

Why people believe weird things about money - kirubakaran
http://www.latimes.com/news/opinion/la-op-schermer13jan13,0,1195880.story?coll=la-opinion-rightrail

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imsteve
> Assume for the moment that prices of goods and services will stay the same.

Assuming that your popularity, social power, and possibly getting laid a whole
lot less are worth nothing to you? The question fails to capture total value,
it seems.

Still a very interesting topic. People reason about money in strange ass ways.

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mynameishere
_popularity, social power, and possibly getting laid_

As you suggest, these things are gotten from relative and not absolute wealth.
If I make 50,000 dollars in an area where everyone makes 25,000, I am
extremely wealthy, and can name my price for the important things in life. I
wonder how the "researchers" missed that point.

~~~
vitaminj
There's an argument that in the strict sense, everyone is rational because
they are all maximising some utility - it just isn't clear what that utility
is, eg. money, sex, power, the satisfaction of having a well ironed shirt, it
could be anything really.

Which is why this definition of rationality isn't very practical. In the
traditional economic sense, rationality means maximimising money. With this
narrow definition (and big assumption), the economic equations become
tractable and can actually be analysed. Of course this doesn't represent
reality. Going back to Kahneman and Tversky with their study on decision-
making under risk (probably even further back than them since this is pretty
obvious), psychologists have shown that humans aren't very rational.

But economists still tend to rely on this assumption so that the game theory
equations work. Having said that though, I'm not sure whether or not this
assumption holds (at least reasonably well) in the macro sense.

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ojbyrne
Putting it into a more emotionally charged version for us all - you can do a
startup on your own and sell it for $1 million. Or you can be partners with
someone who will do no work and take all the credit, but then the company will
sell for $110 million, of which you will get 1% or $1.1 million. It's the VC
value proposition ;-)

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marvin
I'd much rather have the last option - being an employee is less stressful and
feels like a smaller responsibility than being a founder. And to top it off, I
would get paid more.

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yubrew
Loss aversion is a large reason why many of my high school and college friends
end up not doing start ups.

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noonespecial
Loss aversion is about the only reason people don't do startups! :)

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viergroupie
I know this is supposed to be a startup echo chamber, but come on...

I feel silly even contemplating spelling out the many reasons (beyond loss
aversion) why not _everyone_ starts their own company.

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randallsquared
News flash: it's not very enlightening to say that someone isn't rational
because they aren't efficient at reaching goals you would prefer they have.
You may think it's silly to want what they want, but that just means you don't
want what they want. Big deal. Goals cannot be chosen rationally unless
they're subordinate to some other goal.

~~~
__
There is a huge body of literature on cognitive biases. Under the right
conditions, people will reliably make stupid bets. For example:

"Consider a regular six-sided die with four green faces and two red faces. The
die will be rolled 20 times and the sequence of greens (G) and reds (R) will
be recorded. You are asked to select one sequence, from a set of three, and
you will win $25 if the sequence you chose appears on successive rolls of the
die. Please check the sequence of greens and reds on which you prefer to bet.

1\. RGRRR

2\. GRGRRR

3\. GRRRRR"

65% of the subjects chose 2, even though 1 provides the greatest chance of
winning money. (From "Extensional versus intuitive reasoning: The conjunction
fallacy in probability judgment," by Tversky and Kahneman.)

Maybe all those subjects had the unconventional goal of avoiding free money.
But it seems more likely that they weren't thinking well.

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randallsquared
Sure, and I've no problem with that. The article in question, though, was
suggesting that people are choosing wrong when they knowingly choose to be
poorer but happier. There was no failure to understand the problem implied --
it's just that they didn't choose the way the article author wanted them to,
and he conveyed this by calling them irrational.

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viergroupie
It's pretty well established in the psychology literature that the effects of
money on happiness are relative. You're happy (for some short time) if you
make more than you expected, and you're (often) happy if you make more than
your peers. Absolute quantity of money doesn't really do much for us humans,
and I think the "irrational" test subjects were aware of that.

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bayareaguy
Ask a stupid question, get a stupid answer.

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edw519
I've observed that inheritors are more risk averse than those who have earned
their money. This may be rational. The earners know that they can earn it
again. The inheritors know that they probably will not inherit again.

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omouse
Evolutionary psychology crap. Ugh.

~~~
Tichy
People also like to beat up (a ka vote down) people who are already lieing on
the floor (evil grin).

~~~
yters
How good is Arcs underflow checking?

