Letters Remain

  • Anatomy of a Price War

    With the recent Amazon–Walmart price war on books and the 1992 airline industry price war as the backdrop, James Surowiecki takes a look at how price wars start, how they can be avoided, and how to (possibly) win at them.

    The best way to win a price war, then, is not to play in the first place. Instead, you can compete in other areas: customer service or quality. Or you can collude with your putative competitors: that’s why cartels like OPEC exist. Or—since overt collusion is usually illegal—you can employ subtler tactics (which economists call “signalling”), like making public statements about the importance of “stable pricing.” The idea is to let your competitors know that you’re not eager to slash prices—but that, if a price war does start, you’ll fight to the bitter end. One way to establish that peace-preserving threat of mutual assured destruction is to commit yourself beforehand, which helps explain why so many retailers promise to match any competitor’s advertised price. Consumers view these guarantees as conducive to lower prices. But in fact offering a price-matching guarantee should make it less likely that competitors will slash prices, since they know that any cuts they make will immediately be matched. It’s the retail version of the doomsday machine.

    These tactics and deterrents don’t always work, though, which is why price wars keep breaking out.

    Surowiecki mentions that there’s apparently a big banana price war going on in the U.K. at the moment! News to me.

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    Lloyd Morgan

  • Grammar Precisionists, Rejoice!

    Jason points to a 10-question grammar challenge given to the students of a non-fiction workshop held by David Foster Wallace.

    It’s not a particularly easy challenge, made worse by the fact that my non-native English speaking girlfriend just beat my score comprehensively (this wasn’t a difficult feat, however). The answers are provided, and I particularly like the method Wallace used to teach correct adverb use:

    You have been entrusted to feed for your neighbor’s dog for a week while he (the neighbor) is out of town. The neighbor returns home; something has gone awry; you are questioned.

    “I fed the dog.”
    “Did you feed the parakeet?”
    “I fed only the dog.”
    “Did anyone else feed the dog?”
    “Only I fed the dog.”
    “Did you fondle/molest the dog?”
    “I only fed the dog!” [Here Wallace’s voice cracked funnily.]

    The excellent Tense Present: Democracy, English, and the Wars over Usage (David Foster Wallace) and Politics and the English Language (George Orwell) essays are mentioned in the answers section and are well worth your time if you haven’t read them before and have even a passing interest in grammar.

    Another useful resource for those who fall into that category: the After Deadline posts from The New York Times (“Notes from the newsroom on grammar, usage and style”).

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    Lloyd Morgan

  • Environmental Effects of the Shipping Industry

    I don’t usually give much credence to Daily Mail articles—given the paper’s editorial stance and propensity for junk food news—but I made an exception for one penned by Fred Pearce, New Scientist‘s environmental consultant.

    Still not completely free from sensationalism, Pearce looks at the pollution emitted by the shipping industry, particularly some of the world’s largest container ships.

    Because of their colossal engines, each as heavy as a small ship, these super-vessels use as much fuel as small power stations.

    But, unlike power stations or cars, they can burn the cheapest, filthiest, high-sulphur fuel [bunker fuel]: the thick residues left behind in refineries after the lighter liquids have been taken. The stuff nobody on land is allowed to use. […]

    Thanks to the IMO‘s rules, the largest ships can each emit as much as 5,000 tons of sulphur in a year – the same as 50 million typical cars, each emitting an average of 100 grams of sulphur a year.

    With an estimated 800 million cars driving around the planet, that means 16 super-ships can emit as much sulphur as the world fleet of cars.

    Before I come to any personal conclusions on this, I would like to see figures on the environmental effects of the feasible alternatives. After all, the scale of these container ships is staggering:

    The only ships mentioned by name in the article, the Emma Mærsk and the seven other Maersk PS-Class ships, are all the equal largest container ships in the world. All are a few feet shy of quarter a mile long, have gross tonnage of over 150,000 and can hold upwards of 11,000 shipping containers. I find these figures hard to comprehend.

    via The Browser

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    Lloyd Morgan

  • Cultural Differences in Career Change Perceptions

    We all have career transitions throughout our lives—some by choice, some not. By interviewing workers from Austria, Serbia, Spain, China and the U.S., researchers have determined some cultural differences in how people perceive career transitions, and why they occur.

    Workers in the United States didn’t ever attribute a career transition to an external cause, such as conflict with a boss. Not once. Instead they tended to mention internal factors, such as their desire for a fresh challenge. By contrast, workers in China almost exclusively stressed the role played by external factors. Meanwhile, workers in the European nations were more of a mix, attributing their career transitions to both internal and external factors. […]

    Generally-speaking, people are known to be biased towards attributing positive events to themselves, and so it’s perhaps little wonder that many workers attributed all these positive career transitions to internal causes. “In addition,” the researchers said, “in many cultures ‘being in charge’ of one’s life is positively valued. Conversely, reconstructing crucial career transitions as purely triggered by external circumstances does not convey a great amount of competence.”

