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Psychology

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The Russians Did It! (or did they)?

By | Politics, Psychology

The Russians completely destabilized the US political system and skewed the vote of the American public in favour of Donald Trump. They used platforms such as Facebook and Twitter, who were also implicated in this massive fraud. How could the US be intimidated and coerced so easily? Actually the question should be how much of this story is made up and how much is truthful? A question that, unfortunately, we are unlikely to find the answer to. 

The definition of the word propaganda is — information, especially of a biased or misleading nature, used to promote a political cause or point of view. Propaganda is a means of influencing people. Its principle goal is to persuade others to accept certain beliefs and ideas. Propaganda in modern times is now a more potent force than it has ever been. The dissemination of information via social media and the internet happens at warp speed and spreads like a virus. In addition to the methods of distribution, propaganda makes use of a number of tactics, many times used in tandem in order to gain the greatest impact. Here are a few examples:

Fear – A large number of psychological studies have found that humans will do more to avoid pain than they will to gain pleasure. We are hard wire with a fight or flight response which keeps us on our toes when fear is involved. It is therefore a potent propaganda technique. Just turn on the news and you will see the deliberate use of extreme ideas and symbols for the purpose of swaying opinion by causing deep, and at times irrational, fear.

Repetition – The classic brainwashing technique is to repeat an idea, word, or image over and over and over again until it becomes imprinted on the objects mind. When politicians focus on staying “on message,” meaning they repeat the same buzzwords and reinforce the same ideas in multiple public appearances and statements, they are using this technique. The media makes use of this technique. When Howard Dean was running for president he made a speech in Iowa where he yelled out “Yee Ha” to rally the crowd. This caused the death of his candidacy, as the media jumped on it and declared it unpresidential conduct. How did they persuade the public to accept this belief?  According to the Hotline, a Washington-based newsletter, cable and broadcast news networks aired Dean’s Iowa exclamation 633 times (and that doesn’t include local news or talk shows in the four days after it was made).

The Common Folk – With the recent rise of populism in the US and Europe, appealing to the common folk has become a propaganda technique. The goal is to make viewers feel that they directly connect and can relate to the message or meaning of the propaganda. Mark Zuckerberg went on a cross-country tour to meet blue-collar folks and soccer moms. This of course began to fuel rumours that he was considering an eventual run for president. It was noted that Obama said the word “folks” at least 348 times during presidential news conferences.

The Band Wagon – We previously wrote about this (here) in reference to the Bitcoin explosion. The interest in cryptocurrencies and Bitcoin has fuelled the use of propaganda from both directions, for and against its use. The idea here is that everybody is adopting it so you should too. Often the word “we” is used heavily to imply that everyone is in a situation or group together.

Demonizing – By characterizing an enemy or opponent as evil, vile, or dangerous, propaganda can appeal to visceral feelings of fear, disgust, and repulsion. Exaggeration is required, and this technique is particularly necessary for any political “smear campaign.” Donald Trump used this technique effectively in his presidential campaign. He implanted the idea of a dangerous, deep state and evil Hillary Clinton in the minds of many voters. How could you tell? It was so effective that Clinton became recognized as “Crooked Hillary” by his voting base. 

Paternalism – An individual’s need to feel protected and watched over is a perfect target for propaganda. For this reason, many governments will employ imagery and symbolism that evokes a sense of paternalism. The emphasis on a strong, fatherly authority is appealing to many consuming propaganda, making this technique extremely powerful in times of distress or crisis, such as in the use of Uncle Sam in military propaganda.

Victorious – Everyone wants to feel like a winner.  If a piece of propaganda can paint a candidate or group’s victory as certain and inevitable, then the viewer will want to join the group. This is why you will often hear a plea to “join us now,” before it’s too late. 

The Lie – This strategy requires an entire body of propaganda, usually across multiple mediums, and focuses on stirring up strong emotion by retelling or reorienting a major story or event to change people’s perception of the event. This technique ties together with other techniques like fear mongering, demonizing, and repetition. This is what we started the article with, “The Russian Conspiracy.” This story has been presented in loop from all angles, by a number of distribution methods for well over 18 months. Have you encountered it? Have you been influenced by the propaganda? Whether you accept it or not, you have certainly been coerced into forming an opinion based on information that may or may not be fact, without even being aware of doing it. Such is the power of propaganda.

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Discovery Lost – 4 Ways to Get It Back

By | Psychology, Technology

Have you lost your sense of discovery? The number of developments and innovations that have taken place in recent years have been no less than stunning. I don’t think even the true initial believers could have imagined how a platform such as the internet would come to engulf our lives and make us so dependent on the information that it encapsulates. It seems to be the answer we have to every question. It is the arbitrator for every dinner table disagreement. It is our idea generator for the meal we want to cook for our dinner party. It is the purveyor of books we should read, restaurants we should eat at and locations we should visit.

