Pi-Consulting

Homo Sapiens is defined by rationality. Since we mutated into Homo Consumiens, economists believe we are all supposed to be even more logic-driven in our pursuit of self-interest. Really? Maybe somewhere out there super-intelligent extra-terrestrials are monitoring our eBay bids and online purchases, checking the human race for signs of innate common sense. They should perhaps not hold their breath; (or chlorine gas, or whatever it is they breathe).

Faced with rational choices, the options we humans go for can be downright weird. At the supermarket checkout, a self-described thrifty, health-conscious shopper will pat herself on the back for choosing low-fat, no-added-sugar foods at bargain prices. Yet, just as her right hand is handing her money-off coupons to the checkout girl, her left hand is impulsively scooping up a high-priced gossip magazine and a handful of sugar-filled candy bribes for her fractious kids.

Such self-contradictions follow us as we try to “save money” online. We found the book we wanted, reduced. Just as we go to hit the checkout button, up comes a message saying “You qualify for this week’s special purchase. Spend another $19 and get free shipping”. We obediently agree to an additional item that we never intended to buy, to “save” $3.99. Hmmm. Define “free”.

These examples may seem trivial and random, but in fact they are neither, according to Dan Ariely, an MIT professor of behavioral economics, and author of “Predictably Irrational: The Hidden Forces that Shape Our Decisions”. The all-too-human propensity for kidding ourselves betokens “irrational behaviors (that) are neither random nor senseless …but systematic”, says Ariely. “We make the same mistakes over and over”.

These ‘mistakes’ can be life-changing. Rationality says we should be minimizing debt, and saving for our retirement years. So why do we borrow to the hilt and spend virtually all the money we can lay our hands on? Last year, according to The New Yorker, Americans had $10.184 trillion in disposable income. They spent $10.132 of it. That’s 99.5%. Needless to say, a sizable proportion of the money went to credit card companies in late fees and interest payments.

As the report had it, “Americans, having reviewed their options, collectively resolved to spend virtually all the money they have”; proof that “people have trouble acting in their own self-interest”. Some theorize that this is because we are ‘loss-averse’, even when the ‘loss’ from our monthly pay-packet would be going into a savings fund. But how does that explain people who fail to enroll in company retirement plans even when no employee contribution is required?

Homo Sapiens means “Knowledgeable Man”. Yet we seem oddly incapable of perceiving the dividing lines between what we know and what we believe. Perhaps the best-measured example of this is the arresting fact that 60-70% of adult Americans believe the literal truth of Bible stories like the creation and Noah’s flood. Indeed, a 2007 Gallup survey reported 31% saying the Bible is “the actual words of God”. Yet when Gallup fielded questions about the Bible’s contents, half of respondents were unable to name its first book as Genesis; two-thirds did not know who gave the Sermon on the Mount – many thought it was Billy Graham – and 60% failed to name even half the Ten Commandments. 12% thought Noah was married to Joan of Arc. What we know and what we believe, it seems, can diverge.

Of course we have a new excuse for this. The internet has expanded the world’s supply of verbiage, and this fact allows us to dismiss things we don’t like the sound of as “too much information”. The cyber-avalanche of unsifted intelligence, inference and rant impedes real facts from reaching a wide audience. Last year the number of active blogs on the Net passed the 100 million mark. Their readers now vastly outnumber those who read serious, unbiased sources which have to filter their output through a team of fact-checkers. The result is that many of us now only read the ‘facts’ and opinions that actively appeal to us.

A case in point is the battle between Encyclopedia Britannica and Wikipedia, (which the latter has resoundingly won, if eyeballs on screens is the measure; it claims 2.5 billion page-views per month). Britannica’s contributors have included Einstein, Freud, the economist Milton Friedman and more than 100 Nobel laureates. Wikipedia, by contrast, is a ‘wiki’, the type of website that allows visitors to easily add, remove, or otherwise edit content at their whim. Being voluntary, Wikipedia has no real editor. Its driving principle is “This is my truth; what’s yours?”. The aim is not necessarily truth per se, but the warm, fuzzy feeling of consensus. In consequence, Wikipedia offers more “knowledge” on Pokemon characters than on quantum mechanics.

Do we humans really want to know the truth at all? The way the majority of us vote in elections implies, for instance, that we believe saving jobs is more important than productivity and the prosperity it engenders. The folly of this was recently pointed out by a story in The Economist’s Lexington column. An economist inspects a dam-building project, and sees hundreds of workers with shovels. “Why not use a mechanical digger?” he asks, to be told that this would put people out of work. “Oh, fine, if it’s jobs you want, take away the shovels and give them spoons”. Makes perfect sense, doesn’t it? Yet politicians figured out long ago that “job-protecting” xenophobia and protectionism mobilize more voters than genuine economic stimulus and fiscal common sense, however much better off those would make us. A candidate’s aim, after all, is to gain and keep power, not to fix things. We behave just as irrationally when choosing our leaders as we do when spending money.

All in all, it shows we humans are prone to endearingly muddled thinking. If asked by a clipboard-wielding canvasser to agree or disagree with the statement “Either something makes sense, or it doesn’t”, we seem disposed to reply “Uh… what was that middle one again?”