whatislove: according to behavioral finance

a mini experiment:

you’re visiting a new restaurant in town, acclaimed for their beer selection (premise 1: you love beer).

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 [or cider]

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you sit down at the bar because the wait for a table is approximately forty-three and a half minutes, and ain’t nobody got time for that. at least not tonight, not on this occasion (premise 2: you are being good-natured and not cranky about this whole thing cause life is just too short). and here, the situation branches:

scenario 1. lo and behold! you sit down at the bar, perusing the menu, and the bartender comps you half a pint of their house beer, “on tap tonight, enjoy! thanks for being such a good-natured human!” (premise 3a: it is a normal, and not a weird, thing to be served beer in halves of pints.)

now, rate your level of happy/unhappyness about this turn of events:

<– -5 (extreme dejection) — -4 — -3 — -2 — -1 — 0 (neutral) — 1 — 2 — 3 — 4 — 5 (super-elation) –>

scenario 2. lo and behold! you sit down at the bar, perusing the menu, and the bartender comps you whole a pint of their house beer, “on tap tonight, enjoy! thanks for being such a good-natured human!” and then all of a sudden, takes the pint back and dumps out half of it, leaving you with just half a pint. premise 3b: in the perfect, hypothetical world of blog experiments, somehow none of the beer is wasted but simply returns, sluuurp, back into its tap as if it never left. so basically, you don’t have to factor in “waste of beer” as you

rate your level of happy/unhappyness about this turn of events:

<– -5 (extreme dejection) — -4 — -3 — -2 — -1 — 0 (neutral) — 1 — 2 — 3 — 4 — 5 (super-elation) –>

according to the principle of loss aversion, though both scenarios leave you holding the same amount of beer, those two half-pints just don’t feel the same. it’s likely that in the second scenario, you feel the distinct, half-pint-of-beer-shaped hole in your heart, aching a bit more acutely than the half-pint-of-beer-shaped addition of happiness added. it’s the classic “glass half full vs. glass half empty” scenario. of beer.

apparently, loss aversion (like many other behavioral economics-related irrationalities) causes us to assess situations resulting in the same amount of gain/loss and perceive them differently because of the fact that we only feel half as much “happy” from gaining something than the amount of “unhappy” we feel from the loss of something we already owned. even if rationally, we know the two values of the things to be the same.

this is why  you’re compelled to sit through a movie you’re not enjoying, simply because you’re aching for those 9 bucks you dropped.

this is why people stay in bad relationships long after the good has run out, because of the fear of loss rather than the potential gain of a better love life.

this is why you’re gonna fall for that sneaky animal shelter ploy of letting you “foster” baby cats and dogs. because once you’ve experienced ownership, however brief, it’ll be harder to let go.

and because let’s face it:

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[who doesn’t want this daily reminder that you just wish you were a cat sometimes]

aaaand this is why I let myself carry items around a store until I’m all “oh no! I’m attached to this completely unnecessary but irresistibly adorable stuffed animal…guess I gotta buy it” and then blame “loss aversion” afterwards.

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[lamb the lamb, wears hipster glasses]

all this musing; thanks to a departmental project we’re all ideationing (which is a “real word”…), on behavioral finance, and all the interesting research I get to do on loss aversion. apparently, there’ve been studies on “students in a non-credit photography class at Harvard” in which one group was told to “pick your favorite; you won’t be able to change your mind later” and another group to “pick one; if you change your mind within four days, you can swap”.

and it was found that the change in “Like” with the pictures they respectively chose was +1.3 for the group that was told to pick your favorite, until death do you part and a shocking -1.8 (that’s NEGATIVE LIKE) for the group that was told that they’d be foreeevver free; okay fourdays-free to change their minds.

another similarly fascinating study: “students ranked 6 art posters” and were allowed to take home either 3rd or 4th ranked poster. 15 minutes later, they rated their chosen poster again, with group A being told that they could exchange their poster at any time within a month; group B being told that this was a final choice, no take-backs. this study, too, found that group A’s feelings about their poster choice, from before and after choosing to take it home, changed with a factor of NEGATIVE 0.07, while group B’s feelings changed with POSITIVE 0.71. and then, the students were asked which “choice” they preferred to be given — the choice to be group A (“returnable within a month! yay life, liberty, pursuit of free choices!” vs. the choice of group B (“final choice! you choose and that’s it! absolutely draconian!”), with the unsurprising result of about double the students saying that group A had it better—let us be freeeeeeee and uncommitteedddddddddddd.

essentially, this just demonstrates that loss aversion sorta works inversely, too. not only do you feel more amount of sad about losing something you’ve owned than the amount of happy you feel about gaining that same thing anew, but you also feel more warmly and fuzzily about things you already own and are committed to owning. so… not inversely, but actually exactly the same. and on top of it all, even though people think they prefer to have the opportunity to change their outcomes, these opportunities actually hinder ultimate satisfaction in their choices.

but somehow, this flipping of the coin just spoke a lot louder to me, in my researching and ideationing for this project.

it’s mind-blowing, and hopefully, empowering, and maybe it’s cause I’ve been thinking about love or something, but

this also means that, as a wise friend summarized for me:

“you choose the one you love,

but you also love the one you choose.”

there’s definitely no denying that whole “falling” piece in the mysterious equation of “falling in love,” as our movies and as our musics tell us all about. there’s magic in that stomach-bottoms-out-cause-your-face-is-so-pleasing-to-me feeling (…….or so I hear……….).

but there’s also something to say for the “in love” piece because you’ve chosen to fall for another human bean — with all his flawed and perfect bits, getting all integrated with your corresponding ones. there’s mess, and there’s complication, and there’s joy and sanctification and there’s falling cause you’re sorta letting go.

and thus concludes the story of how I ended up writing a blog post while thinking about love while thinking about behavioral finance.

mostly on a Wednesday lunch hour.

😉

[other LOVE-ly things]

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[tiny mousehole home at a not-so-tiny cidery]

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[the fullest my fridge has ever been. vday 2015]

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[my work desk, graced with one markling and two slices of birthday cake, the blue of Frozen blue]

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[oova friends who are now nova friends who remind me of how rull friendship feels]

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[klassic kollege. except 3/4 of us are no longer in college.]

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[goodwill cville on a snowy saturday morning]

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[yeah.]

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[BIG round tables, sturdy conversations, reassuring coffee around three good seesters]

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[“TEA TIME WITH MADISON YEHEAH!”]

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[“why you stop?!”

“oh I just wanted to take a picture!!”

“you scared me, I thought something was wrong!”

haha no, that’s okay mom! go back inside, it’s cold! I love you!”]

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