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    Lloyd Morgan

  • Bertram Forer Experiments: Your Personalised Generic Profile

    Here is the ‘personalised’ personality profile as used in a 1948 experiment by Bertram Forer:

    You have a great need for other people to like and admire you. You have a tendency to be critical of yourself. You have a great deal of unused capacity which you have not turned to your advantage. While you have some personality weaknesses, you are generally able to compensate for them. Your sexual adjustment has presented problems for you. Disciplined and self-controlled outside, you tend to be worrisome and insecure inside. At times you have serious doubts as to whether you have made the right decision or done the right thing. You prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations. You pride yourself as an independent thinker and do not accept others’ statements without satisfactory proof. You have found it unwise to be too frank in revealing yourself to others. At times you are extroverted, affable, sociable, while at other times you are introverted, wary, reserved. Some of your aspirations tend to be pretty unrealistic. Security is one of your major goals in life.

    On a scale of 0 (very poor) to 5 (excellent), participants in the study rated the accuracy of the above statement as 4.26 (mean). Only after these ratings were provided did Forer reveal to the participants that all of them had been provided with the exact same statement.

    It was after this experiment that Forer famously described the personal validation fallacy (or: the Barnum effect)

    In Tricks of the Mind (an excellent Christmas present for those interested in such things, by the way), Derren Brown discusses an updated version of this experiment that he conducted for his TV show of the same name. The fifteen participants in this experiment (from the U.K., U.S. and Spain) provided personal items to Brown (a traced outline of their hand, the time and date of their birth, and a small, every-day ‘personal object’), and in return were provided with personality profiles such as that above and were asked to mark its accuracy out of 100.

    Three participants scored it poorly, between 40 and 50, while the remaining twelve rated the profile as highly accurate–one rating it as 99% accurate, while another was so drawn in to the profile that she believed the TV crew had secretly read her diary. Two more felt so revealed by the statement that they refused to discuss their profile on film.

    Even though all participants in Brown’s experiment expected to receive a series of “vague and ambiguous statements” that could apply widely, they all still fell foul of the personal validation fallacy.

    No matter how much we know, we seem unable to account for our biases and beliefs.

    Update: I’ve now transcribed the text Derren Brown’s used in his Barnum effect experiment.

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    Lloyd Morgan

  • Applying Knowledge and Not Understanding Ourselves

    One of my favourite reads–the British Psychological Society’s (BPS) Research Digest–has recently published its 150th issue. To observe this occasion, Digest has asked what twenty-three psychologists still don’t understand about themselves.

    I’ve mentioned a number of the featured psychologists here before,  including Robert Cialdini, Alison Gopnik and Richard Wiseman.

    As Vaughan notes, many of those contributing to the article “bemoan their inability to apply their research findings to their own life”. An example of this, that I’m sure many of us can relate to, comes from David Buss: the inability to ‘override’ our well-known biases (related: the bias blind spot).

    One nagging thing that I still don’t understand about myself is why I often succumb to well-documented psychological biases, even though I’m acutely aware of these biases. One example is my failure at affective forecasting, such as believing that I will be happy for a long time after some accomplishment (e.g. publishing a new book), when in fact the happiness dissipates more quickly than anticipated. Another is succumbing to the male sexual overperception bias, misperceiving a woman’s friendliness as sexual interest. A third is undue optimism about how quickly I can complete work projects, despite many years of experience in underestimating the time actually required. One would think that explicit knowledge of these well-documented psychological biases and years of experience with them would allow a person to cognitively override the biases. But they don’t.

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    Lloyd Morgan

  • Seven Psychological Principles Con Artists Exploit

    Inherent human vulnerabilities need to be taken into account when designing security systems/processes, suggests a study that looks at a dozen confidence tricks from the UK TV show The Real Hustle to determine recurring behavioural patterns con artists use to exploit victims.

    The study was a collaboration between Frank Stajano of the University of Cambridge Computer Laboratory and Paul Wilson, writer and producer of the aforementioned TV show (Wilson was an IT consultant for twelve years before moving into entertainment).

    The seven principles of human behaviour that con artists exploit, according to the article:

    • The distraction principle: While you are distracted by what retains your interest, hustlers can do anything to you and you won’t notice.
    • The social compliance principle: Society trains people not to question authority. Hustlers exploit this “suspension of suspiciousness” to make you do what they want.
    • The herd principle: Even suspicious marks will let their guard down when everyone next to them appears to share the same risks. Safety in numbers? Not if they’re all conspiring against you.
    • The dishonesty principle: Anything illegal you do will be used against you by the fraudster, making it harder for you to seek help once you realize you’ve been had.
    • The deception principle: Thing and people are not what they seem. Hustlers know how to manipulate you to make you believe that they are.
    • The need and greed principle: Your needs and desires make you vulnerable. Once hustlers know what you really want, they can easily manipulate you.
    • The Time principle: When you are under time pressure to make an important choice, you use a different decision strategy. Hustlers steer you towards a strategy involving less reasoning.

    via Schneier on Security

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    Lloyd Morgan

  • (Preventing) Manipulation Through Irrationality

    Through the theories discussed in Dan Ariely’s Predictably Irrational (and largely based on the excerpts in Chris Yeh’s outline of the book), two articles have emerged on different sides of one topic: our irrational decision-making in terms of products and purchases.

