Hope things are well. At this time all you are supposed to do is eat, crap and sleep, thats it, nothing more nothing less. Daddy and Mommy are really happy that you are here. These are your formative growing years so how about we start with some lessons on behavior.
Most humans have what we call cognitive biases, these were great things when we were evolving from animals, but cripple us today. A lot of research is now being done on this topic and marketers have made a fortune using these biases to make money of you. So its a good idea to understand what these are and how to counter. We will talk about two big ones today, Confirmation Bias and Loss aversion.
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<Disclaimer>This is going to a wonkish post. More of a brain dump on a few interesting ideas in my head, not fully flushed out by any means!</Disclaimer>
I’ve been really intrigued by the “Beyond Scarcity” series by Izabella Kaminska over at FT alphaville. The main thrust of the theory is that humanity has a certain set of needs like food, shelter, security and consumable goods i.e has a level of consumption. Throughout history there has been a scarcity of these items and mankind furiously progressed to make these items available. To grease this production of these items the concept of “money” was invented. Money facilitates the exchange of these goods better than the barter system.This is also why we have entreunpership. There was opportunity to provide humanity with things that it needed in a productive way and earn some “money”. The general public now also had to “earn money” to buy goods. Thus now everybody had to have a “job” and had to work for a living. This general model now caused money to have a positive time value and it itself became an appreciating good. Money had to grow and therein came the concept of interest and the expectation that money should always grow in value. The flip side was the concept of inflation. Since we were still in a scarcity environment, even as more goods started coming to market, demand was still high so prices rose and inflation came into being. Also as money kept getting interest and growing in quantity, there was more money chasing fewer goods, again leading to the concept of inflation. So the need for certain goods and the scarcity of those goods, has what led to mankind creating the concepts of money, interest and inflation.Read More »