic post... that is, if you think the food industry and the various writers and bloggers who comment on it are somehow immune to bias and fallacy.
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The idea for this post came from a conversation with a friend who writes an insightful blog about abusive relationships (thanks, Taz, for all you do!). It's a list of helpful and highly readable books to help you identify and eliminate biases, fallacies and mental blind spots.

We’ve all got 'em. Might as well learn about them, understand them--and limit the damage they do.


You Are Not So Smart
This book will make you conversant in nearly every form of cognitive bias. Better still, you’ll also be conversant in a memorable (and sometimes hilarious) experiment or study demonstrating each cognitive bias. Why is knowing these amusing studies important? So that when you catch someone in an act of cognitive bias you can quickly tell them about the study before they throw something at you. This book was so helpful to me that I took eight full pages of notes from it. Also, see author David McRaney’s follow-up book You Are Now Less Dumb.



Stumbling on Happiness
You'll never trust your memory nor any of your predictions after reading this book (believe it or not, this is a good thing!). Particularly useful is author Dan Gilbert's insightful discussion of how we misperceive what we will value in the future--an insight with gigantic ramifications today for our health, wealth and happiness. Gilbert is an excellent writer, and he shares an astonishing amount of insight and knowledge about how our memories are fallible in sneaky yet predictable ways.



The Invisible Gorilla
An extraordinarily useful book that will teach you the illusions and paradoxes of human perception and cognition. The easiest read on today’s list.



Fooled by Randomness
If there’s any area where our cognitive frailties can be truly costly, it’s in our saving, spending and investing decisions. You’ll save yourself a lot of heartache and a lot of lost future investment money if you carefully read this book, which discusses the illusions of "great" investment performance and how luck and skill in investing are usually indistinguishable. See also Nicholas Taleb’s follow-up work The Black Swan and his most recent book Antifragile. All three of these books will change how you think.



Being Wrong
The granddaddy of all the books on this list, in my opinion, is Kathryn Schulz's brilliant book Being Wrong. It's an exploration of the fundamental nature of human error via history, philosophy, psychology and even the investment world. This was one of the most unexpectedly fascinating and provocative books I’ve read in years, and I find myself recommending it constantly.



[Unrelated bizarre sidenote: The authors of Being Wrong, Fooled By Randomness and The Invisible Gorilla were all--weirdly--plagiarized by the same man!]

Which brings me to my final point: Why am I talking about bias, fallacy and cognitive blind spots in a food blog? Well, to start with, if you think this isn't a place where we should seek to counteract our biases, well... you're biased. But let me ask: have you ever...

...wondered if Big Food is out to get us?
...concluded (uh, falsely) that healthy food has to be expensive or time-consuming?
...made lousy dietary choices, and then rationalized those choices afterward?
...assumed we could fix complex problems like obesity if we could just figure out whom or what to tax?
...decided that you’d be helping the world if you (and everyone else) ate 100% local?
...concluded that some people are just "lucky" or have "good genes" in order to justify your own personal health, weight and dietary miscues?
...underestimated the true capabilities of your body and your mind?

If you don't think your cognitive biases play a deceptive role in each of the questions above, you're... in denial. :)


Related Posts:
Never From Concentrate? Never Again
A Fund For... Who, Exactly? Addressing the "A Fund For Jennie" Controversy
How to Defeat the Retail Industry's Ninja Mind Tricks
On Spice Fade, And the Utter Insanity of Throwing Spices Out After Six Months


How can I support Casual Kitchen?
Easy. Do all your shopping at Amazon.com via the links on this site! You can also link to me or subscribe to my RSS feed. Finally, consider sharing this article, or any other article you particularly enjoyed here, to Facebook, Twitter (follow me @danielckoontz!) or to bookmarking sites like reddit, digg or stumbleupon. I'm deeply grateful to my readers for their ongoing support.

