I was watching a video on one of my favorite websites, TED. In case you don’t know what the site is about, really smart people are invited to share a topic of interest and it has to be under 20 minutes.
The speaker was Laurie Santos and her topic was Monkeynomics. Through her research she discovered that we share many of our traits with monkeys, capuchin monkeys to be exact. It seems that we make the same mistakes over and over again as consumers. What’s worse, these errors are predictable and measurable.
Her point was that while we can create the most incredibly complex things – such as our economic model, financial markets and mortgages – we can’t seem to make them work any better than they do or simplify them, even though we know they need to be fixed. Her theory was that while we’re the smartest creatures on the earth, we may be defective. Primitively defective. Monkey defective.
And hence, the birth of Monkeynomics.
The experiment is very cool. She taught monkeys how to use currency. It was a simple thing really. When the monkey handed a token over to a researcher, they got food. We do it every day at restaurants and supermarkets.
At the “monkeymarket,” the monkeys could buy food from two different vendors. One would give them more food, the other less. They got really good at understanding the value of the tokens, even to the point of stealing monkey money from one another.
Then the researchers messed with the experiment. They would have one of the salesmen show the monkey three grapes, but when the monkey handed over the money, he would sometimes get three, other times he’d get just one. And even though the monkey would get cheated, he would still take the risk that he would get three the next time and would choose the same shady vendor.
If you have 20 minutes to kill, I recommend watching this presentation and the ensuing experiment because we’re exactly like the monkeys.
It seems we make the same mistakes as they do in the marketplace. And it all has to do with our relative understanding of risk, something our primitive little primates have, too.
Here’s the example she used. Say you are given $1,000, cash. Now you can flip a coin and perhaps get $1,000 more if it comes up heads. If it’s tails, you get nothing. If you don’t flip the coin, you will get $500 more. Most people will choose not to flip and pocket the $1,500.
Now, the stakes are offered differently. This time you get $2,000. Only this time you’re going to be deciding how much money you’re going to lose, not gain. If it comes up heads, you lose everything. If it comes up tails, you get to keep the $2,000. Double or nothing. If you don’t flip, you have to hand back $500. Oddly, most people choose to flip the coin even though the outcome by not flipping is the same in both scenarios: You get $1,500 either way.
This is known as loss aversion. We don’t like to lose money, even if it’s a perceived loss. It’s the reason why we won’t sell off a losing stock or a home that has lost its value. We assess things in relative terms, not in absolute terms. So do the monkeys.
Now, we could feel really bad about this, knowing that our stupid investment and purchasing decisions go back some 35 million years.That’s why we still make the same mistakes over and over again, because we’re wired that way.
I don’t know about you, but Monkeynomics has been extremely freeing for me. I have made several mistakes over and over again in my life. I know they are bad decisions, and yet I still make them.
But at least now I know that I am wired that way. My “monkey brain” that’s rooted 35 milllion years in the past is going to defeat me at every turn. Even if I can conjure up all the logic humans have acquired since, I’m going to end up giving my monkey money to some guy holding out three grapes, be pissed off when I get just one, and still go back to him time after time in the hopes that perhaps one day, I’ll get the three grapes I was promised.
I know, small comfort. I’ve been dishing out monkey tokens now for the better part of five decades and I’m still getting screwed in the grape category. And in personal relationships, too. There I am, with my feeble monkey brain, deciding to whisk myself off on one foolish adventure after another hoping I’ll finally get a good deal. Sometimes I even luck out and get all the grapes. But after awhile, they seem to turn into shriveled up raisins. Sigh.
But still I’ll lay those monkey tokens down. I’m risk averse, to be sure, but I’ll go head to head with any capuchin out there and show him that I can make far better decisions than he ever can. Bring on the monkeynomics, Laurie. I’m ready.
What? They’re going to start offering wine for monkey tokens?
I’m all in then again. That’s certainly a far better use of monkey tokens and grapes.
Somewhere on the Treasure Coast, waiting for today’s feeding,
– Robb