A friend in trying to convince me to be a trader in the stock/securities exchange says to me he made R35,000 profit and that its a good return.
If you make R35,000 profit over a period of a six months, that’s a good return, but if you made a profit over a period of 5 years, well maybe that profit is not a good return.
In his book Influence, Robert Cialdini tells the story of two Brothers, Sid and Harry, who ran a clothing store in 1930s America. Sid was in charge of sales and Harry led the tailoring department. Whenever Sid noticed that the customers who stood before the mirror really liked their suits, he became a little hard of hearing. He would call his brother: ‘Harry, how much for this suit?’ Harry would look up from his cutting table and shout back” ‘For that beautiful cotton suit, $42.’ (This was a completely inflated price at that time.) Sid would pretend he had not understood: ‘How much?’ Harry would yell again: ‘Forty two dollars!’ Sid would then turn to his customer and report: ‘He says $22.’ At this point, the customer would have quickly put the money on the table and hastened from the store with the suit before poor Sid noticed the ‘mistake’.
Maybe you know the following experiment from your schooldays:
Take two buckets. Fill the first with lukewarm water and the second with ice water. Dip your right hand into the ice water for one minute. Then put both hands into the lukewarm water. What do you notice? The lukewarm water feels as it should to the left hand but extremely hot to the right hand.
These three stories epitomise the contrast effect:
We judge something to be beautiful, expensive or large if we have something ugly, cheap or small in front of us. We have difficulty with absolute judgements.
The contrast effect is a common misconception: You order leather seats for your new car because compared to the R600,000 price tag on the car, R30,000 seems small loose change. All industries that offer upgrade option exploit this illusion.
Without the contrast effect, the discount business would be completely untenable. A product that has been reduced from R1000 to R700 seems better value than a product that has always cost R700. The starting price should play no role.
When we encounter contrasts, we react like birds to a gunshot: we jump up and get moving. Our weak spot: we don’t notice small, gradual changes.
A magician can make your watch vanish because, when he presses hard on one part of your body, you don’t notice the lighter touch on your wrist as he relieves you of your Rolex.
Similarly, we fail to notice how our money disappears. It constantly loses its value, but we do not notice because inflation happens over time. If it were imposed on us in the form of a brutal tax (and basically that’s what it is), we would be outraged.
The contrast effect can ruin you whole life: a charming woman marries a fairly average man. But because her parents were awful people, the ordinary man appears to be a prince.
One final thought: bombarded by advertisements featuring supermodels, we now perceive beautiful people as only moderately attractive.
If you are seeking a partner, never go out in the company of your supermodel friends. People will find you less attractive than you really are. Go alone or better yet, take your ugly friends.