Retail Ninja Mind Tricks: Conclusions

Readers: this post wraps up my monster series on consumerism and the retail industry. I hope you've enjoyed it, and as always I live for your thoughts, comments and feedback.
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By now it should be painfully clear how our psychological biases can be exploited by the consumer products industry to get us to buy things we don't want or need. Look, if Budweiser can get us to associate bad beer with hot girls in bikinis, then--seriously--what can't they do? :)

And yes, plenty of companies make a living by taking advantage of our various cognitive foibles and blindspots. But let me make one point perfectly clear: I refuse to let my my readers wring their hands, whine, whimper, mewl, bitch, complain, shake their fists, or participate in any other acts of personal disempowerment because of the supposed power of the retail industry. I've made this statement many times here on this blog, but it bears repeating: Do not give your power away like that.

Instead, take action. Share this post series with others, start conversations about this subject, and educate the people around you about these concepts. Use your power.

Remember, no industry controls consumers. Instead, the exact opposite is true: We control all industries by deciding where and when we choose to spend our money. It is the height of disempowered hypocrisy for us to to complain about the consumer products industry when it merely sells us the products we consent to buy.

Again, don't give your power away. Instead, learn the game. Understand how things work--and that includes understanding how your own mind works. Be mindful of the mental foibles we have as consumers, and be even more mindful of how companies use those foibles to get us to buy more stuff.

For those readers perceptive enough to recognize their own psychological tendencies, what examples of psychological bias have affected your consumption and purchasing decisions in the past? Share in the comments so other readers can learn from your experiences!

I owe an enormous debt of thanks to Dan Gilbert's exceptional book Stumbling on Happiness, Nick Taleb's books Fooled by Randomness and The Black Swan and Tal Ben-Shahar's book Happier for prompting me to think about many of the issues described in this series of posts.


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

Retail Ninja Mind Trick #7: False Urgency

We enable the retail industry to create a false sense of urgency in our minds. It separates us from our money.

Today's post covers what is probably the most effective and subversive of all the ninja mind tricks consumers face. When retailers create a sense of urgency, bad things almost always happen.

To us, that is.

A few preliminary words on the semantics of the word "urgency"--after all, urgency isn't always a bad thing. If I'm gushing blood out of my carotid arteries, urgency can be a really good thing if it gets me in front of a competent ER doctor in time. Less dramatically, if I'm 100 pounds overweight and suffering health complications because of it, urgency here is yet another positive if it calls me to action to change my lifestyle.

However, when urgency is imposed on us in the retail world--especially in big-ticket retail--it usually calls us to action to buy things we don't need.

But why? Why place consumers in stressful, seemingly urgent situations?

Well, if there were no sense of urgency to buy things right now, hardly anybody would buy anything. Duh. The numbers are pretty compelling: if you have a customer who walks into your store, looks over your merchandise, and then leaves, the odds of him or her coming back and buying anything are practically zero.

And that's why salespeople will often start cutting deals the minute you make for the door.

Okay then. Right off the bat we've got one weapon that any empowered consumer can use to his or her advantage: get up and leave.

At best, you'll give yourself time to think through and decide if your purchase is really worth it--and save yourself from catching a whopping case of buyer's remorse afterwords. At worst, you'll unlock quick discounts from a salesperson who's scared you might walk out that door and disappear forever.

A related thought: What about those cheesy call-to-action phrases like "Hurry! Sale ends tomorrow!" or "Act fast--supplies are limited!" Modern, sophisticated consumers would never obey phony-sounding phrases like that, right? Those cliches can't possibly work on us any more, could they?

But then again, we consumers still do things like sleep out overnight to get our hands on the new iPhone. And we spend hundreds of millions of dollars after watching time-sensitive infomercials for things like Carleton Sheets' No Down Payment and P90X exercise DVDs.

Why? Essentially, because those phrases--as cheesy as they seem--still work. And the best retailers combine these phrases with other urgency-creating techniques (like creating the appearance of shortages, or simulating urgency with various discounting and couponing strategies and use other subtle techniques) to get us to buy. Now.

Rest assured, you are regularly tricked into feeling a false sense of urgency by many different types of industries, in many different circumstances.