    One on how to take advantage of our irrationality when marketing products, and another on preventing manipulation by being aware of our own irrationalities.

    One point from each article, per section:

    Price Relativity and the Encouraging of False Comparisons

    • Offer a premium version of your product/service and make it easy to compare.
    • Realize that some premium options exist as decoys — that is, they are there only to make the less expensive options look more appealing, because they’re easy to compare.

    The Fallacy of Supply and Demand and the Reinforcement of Anchoring

    • Set yourself against “premium” competitors in premium markets. Positioning is critical to the perception of value.
    • Scale your purchases to your needs, not your circumstances or wallet size. Try to objectively measure the value of what you’re buying.

    The Zero Price Effect

    • Offer free stuff (especially to those whose affections/actions you desire most), but make sure you get ROI from it.
    • Do not overestimate the value of items you get for free. Resist this by viewing free stuff sceptically rather than welcoming it with open arms. What are the hidden costs involved (restriction on future choices, time and effort expended, etc.)?

    The Exploitation of Social Norms

    • The mindset of volunteers vs. employees (free vs. paid) is very different — consider which behaviour set you want before deciding on the type of labour to attract.
    • Consider carefully before choosing to participate [for free].

    The Influence of Arousal

    • Arouse your audience and their behaviour (especially their decision-making) changes drastically.
    • Be aware when you are being aroused (not just sexually).

    Designing for Procrastination

    • Procrastination is an extremely common human behaviour — plan for it in your business and take advantage of it where it can help (trial offers that turn into paid services, for example).
    • Either favour fixed-rate, fixed-term plans — or become meticulous about cancelling unused recurring services, or services with automatic price increases.

    The Endowment Effect

    • ‘Free’ products are valued less than purchased products. It’s easier to get more money from your existing customers than it is to attract new ones.
    • Be willing to walk away from–and never rely on your internal value judgment of–already purchased goods/services. Ask an impartial third party for their objective advice.

    Capitalisation of our Aversion to Loss

    • Narrow your customers’ choices and they’ll be more likely to commit.
    • If your choices are artificially narrowed, don’t passively get funnelled towards the goal you’re being herding toward. Don’t pay extra for options, unless you can point to hard evidence that you need those options. Some options exist just to make you doubt yourself.

    Engender Unreasonable Expectations

    • Take advantage of expectations of value creation. Position your brand so that users expect great things, and they’ll get them.
    • Let your own opinions guide you, not the opinions of others. Don’t let marketing set your expectations. Rely on evidence and facts.

    Leverage Pricing Bias

    • Higher pricing means higher expectations, but also more fulfilment, even if the product isn’t actually more fulfilling. The placebo effect is strong.
    • Price often has nothing to do with value. Don’t fall prey to the ‘moneymoon‘.
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    Lloyd Morgan

  • Sugar Ray Robinson and Self-Reliance

    In Intelligent Life‘s review of Sweet Thunder, a Sugar Ray Robinson biography, they discuss Sugar Ray’s entrepreneurial spirit and tenacity in keeping control over his own business and brand.

    Robinson was savvy. He was the first black athlete to own most of the rights to his fights and to negotiate broadcasting deals on radio and television. […] Robinson would regularly raise the issue of compensation with promoters only after tickets had been sold, when calling off a fight was not a possibility. He would also only agree to fight if mobsters weren’t involved. Once he was paid, he spent lavishly on fine clothes, fancy cars (he preferred a pink Cadillac) and an extensive entourage.

    But all of this came at a price. Barnes lamented that the sports writers of the time, who had enormous power to build up and then tear down a fighter, soon turned on Robinson and criticised him for his unsportsmanlike greed. Of course many of these same writers happily buzzed around Frankie Carbo and other New York mobsters who controlled the sport at the time.

    Robinson’s financial confidence extended beyond the ring. At a time when banks would not lend black people money for businesses, he realised the only way he could become financially independent was to invest his own money. […] After Robinson purchased six buildings in Harlem, “he did not need to go to the bankers ever again”. He owned several businesses, including his famed (and now defunct) nightclub, “Sugar Ray’s”.

    This reminds me of the self-reliance quote from The 50th Law (previously).

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    Lloyd Morgan

  • Influencing Behaviour Online

    Ignoring, for a moment, the rather unsound and outmoded neuroscience propounded in the introduction, these tips for extending influence online and persuading your visitors are worth a few minutes:

    1. Show ratings and reviews by other users (for action through social validation).
    2. Provide instant gratification and a quick fix.
    3. Put the most important action to be done first.
    4. Use the illusion of scarcity (previously).
    5. Build reciprocity by giving away something for free.
    6. Learn to use food, sex and danger in an advertising context.
    7. Limit the choices available and promote bundles (noted in this list with the paradox of choice/too-much-choice effect theory firmly in mind: while the advice is solid, the paradox of choice theory is overestimated).
    8. Speak to your visitor by using the word ‘You’ (personalisation).
    9. Get your visitors to make a (small) commitment. Preferably a public one.
    10. Use images that demonstrate similarity and attractiveness.
    11. Be a master at telling stories.
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    Lloyd Morgan