The development of smart phone technology has extended that convenience one step further. Now, instead of having to slip into a cyber café to use a computer or wait till we are home to check our own, we can now have access to all this information whenever and wherever we are. This provides added capabilities such as geolocation applications whereby we can check to see if there is something within 100 feet of where we are standing that merits our attention. Are the burgers good at that place on the corner? Do they serve a good espresso over there? I have an hour to burn, is there an interesting museum to visit nearby?

The speed of the dissemination of this information has also vastly increased, and only seems to be getting faster. This allows people to spread the word to their tribes in a matter of seconds. We saw recently one of the more negative aspects of this advancement where an alert went out in Hawaii about an incoming missile. Around 8:07 a.m. on January 13, 2018, an errant alert went out to scores of Hawaii residents and tourists on their cellphones: “BALLISTIC MISSILE THREAT INBOUND TO HAWAII. SEEK IMMEDIATE SHELTER. THIS IS NOT A DRILL.” The spread of the message was extremely quick and effective as it sent scores of residents and travellers into a panic. There was only one problem, the message was false.

The combination of a worldwide internet, geolocation tracking and the speed at which we can transmit information, has created an arena for just about anybody to voice their opinion, on just about anything to the world, wherever they happen to be located at that moment in time . This has now created tribes of self-declared independent restaurant connoisseurs, historians, travel experts and curators of lists. The 10 best cafés, The 10 best cities to visit, What to do when you are in Paris, The best hotels for couples under 40, and my personal favourite, 20 hidden beaches away from the tourist crowd!

The blogs curating this kind of content have flourished over the years and there is a principle reason for their success. People look for certainty in their lives. When they go to a restaurant they want to know that they are assured of receiving something of equal or better value compared to what they have to pay. They want the promise that they have tasted the best cappuccino that can be found in all of Italy. If they go to a hotel they want to know that others who have been there previously have enjoyed it. This provides them more confidence that they won’t expect any unfortunate surprises. If they have traveled a long way, they want the guarantee that they have experienced the best that the location has to offer. The best way people have found to gain this certainty is to follow in the footsteps of someone else’s experience. So they go online and a quick Google search provides them with no lack of self proclaimed experts on where to go, what to see and what to eat.

In addition to the endless number of self-proclaimed experts, there is artificial intelligence. These are the algorithms that analyze everything you search for on the internet — music, art, articles, travel locations, restaurants or cafés. If you like rock music, the algorithm will feed you back a bunch of rock music. If you have been looking for Indian food, the algorithm will propose even more Indian food. Basing recommendations on a set of personal preferences sets up an endless cycle loop that is not so easy to break free from, unless you change those preferences yourself, at which point there is no discovery.

This is the point where we find discovery is lost. Discovery used to be a serendipitous event. We may have been invited to a friend’s home while his parents were playing their favourite Bach concerto. Never having heard one before made you want to go out and discover more despite the fact that you never listened to classical music before. You may have been invited out to dinner to a Greek restaurant where you discovered Souvlaki. This experience made you want to look more into Greek cooking. These are personal discoveries that were not based on any previous bias. They were pure discovery, which made them all the more appealing and memorable.

Now we have so called travel bloggers that will go out and comb every inch of a city to put up on their blog. We are not even sure if they have been to the sites they recommend. We don’t know under what conditions. They may have spent only 10 minutes in the place, long enough to grab a coffee and take a few pictures. The drawback to following someone else’s opinion on a location is that it is their opinion and not yours. Their personality may have a lot to do with their choices. If they are extroverts and you are an introvert, their choices will most likely differ from yours.

There’ll always be serendipity involved in discovery – Jeff Bezos

As an example, I happened to read an article on Vietnam by one of the most widely followed and successful travel bloggers. It was one destination that he vowed never to return to. As he stated, “The simple answer is that no one ever wants to return to a place where they felt they were treated poorly. When I was in Vietnam, I was constantly hassled, overcharged, ripped off, and treated badly by the locals.” This was his experience and maybe his personality brought out the worst in people, we can’t be sure. There are millions of people in Vietnam and to judge them all because of a few bad apples is not a fair assessment of the country. I disregarded the blogger’s experience and advice not to go to Vietnam. My experience was quite the contrary. I met some amazing people, discovered some incredible culinary dishes, and saw some stunning scenery. The best part was just walking around the city, dropping in on a café here or there and speaking with the locals — who were incredibly hospitable. That was my experience.

To travel is to take a journey into yourself – Danny Kaye

Not every discovery works out for the best, but it is pure discovery. There is something special about walking down a little back street in Rome and stepping into a café filled with locals. You feel like it is a hidden gem that only you know about. Being excited about visiting Rome for the first time just adds to the emotion and adventure. Following in the footsteps of somebody else is just that. Living someone else’s experience. Doing this you rob yourself of pure discovery. You deprive yourself of a very personal experience.