Here's an idea. The next time you are about to make a big purchase... get up and leave. Give yourself time and space to think about it for a day or a month. Or a year. Defy the urgency. Remember, it's not like you're bleeding from your carotid arteries. If you still want the item, you can still buy it. Later. That car, boat, house, timeshare or Faberge egg will still be there waiting for you, right where you left it. And the price will probably still be the same. If not lower.

And the next time you see a sale about to end, or you're facing what seems to be an "opportunity" to make a big-ticket purchase at a seemingly temporary "sale" price, try this experiment: Let the sale end. Let some time pass, and again, if you still want the item, ask the salesperson or the manager to give you the discounted sale price.

You'll be shocked at how that sale didn't really end when you thought it ended.

Score one for the consumer.

Readers, what are your thoughts and reactions?

Next up: Conclusions


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

Retail Ninja Mind Trick #6: Rationalization and Justification

We rationalize and justify our purchases and our money mistakes without realizing it. The bigger the mistake, the more we rationalize it.

Look, we humans make lots of mistakes. Big ones, dumb ones--and once in a while, really big AND really dumb ones.

And, frankly, if we didn't make some effort to explain away our biggest, dumbest mistakes, our fragile psyches would collapse in the face of our profoundest stupidities. Even the most iron-willed of us would curl up into little balls and never leave the house.

That's just no way to live.

Fortunately, our brains have figured out how to make us feel better by using an entire bag of psychological tricks to help us play down--or even hide--all the dumb things we do.

And that's why that Soloflex machine we bought in a burst of optimism and fifteen easy payments of $99! somehow ends up collecting dust in a hard-to-see corner in our basement. Hey, who wants a daily reminder of both our waste and our laziness?

And that's why we convincingly tell our neighbors how much we love having that pool in our backyard, despite the hundreds of hours and thousands of dollars we spend each year maintaining it. Do we vividly remember that we only used it twice last year? Nope, not if we can help it. Instead, we'll vividly remember that it was an "investment" to improve the value of our home.

Of course there's a more pernicious form of rationalization/justification, in which we blame the government, "the system," George Bush, Alan Greenspan, Goldman Sachs--essentially anybody but ourselves--in order to protect our egos. Because that second home we bought at the top of the real estate market couldn't really be our fault.

Now, let's be fair: rationalization and justification have their advantages too. For one thing, they help keep the suicide rate below 100%.

The problem is, they also prevent us from accepting and learning from our mistakes. It's a whole lot easier to rationalize something than it is is to deeply grasp that we've committed a soul-shattering waste of time and money. And thus we fail to protect ourselves from our next gigantic dumb mistake, because we cannot learn from mistakes we rationalize away.

Here's the bottom line. When it comes to buying stuff, rationalization and justification are incredibly useful to the companies selling to us. Hey, if we keep making the same expensive mistakes over and over again, it keeps plenty of companies flush with plenty of our hard-earned money.

A few hints on handling this particular bias. First of all, just be sure to be very, very careful with all of your big-ticket purchases. Always remember one of the ugliest truths of psychology: the bigger the mistake, the more skillfully we'll rationalize it.

Therefore, reframe how you think about big-ticket purchases. Consider them mistakes until proven otherwise. Defer all of your big-ticket purchases until you are really sure you need and want them. Take some time to really roll them over in your mind, and to examine the emotions running underneath. Are you "too" excited to buy? Are events moving along where you think you or your significant other are getting pushed along towards buying something that you're not quite sure about?

You are completely within your rights to say "no," or "not yet" to any big-ticket spending decision. It's your money--you have the right to take as much time as you need. We'll go deeper into this in our next post.

Next up: False Urgency


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

Retail Ninja Mind Trick #5: Value and Discounting Biases

We are notoriously bad at estimating the value of things in the future, especially in the distant future. Also: Anybody who's ever purchased an extended warranty should re-read this post twice.

Back in the 1800s when I was a wide-eyed finance student getting my MBA at Columbia University, we had a surprisingly cute economics professor who one day in class held up a check for $100. She told us that this check was dated one year in the future, and that she was selling this future-dated check to whichever student made the highest bid.

