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• The Truth about Relativity Why Everything Is Relative - Even When It

• Shouldn't Be

• So imagine you're walking around the store looking at things,

• and you see a bread maker. There's only one bread maker, and it costs

• \$99. And You look at it and then move on to other

• things.

• This was a huge problem for a bread maker company.

• People weren't buying, so they decided to do something clever.

• They came out with another more expensive bread maker

• so that they could start selling the less expensive one.

• So how did that work?

• Well, now you walked around the store, came across bread makers,

• and you saw one for \$99 and another one for \$199.

• And all of a sudden, there was something to compare it to,

• the \$99 bread maker became much more attractive, and people started to buy.

• This is the power of relativity. We have no idea about how much things should

• cost. Should a bread maker cost \$49, \$99, \$199?

• I mean who knows?! Wine companies, along with restaurants,

• and many other establishments know this really well.

• Most people have no idea about wine. If you're like most people,

• you wouldn't be able to tell any difference between a \$10 wine and a \$35 wine in a blind

• test.

• So because of this, relativity is one of the most powerful tools.

• If you're the buyer, do you want to buy the wine that costs \$10

• or \$35? You know you won't be able to tell the difference

• if you're like most people, but hey, look,

• there's also one for \$70, so I'm gonna go ahead and grab the \$35 wine.

• That is literally how most people make the decision

• on what to buy.

• And this has huge implications if you're selling as well.

• Let's say I wanted to sell you an educational product I made for \$49.

• Now who knows what a product like that should cost?

• I mean seriously... But what if I put it in perspective for you?

• What if I tell you... If you live in North America,

• that translates to going out and eating twice at a mediocre restaurant.

• Do you think it's worth it to give up eating out those two times,

• so you can buy a product that really has the potential

• to make your life a lot better? And I could actually do this really well,

• and I don't even have to lie to you about anything either,

• I can be super honest about it. But the difference is that I've put it in

• perspective for you now, and you're much more likely to buy.

• The Cost of Zero Cost Why We Often Pay Too Much When We Pay Nothing

• Alright, let's be honest... How much pleasure do you derive from Amazon's

• Free! shipping? Me personally, I absolutely love it.

• I love when something is shipped to me for free.

• If you're final came out to \$62 and you had to pay \$6 for shipping,

• and if your final came out to \$68 and shipping was Free!,

• most people are going to be much happier, or what economists call deriving more utility,

• with the second purchase.

• Now that's crazy but there's something about Free!,

• that we're just wired to absolutely love . Perhaps, it's loss aversion that I talked

• about in my last video. When you pay \$5 for something,

• there's a chance that you made a bad decision, so there is a downside to it.

• You might get home and be sad that you didn't make the right choice.

• But what happens in the case of free stuff is that it seems like there's no downside,

• especially by the standards of System 1, which again I discussed in my last video.

• If you get home, and the product sucks, your brain will say,

• "Well, whatever... I got it for free anyway."

• But what if what you got is Ben and Jerry's ice cream,

• that you waited 2 hours for just like a lot of people do?

• Your System 1 will still say, "Well, whatever... I don't like this flavor

• but it's not like I paid for it." But you did,

• and you paid a lot! 2 hours of your time for a \$3 item?

• Come on! You're valuing your time at \$1.50/per hour.

• At least go for the minimum wage.

• So there are huge implications to understanding our love for

• quote unquote FREE! stuff whether you're the buyer or the seller.

• You can dramatically diminish your irrational behavior as a buyer,

• and you can sell a lot more as a seller.

• The Cost of Social Norms Why We Are Happy to Do Things,

• but Not When We Are Paid to Do Them

• Imagine I'm your neighbor and I need help with my car,

• and you're walking by and you offer to help. Now imagine I tell you thank you

• and I offer you \$5 when you're done helping me.

• That will make you angry and pissed off. "What the hell?"

• Now here's the thing... From a traditional economic perspective,

• \$5 is much better than \$0, but we're confusing market norms with social

• norms.

• I could offer you a \$1000 to help me, and you will gladly help.

• I could ask you as a human being in need, and you will also help.

• But as soon as I pay you \$5, I've messed everything up.

• Now this has huge implications. Dan Ariely has a great example of lawyers.

• They were asked to offer services at a discounted price of \$30

• to a group of people in need, and they all rejected.

• Then they were asked to offer services for completely free

• as a decent and a charitable thing to do and most of them agreed.

• This is the problem that we face today. You don't want to offer the \$30 to the people

• that you're leading. You either want to offer the real wage

• and meet the market norms, or you want offer something congruent with

• social norms. And I think utilizing these social norms

• can have really efficient, amazing effects, but at the same time,

• even large corporations don't quite clearly understand

• this distinction. Instead of appreciating

• the person's dedication to helping fix the car,

• they offer the \$5 incentive.

• The Problem of Procrastination and Self-Control Why We Can't Make Ourselves Do

• What We Want to Do

• So Dan Ariely had a class where three papers were due

• by the end of the semester, and also a class where the three papers were

• spread out with three deadlines at 4 weeks, 8 weeks,

• and 12 weeks.

• Now there was more to this study, but to keep it simple,

• let's look at the results. The class with no deadlines did much worse

• than the class with the deadlines spread out throughout

• the semester.

• Now, two huge takeaways here... One...

• I know a lot of people who are working on a project

• or a new business or whatever you want to accomplish,

• and they don't have any set deadlines. And if you do this, you're pretty much guaranteed

• to fail.

• You don't want to be one of those people. A lot of times in life,

• you won't have a teacher who will set the deadlines for you,

• but you have to set artificial deadlines for yourself.

• This is absolutely crucial!

• One of the things that I've done with these videos

• is taking it from having no deadlines whatsoever, to having a video that has to be ready for

• rendering every Tuesday, Thursday, and Saturday before I go

• to bed. I've stayed up till 6 in the morning sometimes

• because I can't go to sleep unless the videos are ready.

• And for over a month now, I've always had a video ready

• for final rendering before I go to sleep.

• So this has obviously worked really well, but if I was still struggling with it,

• I would put some really unpleasant punishments in place,

• just like having points taken off if the paper is late,

• and just like how doctors offer paying an extra \$200 up front to patients

• that will be deposited back into their bank account

• if they show up for their colonoscopy or whatever, and a lot patients actually agree to it

• because they know they will be forced to show up

• and do the right thing for their health.

• So if I were struggling with meeting my artificial deadlines,

• imagine how effective it would be setting up a \$500 punishment,

• where if I don't have a video rendering in my computer

• before I go to sleep, I have to pay \$500 to a charity

• that I absolutely hate. Well I can guarantee you,

• I would do anything and always have it ready just so that wouldn't happen.

• And there are so many aspects to procrastination, which I will probably address at some point

• in maybe a quote unquote ultimate guide to it or whatever,

• but this particular part is a huge part.

• So again, One... Set up artificial deadlines.

• Two... If you're not meeting them, set up some really unpleasant punishments,

• and I will guarantee you that you will meet them.

• I had a friend a few years ago who had major trouble

• approaching girls that he liked. So I took him out one time and got him to

• agree to give me a \$100 that I would keep for myself

• unless he approached every girl that I told him to approach.

• The result... He approached every single girl,

• even if the interactions were possibly the most awkward thing

• I have ever seen. But, fast forward a few years later now,

• and he's better at it than almost any other guy I know.

The Truth about Relativity Why Everything Is Relative - Even When It

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# PREDICTABLY IRRATIONAL BY DAN ARIELY | ANIMATED BOOK REVIEW

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VoiceTube posted on 2016/07/03
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