“The real voyage of discovery consists not in seeking new landscapes but in having new eyes.” — French writer Marcel Proust

The Hutch ReportThe world changes. Cities change. The fantastic time you had at a little jazz club in Greenwich Village in New York is a memory you will have forever. What makes it all the more valuable is that the jazz club is not there anymore. Nobody else will ever experience what you did because it was unique. It was a discovery at the right time.

Recommendations are fine. We all ask for recommendations which can save us time.  We are not saying that all lists are bad. If you are visiting a city for a short duration and you want to know where some of the best museums are, a list can come in handy. So choose one, go and get lost and discover what they have to offer. See it through your eyes and not somebody else’s.

Here are a few “ideas” on how to get discovery back:

Embrace uncertainty

There is a comfort in always having the same thing. Woody Allen was known for going to the same restaurant in New York and ordering the exact same meal for years. If this is who you are then fine, but if you want to break free then embrace uncertainty. Try something different.

Put away the map for a while

Don’t always feel the need to follow the map when you are in a different city. I am not saying go and get lost, but just find a quarter and go discover it. See where your intuition takes you. Take the road less traveled. I was in Istanbul one time with a few friends and saw a man crossing the street with a tray and 4 small glasses of Turkish tea. He turned into a very narrow alley way. We were intrigued so we followed him to see where the tea room was located. It turned out that it was not a tea room per se but his little business which consisted of a small bench and a hole in the wall with his material to make the Turkish tea. He gave us a sign to come and he offered us a cup of tea. We had a good laugh speaking to him through a Turkish dictionary and his broken english. Somehow the experience made the tea taste that much better. It was pure serendipity.

Speak with people face to face

What a novel thing to do in our day and age. It feels like we have lost one to one discussions with everybody peering into their smart phones. Get out and ask your friends what they have been listening to. Who are their favourite groups. You may know someone with eclectic tastes that will lead you to new forms of music you may have never discovered otherwise. I met someone from Brazil a few years ago. They gave me a cd of a Brazilian singer I had never heard of. I loved it. It sent me on a journey of discovery of forms of Brazilian music I never knew existed.

Read Books

It seems like everyone reads articles on the net and have become too lazy to read books. Articles have existed for years in magazines and other publications and can be very insightful. Books, on the other hand delve deep into the subject matter. Books are an incredible source of information. Whenever I read a book I discover leads to other interesting books to read. Years ago, I was reading a biography on a musician that was discussing his love of philosophy. I never expected that this book would lead me into a study of philosophy and some of the world’s great thinkers. It was a wonderful discovery that continues today. Check out our list of “Books You Should Read.”

The founders of The Hutch Report are originally from North America. A sense of adventure and thirst for discovery eventually brought us to live in Switzerland. From here, we have traveled extensively throughout Europe and the rest of the world. We have a fascination with all the moving pieces that make up what is now known as “The New Economy.” We dig into all these new moving parts and analyze how they affect society and our lives directly. Our experience and findings, hopefully provide insights, ideas and tools for our readers to profit from.

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WMD – Words of Mass Destruction

By | Politics, Psychology, Technology

On April 23, 2013, I was sitting at my desk watching the stock markets on my screen. I happened to be in a chat room with a number of other traders at that moment. Some were discussing their current Apple trade, others were concentrating on some options, and others just looking for their daily setups for their next trade.

I happened to be looking over at my twitter feed, when suddenly I saw this tweet show up from the Associated Press (This screen grab was taken by somebody else at the time before the twitter account was blocked and the tweet deleted).

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My first reaction was to tell the others. “Hey, did you guys see that a bomb just went off at the White House?” Just as the words came out of my mouth, the news began to spread like wild fire as more people became aware of the tweet. At that instance the stock market took an instant nosedive. Everybody started to scour all the other news sources to see if they could verify what we saw.

Just as quickly, the market reversed course and made a recovery. The Associated Press came out and said that the message was the work of a hacked @AP account. The account was immediately suspended by Twitter. Regardless, that tweet of an explosion at the White House was enough to tank the markets as much as 1% in those few seconds. The fact that the “fake” news was coming from a reputable source made the impact all that more powerful. Responsibility for the attack was later claimed by the Syria Electronic Army, a group that is reported to have the tacit support of Bashar al-Assad, although that could not be independently confirmed.

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The combination of a connected world, speed of delivery and the sheer volume of information seems to have created a weapon that we have never seen the likes of. At least, not one of this size. This weapon has been used in the past, but it has only been used sparingly and by only a few players at a time.  In addition, it was only implemented in certain situations in history.

So what has changed? Well, now this weapon is implemented daily. It is in the hands of many, although some wield more power than others, the small players still have the ability to make use of this weapon in a very efficient manner. The weapon is misinformation.

Why is it so powerful? Each time a reader encounters one of these stories on Facebook, Google, Twitter or really anywhere, it makes a subtle impression. Each time, the story grows more familiar. And that familiarity casts the illusion of truth. The more sensationalized a story, the more it has the ability to spread. A story that casts a wide net attracts a large number of viewers. In today’s connected world, a large audience translates to money.