For a few minutes we all sat there in confused silence, until I broke the spell and bid ten bucks.

Soon afterward, several other students caught on and I was quickly outbid. The bidding went to $40, $50, $75, $85, $90, $95... and finally one guy in our class idiotically bid $99 cash for a $100 check that he might get next year.

I think that guy later went on to work in mortgage-backed securities.

Okay, what's the point? The point is that money paid in the future is worth a lot less than money in your hot little hands today. It should also go without saying that a mere promise to pay you money in the future is worth hella lot less.

All of this explains why the insurance industry--which is in the business of taking money from you today in exchange for a promise to pay you if you experience a loss in the distant future--is hilariously profitable.

And yet insurance seems like such a mathematical, quantitatively-driven product, doesn't it? "I'd like one million dollars in life insurance coverage. How much will it cost?" And the friendly agent checks the book, quotes you a price and helpfully offers you a whole suite of investment products that he can wrap around his policy. All of which are designed to help "protect" you from what is really a highly emotional situation... triggered by the fear of your own death.

An extended warranty is just another form of insurance. The product you buy--whether it's a DVD player, a car or a that brand new blimp you've always wanted--will have some form of warranty already offered by the manufacturers. After all, they want to at least try and convince you that their product isn't defective right out of the gate. So you might get a three-year warranty on your car automatically. But then the dealer wants to sell you extended warranty coverage. He wants to sell you protection that doesn't even begin until year 4. And he wants in exchange a lump sum payment now.

Did you know that extended warranties are among the most profitable products sold at Best Buy? That a good conversion rate for extended warranty sales can have an enormous impact on an auto dealer's profitability?

What does this imply about the value you get as the consumer on the other side of this trade?

If you are ever asked to enter into an exchange of your money today in return for a promise of some amount of money in the future, be very very careful. You are most likely egregiously overpaying.

That's why I only bid $10 for my cute professor's check.

Next up: Rationalization and Justification


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

Retail Ninja Mind Trick #4: Habituation

Most of our purchases are mindless and habit-based rather than mindful and considered. Therefore, branded products companies know that once they've got us habitually buying their products, well, they've got us.

In prior posts here at Casual Kitchen, I've talked about how easy it is for consumers to settle into buying a specific brand of each of the various products they use.

And it's totally okay to settle into some habitual purchasing decisions. Honestly, if we spent time deeply considering every purchase, we'd never make it out of the grocery store. I'd still be in there deciding between 45 brands of shampoo. And I don't even have that much hair.

The problem is, if we are too habit-based, the company behind that brand can easily take advantage of us. They can put in stealth price hikes that we don't notice. They can gradually raise the price of their brand until it reaches a premium far beyond what it's really worth. Heck, they can stop making their product entirely and choose to outsource that product to the same factory that makes the nearly identical generic brand sitting next to it on the store shelf.

Over the course of a lifetime, a pattern of habitual and passive purchasing decisions will needlessly separate us from thousands (perhaps tens of thousands) of our hard-earned dollars. That's why from time to time it's an excellent practice to reconsider the value of each of the brands you buy. An empowered consumer will occasionally look over the prices of competing products--including store brands--and ask: does the brand I normally buy provide value to me commensurate with any premium in price?

If it doesn't, you know exactly what to do: Drop that brand instantly.

One final thought: the laughably pretentious assumption that certain brands "say something about us" is just another form of habituation. It is also, coincidentally, deeply in the interests of consumer products companies for us to think this way.

After all, being pretentious can be habit-forming too.

Next up: Value and Discounting Biases


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

Retail Ninja Mind Trick #3: False Comparisons and False Expertise

When making major purchases, we often make false comparisons or fixate on irrelevant details and distinctions.

Imagine wandering into your local Best Buy to look at new televisions. What information will help you make the best decision?

Well, once you're in the store, there's an entire encyclopedic universe of things to know: Plasma, LCD, or projection? Which aspect ratio should I pick? What resolution do I need? Is the 70-inch screen best, or should I go big-time and get the 126-incher? Is the contrast ratio going to be high enough? The store's incredibly helpful salespeople will patiently answer all of our questions and share all sorts of information.

