David Krueger MD
For the second Christmas in a row, I purchased my wife Charles Krypell jewelry from an exclusive jewelry boutique. I negotiated for a ring and bracelet, just as the year before for a necklace and earrings. Both times my negotiation reduced the marked price. My wife, who was astonished that I dared attempt negotiating designer jewelry at such an exclusive store, appeased her shock by the pleasure of the jewelry. And rather quickly, I might add.
The stock market is really not a “market” but an auction; the price of any stock is what someone is willing to bid at any moment, based on the perception of the bidders, influenced by many factors including their herd mentality.
Like an auction, life’s distractions with the money tool plays out in the brain as cognitive bartering and mental accounting. An opening “bid” is perceived as a mental anchor, the starting point for the psychological jockeying that follows. Even if we perceive an opening bid as inaccurate or unfair, it still serves as an anchor to shape the way the brain thinks about value and to determine subsequent bidding behavior.
A group of people is given the opportunity to bid for a bottle of wine. Rationally, they will calculate the value—which they are actually told—and bid accordingly. Immediately prior to the auction, they are asked to write down the last two digits of their social security number on their bid sheet. The people who bid the highest for the wine were those who had the highest social security numbers. Unwittingly, they were influenced by a completely unrelated fact. Anchoring—the influence of the reference price—even has an irrelevant cousin when two unrelated digits are written down.
So much of life is an auction—buying a house, car, antique or healthcare. One healthcare senior executive told me (when he was no longer an Executive Mentor Coaching client and after he moved on to his CEO position for a non-healthcare corporation) that hospitals expected to collect 40 to 50% of their billing and thus, though never publicized, are always willing to negotiate.
Even death is negotiable. Read Younger Next Year (Henry Lodge Jr. MD) and The Singularity Is Near: When Humans Transcend Biology (Ray Kurdzweil).
Neuroeconomics illuminates our life, and like the stock market, is given to herd mentality in developing bubbles and many of the other mind matters and brain business that constitute a mutable logic and influenced behavior.
Awareness is the best antidote. Whatever remains unconscious will be attributed to fate. (Or the economy).