Although many companies and individuals attempt to “stretch the truth” or outright create “fake news” as a strategy to gain followers there are many other motives to do so. The Government has employed a strategy of misinformation for years as a means of rallying support for their causes. On February 5, 2003, Powell appeared before the UN to prove the urgency to engage a war with Iraq. Powell himself stated later: “I, of course, regret the U.N. speech that I gave,” he said, which became the prominent presentation of their case. In May 2016, Powell said,  “At the time I made the speech to the UN, President George W. Bush had already made the decision for military action.”

Donald Trump has been the US President for over one year now, yet that has not stemmed the constant barrage of conspiracy theories around his win concerning potential collusion with the Russians. What it has done though is to present the power of misinformation in forming people’s opinions. Regardless of the fact that the stories we have heard are true or not, the seeds have been sown.

These false ideas that enter our psyche create feelings of doubt and suspicion. This in turn creates anxiety within the masses. The manipulative power of today’s social media tools (see here) coupled with our need to satisfy our addiction for more information, in order to quell these doubts, creates a powerful tool in the form of WMD, words of mass destruction.

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Maslow and the New Economy

By | Psychology, Technology

Abraham Maslow was a pioneer in humanistic psychology. He devoted much of his career to describing human needs and defining human potential. He believed that people have two kinds of needs, deficiency needs and growth needs. Deficiency needs are what you need to survive, such as food, water and shelter. Growth needs are quite different. They are needs to become more and more yourself. Each person wants to develop the abilities and talents he finds in himself. Some call it destiny and others call it fate. Some call it finding your purpose in life. Finding your purpose eliminates self doubt, inner conflict and confusion.

Maslow observed that it is extremely difficult to work on your growth needs if you have deficiency needs. The more energy a person must devote to obtaining food and shelter, or building up their own self-respect, the less time they have to identifying their purpose, or as Maslow called it “Self-actualization.” Self-actualization is not a process that has an end; it is a way of being, of continuously becoming more yourself.

As we now live in an environment which seems to be dominated by smart phones and computers we thought it would be interesting to revisit Maslow, and using his framework, identify what smart phones and particularly social media has done for us as individuals.

Maslow presented his work as a pyramid, or as it is called, “Maslow’s Hierarchy of Needs.”

Self-Actualization Needs

The need to fulfill one’s unique potential

Psychological Needs

Esteem Needs: To achieve, to be competent, gain approval and recognition

Belongingness and love needs: To affiliate with others, to be accepted and belong

Fundamental Needs

Safety Needs: To feel secure, safe and out of danger; Psychological Needs: Satisfy hunger, Thirst, Sex Drives

On the lowest level are the needs that every human must satisfy to stay alive. We need to nourish ourselves with food and water, and our natural sex drives are what keep humanity from becoming an extinct species. On the same level is shelter and safety.

It is not always so obvious today with apartments, housing, supermarkets etc. everywhere you look but in our ancestors day you can clearly see that from their waking hour the main objective was to find food and water for the day. Once that was done, they spent time securing their caves from potential threats. I don’t think they spent much of their day pondering thoughts of acceptance or what their calling may be.

On this level we can ask ourselves how smart phones or your social media accounts have helped. It is clear that they don’t provide actual nourishment or shelter. It can be argued to what extent they fulfill psychological or self-actualization needs and we discuss this further on in this post.  There are other technologies that are enabling new and innovative ways of building. Advances in biotech are allowing us to understand living organisms more so that we may find better ways of nourishing the planet and its inhabitants. In addition to technologies enabling creation, there are equally just as many technologies that are enabling destruction. Regardless of technology, each individual still has to think about satisfying their basic needs daily. It can be argued that for all of our recent technological innovations that have increased efficiencies, they have also put many individuals out of work. Statistics show that the homeless population in rich countries such as the US are growing. There are an estimated 553,742 people in the United States experiencing homelessness on a given night, according to the most recent national point-in-time estimate (January 2017). This represents a rate of approximately 17 people experiencing homelessness per every 10,000 people in the general population. Regardless of any technology, the fundamental needs of these people are not being met. These needs are their priority every night.

Those who have satisfied their fundamental needs move to the next level. They then become concerned with psychological needs. The need to affiliate with others, to be accepted and belong.  They have esteem needs which include the need to achieve, to be competent, gain approval and recognition.

This is the level where smart phones have taken over the lives of many. All of the current technology powerhouses such as Google, Facebook, What’s App, Instagram, Snapchat and so many more, have exploited this human need for belonging and affiliation with others. We have previously written about how these companies have gone to great efforts to analyze our actions and behaviors so that we are drawn to their platforms and stay as long as possible. It becomes an endless loop which can also cause opposite negative effects of loneliness and depression as people find themselves locked in a virtual world of many yet isolated from everyone.