But this is all proxy information, obscuring a much more important fact that is completely counter to your interests as a consumer. No one in this store is going to help you decide whether to buy a TV.

Instead, we learn about differences that make no difference. The salesperson can tell us about some quantum color adjustment feature that makes the Panasonic TV's picture better than the Sony's picture. We never knew this difference existed, and quite frankly it matters only in a direct side-by-side comparison in the store. And of course once we get our new TV into our living room, any specific visual memory we might have of that difference will fade, replaced by vague self-reinforcing thoughts like, "Oh, yeah, the picture on the Panasonic was way better."

And yet this might very well be the key deciding factor on which TV we choose. Hey, it seemed really important at the time.

Buried in here is the fact that all these seemingly important distinctions displace questions that actually are important: Do I really need a new TV in the first place? Is this TV really going to be that much better than the three TVs I already own? Or most fundamentally of all: Does watching TV at all add any value to my life?

One final point. If you:

1) fancy yourself an expert on the subtleties of large screen TVs,
2) deeply understand the various moisture-wicking properties of Under Armour vs. Nike vs. lululemon sportwear,
3) are conversant in the key distinctions between iPhones, Blackberrys and Droids,
4) have an intimate understanding of whether oak, bamboo, cork or vinyl is a superior flooring material,
5) have mastered the use of the iPad and all of its subtleties,
etc.,
etc.,
etc.,

Then I have question for you:

Are these things that you know actually important?

Nope. Instead, an entire universe of knowledge has been created for you--in order to make you more ignorant.

Next up: Habituation


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

Retail Ninja Mind Trick #2: Hedonic Adjustment

Once you "get used" to luxury products and luxury brands, you're finished. Also, our joy in new purchases quickly wears off.

When I was growing up, I used to think that Hershey's chocolate was good stuff. Of course, once I discovered Lindt dark chocolate, well, the rest was history. I never went back.

Likewise, once I discovered Ben & Jerry's ice cream, I just couldn't go back to that old Sealtest brand my family ate back when I was a kid.

Now, most of you would argue that the incremental costs of good chocolate and good ice cream are minimal, and it's worth it to pay up for good stuff. I suspect most of you would also qualify that statement by saying "it's worth it--up to a point."

Which brings us to big-ticket and huge-ticket items. A simple and particularly expensive example: The difference between a high-end car and a regular, good-quality Honda can mean tens of thousands of dollars' worth of incremental payments over that car's loan period. And if you start buying high-end luxury cars early on in your life, you'll most likely "never go back"--just like I never went back to Sealtest ice cream.

Therefore, practicing this particular form of hedonic adjustment over the course of your entire driving life can mean pissing away several hundred thousand dollars.

That's why I feel pity and compassion when I see a twenty-something driving an expensive car. A young person who's hedonically adjusted to a high-end car will never be able to backtrack. To him, the idea of driving a Honda for seven years instead of leasing a new BMW every 24 months would be laughable. And vaguely humiliating.

And it should be no surprise that this bias plays right into the hands of the auto industry--and it will separate this poor kid from a substantial portion of his life's personal wealth.

It gets worse. The pleasure we get from making new purchases tends to wear off very quickly. Which, conveniently, makes us want to buy still more stuff. Thus not only has our hypothetical BMW driver hedonically adjusted to his high-quality car, he's also hedonically adjusted to the idea of paying for a new one on a regular basis.

And he doesn't know it yet, but he's also adjusting to an entire universe of other expensive purchases that he'll need to make in order to have an internally consistent lifestyle. An automotive Diderot Effect, if you will.

Normally, I'd encourage readers to reconsider the nature of the "happiness" they get from many of these purchases in the first place. You know intellectually that it's not real happiness, and you know, thanks to hedonic adjustment, that it can't last. So why do we make these purchases in the first place?