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Our connected world has brought many people, separated by great distances, together. So it is not all bad, but like anything, too much of a good thing can produce harmful effects. Many users have managed to satisfy those psychological needs of belonging through these devices. Yet that dopamine and adrenaline rush produced from those feelings of love and acceptance from the 20 likes you may have received from your “friends” has also produced problems of addiction. It keeps you coming back for more. At this point, it is difficult to break free of that cycle and move to the top need on Maslow’s hierarchy, the need for self-actualization.

Those individuals that have their fundamental and psychological needs satisfied begin to ponder self-actualization needs which may include the pursuit of knowledge and beauty, or whatever else is required for the realization of one’s unique potential. Maslow believed that although relatively few people reach this level, the needs lie dormant in all of us.

Technology has not really produced anything ground breaking in terms of helping one to reach a level of self-actualization. Maslow observed that self-actualizing people are exceptionally spontaneous. They are not trying to be anything other than themselves. They know themselves well enough to maintain their integrity in the face of opposition, unpopularity, and rejection.  The people that Maslow studied also had a rare ability to  appreciate even the simplest things. They approached their lives with a sense of discovery that made each day a new day. They rarely felt bored or uninterested. It should be noted that no amount of wealth, talent, beauty, or any other asset can totally shield someone from frustration and disappointment. A certain degree of stress is built into the human condition.

All our technology innovations may enable us to reach certain objectives a bit quicker, although at the same time, they can restrict us from moving ahead. In the end, we are no better off considering that human needs have not considerably changed over our thousands of years of history.

Are you aware of anybody who has reached self-actualization? Have you made it there yet? You may find it interesting to ask yourself which needs are you currently spending most of your days trying to satisfy or how far you have to go before you can sit back and comfortably reflect on what your real life purpose is.

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The Fear of Choosing

By | Economics, Marketing, Psychology

I moved to Europe years ago from Canada and although I made the move to embrace the change and experience another way of life, the first thing I noticed was the stores closed at 6pm. There was no 24 hour convenience that would provide me some peace of mind should I run out of milk at 8pm. I also noticed that restaurants closed at 2h30 pm, once the lunch crowd was served. If I happened to get hungry at that time I was out of luck, the kitchen staff had all left.

The supermarkets, at the time, were far from the super that I knew.  Although they had all the necessities, they didn’t have all the necessities in different sizes, colours, shapes and flavors. Something that I was accustomed to.

Regardless, over time I found myself adapting to the rhythm of this world and stopped trying to fight it. I couldn’t find my beloved peanut butter so I did without and eventually found other products that were just as good and fun to experience. I discovered the joy of having fresh bread everyday, as was the custom, rather than having that loaf of Wonder Bread that would last two weeks before mold started to set in.

On a visit back to Canada I had the chance to show my new Swiss in-laws the city that I grew up in, along with many of the aspects of North American living that they only knew from movies.

In order to accommodate them I wanted to make sure that they had everything they needed to make their stay comfortable. This included their much desired morning coffee. We had instant coffee at the time and they preferred fresh brewed so no problem, I said, “Let’s go over to the supermarket and I will show you an incredible assortment of coffee to choose from.”

We arrived at the supermarket and made our way over to the coffee isle. In front of us were rows of shelves of every kind of coffee you could imagine. I said to my mother-in-law proudly “look, we are here, you can find any kind of coffee you want.” There was deep roasted, light roasted, medium roasted, french roast, instant, ground, finely ground, whole bean, and decaf. There was Mexican coffee, Ethiopian, Colombian, and Ecuadorian. Then there were the different brands. There was Folgers, Maxwell House, Juan Valdez, Nabob, Nescafé, Tully’s, Tim Horton, Van Houtte and others.

I turned to my mother-in-law and asked, “So, what kind of coffee do you want?” In a state of anguish, she replied, “I just want coffee, just regular coffee, Espresso, Espresso.” So we found the regular espresso in the regular packaging and the regular size and left the store. I then found myself actually disappointed by her reaction. I thought it would be one of amazement, such as, “wow, I can find every kind of coffee I can imagine here.” Instead, what I found was that this myriad of choice that she was presented with, in fact, complicated things for her.

I spent years in University studying all aspects of Marketing and it never occurred to me that more choice could be a problem for somebody, until I saw my mother-in-law’s reaction. In addition, it forced me to reflect on my years in Europe doing without all that choice and I actually found daily life to be easier. I gained an appreciation for basic things that we often take for granted. So, I looked a bit deeper into this choice dilemma to see why it would cause such psychological reactions in us.

We can, in fact, go back to the 14th century, where we find an analysis of the condition with the illustration of Buridan’s ass. There’s an ass (donkey) and it’s very hungry and thirsty. But because someone is very cruel, the ass has been placed at equal distances between a pail of water and a stack of hay. The donkey would try to relieve its desire for food or drink, with the choice between those depending on which is closer. But since they’re equally spaced, the donkey is paralyzed. So it stands there, and sits, and ultimately dies.

In her book “The Art of Choosing,” Professor Sheena Iyengar, S.T. Lee Professor of Business in the Management Division at Columbia Business School researched this phenomenon. A grocery store presented customers with two different sampling stations: one with 24 flavours of jam and the other with only six options. The results of the study revealed that the availability of six options resulted in 30% of consumers purchasing at least one jar of jam, while the sampling station with 24 flavors had a conversion rate of only 3%. While the larger selection attracted more onlookers, the smaller selection actually generated more sales.

When we are presented with many options, we usually fear making the wrong decision. This can be translated mathematically. When there are only two options, we have a 50% chance of choosing the right one. But when there are five options, our chances suddenly decrease to 20%. Matters become even more complicated when there are twenty options or more. Human cognitive ability cannot efficiently compare more than five options, so most of us will start looking at the first few options and then stop.

According to classical studies the consumer goes through 5 stages in the decision making process:

Image result for 5 steps decision making process

The problems begin in the Search for information and Evaluation of alternatives stage. Most consumers do not feel particularly confident, which has the potential to trigger strong emotions like frustration, confusion or annoyance. Frustrated shoppers who are unable to choose will most likely postpone their purchase, whereas confused shoppers may rush themselves only to get over with it quickly, and choose something they will regret later. Annoyed shoppers are quick to leave the store and head straight to a competitor, swearing to never ever return.

In his book, “The Paradox of Choice” (HarperCollins, 2003), author and psychology professor at Swarthmore College, Barry Schwartz said, “Consumers have always had choices, but today options have exploded beyond all reason.” “It’s the ethos of American society; the idea that freedom is good, more is better, and you enhance those ideas by offering choice. Logically, you can’t hurt anyone by adding options. It makes no one worse off, and some better. That’s the theory, but in practicality it’s not true.”

Schwartz argues that even if we do make a choice, “We end up less satisfied with the result of the choice than we would be if we had fewer options to choose from”. Increased choice, can make us miserable because of regret, self-blame and opportunity costs. Worse, increased choice has created a new problem: the escalation in expectations. Greater expectations will drive companies to increase the number of choices they offer, which will in turn make it harder for the consumer to make a choice. A vicious cycle.

What consumers have been confronted with is “Choice Overload”, a term that was first introduced by Alvin Toffler in his 1970 book, Future Shock. Toffler noted that as the choice turns to over-choice, “freedom of more choices” ironically becomes the opposite—the “unfreedom.” This choice overload has become even more evident in the new economy with the likes of super online stores such as Amazon and Alibaba.

In the end, according to Professor Sheena Iyengar, when faced with a complex multitude of options, consumers tend to disregard sound reasoning and pick a product based on what’s easiest to evaluate, not what’s most important. She says that, “We stick to the familiar or go by price because we don’t want to deal with so many choices and scrutinize label claims or nutrition information.”

Between 1975 and 2008, the number of products in the average supermarket swelled from an average of 8,948 to almost 47,000, according to the trade group, Food Marketing Institute. The business point of view, most new items are generated because manufacturers are under pressure to increase growth, even if those items are an extension of an existing product as opposed to something innovative. Yet, in spite of this point of view companies usually see just 20 percent of products accounting for 80 percent of total sales.

Tesco chief executive Dave Lewis, in 2015, decided to scrap 30,000 of the 90,000 products from Tesco’s shelves. This was, in part, a response to the growing market shares of Aldi and Lidl, which only offer between 2,000 and 3,000 lines. This has enabled Aldi and Lidl to be more competitive on price which has in turn helped them to gain market share.

Although we have highlighted supermarkets, choice overload is apparent across many industries and if more companies don’t take the same actions as Tesco then the onus is ultimately upon the consumer to deal with the myriad of choices before them. But how?

There is an overwhelming amount of studies on what makes consumers decide, how to force consumers into decisions, how to manipulate a consumers buying process and on and on. What is less available is information related to helping consumers fend off this barrage of marketing and choice overload, which would make sense since companies are making money from consumers and not vice versa, but there are solutions.

In a 2003 JPSP paper (Vol. 85, No. 1), it was reported that the bigger the assortment, the harder it is for people to choose, “except” under one condition: when they enter with an articulated preference. Nobel Laureate Herb Simon, PhD, first referred to this as a “satisficing” option: the first decent choice that fits their preference as opposed to exhaustively scanning all options until finding the perfect, or “maximising” one.

Essentially, the best thing that a consumer can do is to know as close as possible what he wants to purchase before he goes searching for it, no matter what the product is. Simplify it as much as you can. In addition, it may be wise to lower one’s standards when making a buying decision.

“Any customer can have a car painted any colour that he wants so long as it is black.” — Henry Ford

The next time you purchase coffee, define as close as possible what you want before you even think about choices or enter a store. Next, lower your standards and accept the fact that it may not rank as the best coffee in the world, then you reduce the chance of regretting your choice.

Do this and you will feel better about your decision and at which time you will have made the ultimate choice you can make!