It's easy for CK readers to think through this question carefully and consistently, because they value their wallets over voracious consumerism. But have you talked about this subject with normal, regular people? These questions and these ideas draw at best uncomprehending stares--and at worst viscerally negative reactions. Quite frankly, it's a question the average person can't really process.

Why? Because--once again--buried deeply within these ideas is a tacit understanding that the traditional, modern, urbane consumerist life is fundamentally... empty.

Nobody likes being told they live a fundamentally empty life. Yeah. Better not think about that. Hey, why not go buy a little something to brighten my day instead?

Next up: False Comparisons and False Expertise


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

Retail Ninja Mind Trick #1: Association

Retailers create powerful and artificial associations for us--without us even knowing it.

Why do 50-something men buy red sports cars? Why do 30-something women buy $1,000 pairs of shoes? And why do teenagers demand a specific brand of clothes and refuse to wear anything else?

Because these products and these brands somehow make us feel a certain way. A red sports car symbolizes youth, vitality and hair. A pair of $1,000 shoes symbolizes sexiness, strength--and bunion surgery. A certain brand of jeans can be the difference between a teenager sitting with the cool kids and sitting with the band geeks (extra credit for any reader who can guess which group I sat with).

But why do these things carry powerful associations? They're just things, right? How is that they can make us feel anything?

Well, partly, it's because life as we know it is kind of ... empty. We have to work really hard to make life meaningful, and because most of us spend almost all of our time looking after our stuff, our careers, our mortgages and our kids, there's so little time left over that many of us find ourselves taking shortcuts to a meaningful and happy life. So we buy things that represent "meaning" to us.

But here's the thing: who decides these associations? Who creates them and who gives them meaning--to the point where people will even choose their friends based on a brand of pants?

Hint: if you actually think you decide, you're already doomed. Don't bother reading any more of this series.

Next up: Hedonic Adjustment


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!

How to Defeat the Retail Industry's Ninja Mind Tricks

If there's one truth about humanity, it's this: we are products of cognitive and psychological bias. And our biases often trip up our minds in unexpected and costly ways.

And it's funny: by some odd coincidence, certain industries--namely, the retail industry, the consumer products industry and the food industry--have become exceptionally skilled at using our own worst biases against us.

It turns out that this highly convenient "coincidence" not only affects our consumption decisions, it also directly affects our financial wealth, our perceived status among our peers, even our personal happiness and satisfaction with our lives.

If we let it, of course.

That's why empowered consumers must have some working knowledge of the most common forms of cognitive and psychological bias. More importantly, we should also understand exactly how these biases are used by marketers and advertisers when they sell us the stuff we buy.

As consumers, we have an obligation to fight back and think for ourselves, rather than allow ourselves to be misled. And in this upcoming post series, I'm going to walk through several of the most important biases we face as consumers. Biases that cause us to spend more of our hard-earned money than we want to, that cause us to misjudge value, or that cause us to take action when we shouldn't.

A quick side-note to readers: This post was originally a 4,000-word monstrosity that would have shattered all records at Casual Kitchen for post length. That was before I decided to have mercy on my readers and break it down into a multi-part series. Just be warned that for the next couple of weeks the post frequency will increase to two articles a week, with a new post running every Tuesday and an extra post on Wednesday. As always, I live for your comments and feedback.

Finally, I invite you to share how you've learned to counteract each of the biases we discuss. What ideas and solutions work best for you? By sharing your thoughts on any of the upcoming posts, you too can help the thousands of readers here at CK become more savvy and more aware consumers.

Tomorrow I'll start with a brief post on the most subversive (and expensive) bias of all: Association.

Finally, here's the entire archive of articles in this series:

Retail Ninja Mind Trick #1: Association
Retail Ninja Mind Trick #2: Hedonic Adjustment
Retail Ninja Mind Trick #3: False Comparisons and False Expertise
Retail Ninja Mind Trick #4: Habituation
Retail Ninja Mind Trick #5: Value and Discounting Biases
Retail Ninja Mind Trick #6: Rationalization and Justification
Retail Ninja Mind Trick #7: False Urgency
Retail Ninja Mind Tricks: Conclusions


How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!