The Hutch Report

The Better Life Fallacy

By | Psychology, Technology

The world has been innovating at a rapid pace over the past 20 years like no other time in history. Technological advances have created the likes of companies such as Uber, Task Rabbit and Airbnb. In this new connected society we now have new powerful social networking platforms such as Facebook, Instagram, and Linkedin. We have everything that we ever wanted to know at our fingertips with tools such as Google. We have new communication tools such as email, text messaging, Twitter, Snapchat, What’s App, or Skype. We are seeing the reduction of brick and mortar stores, slowly being replaced by online Mega Stores suchs as Amazon, Alibaba, and Priceline, driving down prices. Traditional television is being replaced by the likes of Netflix and YouTube.

These changes have removed the gatekeepers from a number of industries. You don’t require a publisher to sell a book, you don’t need a record label to sell music, you don’t need to be a journalist to publish news. Soon we may not need banks to transfer money with the introduction of cryptocurrencies such as Bitcoin and Ethereum.

With all of these changes in our society, you would think that the results have all been for the betterment of us all. After all, our lives are more efficient now, are they not? We have more time on our hands, don’t we? More jobs have been created, have they not? The information and news flow in the world is more transparent isn’t it? The internet, ipads and iphones have produced better educated children haven’t they? People are generally happier now that they can have what they want when they want it, aren’t they? We think the jury is probably still out on all these points because the truth is, the reality has not lived up to all the promises.

While we can translate smartphones and the Internet as tools of efficiency, these efficiencies have in fact made people’s lives more sedentary, which in turn has a negative impact on health. The message always seems to be that you don’t have to move from your seat, just press a button and the world comes to you. Search the net for the best buy, get it delivered right to your door. Buy your groceries online and have them delivered to your door. Find the best restaurant nearest you.

Why go outside to play sports when you can play them online? Playing sports outside now seems so strange. Intead of actually playing sports, people are sitting down and playing them on their screens. Multiplayer used to be real interaction between people. Now you sit alone in a cyber world and pretend that you are really interacting with people. This is causing psychological problems of isolation. In addition, the amount of violence steaming across our screens has reached never before seen levels. This is is causing us to become desensitized to it, which we wrote more about here.

Now that we spend so much of our time looking down into these smartphones, people are starting to experience new kinds of aches and pains. Just recently a study showed that smartphone related neck pain has been on the increase.  According to a study at Harvard Medical School, researchers found that reading e-books had an adverse impact on “overall health, alertness and the circadian clock, which synchronizes the daily rhythm of sleep to external environmental time cues”

We have highlighted here how google search is modifying our brain’s ability to think and how our attention spans are being slowly eroded. Having all the answers at your fingertips seems to be removing the need to think about problems. As the old saying goes, “use it or lose it,” as it applies to our brains in this case. We wrote about the social media casino here, explaining how big social media companies are manipulating our brains so that we stay longer on their platforms.  This increases their revenues while at the same time they are creating problems of smartphone addiction among the masses.

The new world of text messaging and Snapchat has done nothing for english spelling skills. Texting has become any every day task that many teenagers engage in on a day to day basis. Many of those text messages that are sent often contain textisms. The use of textisms is starting to become more accepted among the younger generation. There are now worries from both media sources and educators that texting may have a negative effect on the literacy skills of students. In addition, the constant scrolling and texting is causing increasing cases of repetitive strain injuries.

In a always connected world there doesn’t seem to be anywhere to hide. If you want to use the technology you have to give something up. That something is your privacy. Long gone are the days of having an unlisted telephone number and staying offline to keep your information safe from prying eyes. It doesn’t take much effort to find anyone’s address and contact information. We can go on google and basically stand infront of a 3D picture of their house. People don’t seem to worry about letting this technology track every move they make, freely giving out their location on Google Map and putting their entire life story on Facebook.

We keep making things smaller and thinner giving the impression that it is saving room but at the same time we are producing more and more gadgets that don’t provide much more than the ones you already posses. Think about all the families with multiple gadgets doing the same things.  Televisions, that now come with access to the internet, computers, iPads, big smartphones, smaller smartphones, iPods etc..

The companies producing these products, want you to have all of them and repurchase them as often as possible. For this reason we have multiple upgrades with very little value added with each one. If your smartphone, ipad or television breaks, getting it repaired is no longer even an option. We used to have an industry built on reparations. Now it would cost you more than the price of the product to get it repaired, so we dispose of the old one and purchase a new one.  This is creating huge amounts of waste in our environment. It is dding to the current levels of toxicity in our air and land. These products are rarely disposed of properly, causing deadly chemicals to leak into the ground. Companies in Asia that manufacture the electronics are not properly regulated and therefore have been responsible for emitting toxic fumes into the air.

This new economy has changed the face of the middle class and consumerism in general. Americans now owe more than ever before, with household debt hitting a record of nearly $13 trillion. And auto loans, home loans and credit card debt are all still on the rise, according to the Federal Reserve Bank of New York. While at the same time, the richest 1% now own more than half of all the world’s household wealth, according to analysts at Credit Suisse (These millionaires – who account for 0.7% of the world’s adult population – control 46% of total global wealth that now stands at $280 trillion. At the other end of the spectrum, the world’s 3.5 billion poorest adults each have assets of less than $10,000. Collectively these people, who account for 70% of the world’s working age population, account for just 2.7% of global wealth).

So are we living a better life? You be the judge.

The Hutch Report

The Tribal Echo Chamber – 7 Ways to Escape It

By | Psychology

The advent of social media and social networking has brought about some fundamental changes in the way we connect with people and with whom we connect. In addition to the speed with which we are able to connect,  we are now making connections with people in remote villages in far away places such as India and China. We now have numerous channels by which to make these connections and at lightening speed. By way of the internet and applications such as What’s App, Snap Chat or Instagram we are able to find like minded people in all different realms of life to connect with. Before our eyes we are seeing the development of tens of thousands of tribes.

Seth Godin has written and spoken about “Tribes” and how there are many tribes out there just waiting for someone to lead them.

“It’s simple: there are tribes everywhere now, inside and outside of organizations, in public and in private, in nonprofits, in classrooms, across the planet. Every one of these tribes is yearning for leadership and connection. This is an opportunity for you—an opportunity to find or assemble a tribe and lead it.”

What is a tribe? “A tribe is viewed, developmentally or historically, as a social group existing outside of or before the development of states,” as one definition puts it, however, it can simply be described as a group of people joined together by a common goal or interest.

Tribes have always existed in history. Some tribes remain small and remote while others have flourished and grown to millions of members. Some tribes define themselves as wine connoissieurs, Rolling Stone fans, Harley Davidson riders, or stamp collectors. Tribes have been a great way of exchanging information or experiences with other people who share similar passions and interests.

But in today’s world something has changed. As stated above, tribes are typically created with a common interest and therefore typically a common mindset is fostered within the tribe. This is still true today. However, there is a difference today that amplifies the dangers of a singular mindset. Individuals seek out those in the world whose mindset represents theirs and look no further effectively creating a closed loop. Different viewpoints are not exposed. The singular mindset and set of beliefs of a tribe can be reinforced to the point they think theirs is the “right” and “only” world view. The tools of social media and social networking allow them to create this closed loop much more efficiently than they ever have. They congregate on similar platforms. They all follow each other. They create defense systems for their beliefs and attack others that don’t agree which is unfortunate as our society now seems to have forgotten that it is ok to disagree respectively. To concentrate only on those sites whose editorial point of view coincides with one’s own view leads to living in an echo chamber. So, in spite of all the advantages our new connected world provides us, it has brought along with it many disadvantages. Tribal echo chambers are one.

If you are locked in a tribal echo chamber you are not being exposed to the opposite side of the argument. You are part of a tribe of like minded people who choose to live within a comfort zone. You are only interested in protecting or supporting your side. You only have an interest in following people that agree with you. Ideas that are opposed to your own are like a virus that need protection from. You are a victim of confirmation bias!

Those who step out of this chamber do so with a mission to discredit others with differing beliefs. They set out to harass and insult without any interest in understanding the opposing viewpoints. This became very apparent during the last Presidential election. The opposing sides were split, not wishing to engage in any kind of intelligent discussion. It became a contest of who could shout the loudest and longest. Who could come up with the most clever insult.

The smartest people in our society are able to engage in healthy debate. They can disagree with each other without having to resort to character defamation. They are active listeners and respect the right of the other side to present their views. Studies of the most successful lawyers show that they are those that know the arguments of the other side better than the other side. It is not necessarily the lawyer who has studied the most and knows the most about law. However, in today’s society it has become dangerous to openly criticize popular vision.

These tribal echo chambers are not limited to the actions of the participants of the tribe. The tools of social media are also responsible. Companies like Soundcloud, Pandora, Spotify or YouTube use algorithms to analyze what we are listening to and propose something similar. This locks you into an echo chamber of a cycle of similarities that is difficult to get out of.

You may think you are discovering something new when you search in Google but Google’s search algorithm appears to have been systematically promoting information that is either false or slanted on various subjects based on what you search for. Facebook has also been accused and found guilty of similar actions. So are you discovering something new or are you discovering what someone else wants you to discover?

The internet and social media is a very addictive place, and as we pointed out in our article “The Social Media Casino,” the biggest and richest technology companies are investing a lot of money to learn how you think and act in order to keep you locked in. Therefore, there are no easy answers on how to break out of these tribal echo chambers. The onus is on the individual and as we are largely responsible for the applications we use or tribes we join, we do have the power to make a change. Here are a few things to consider;

  1. Become an active listener – Respect the others right to speak and give them time to state their viewpoint.
  2. Read books – You will learn and discover much more by reading a book than reading a hundred articles that are being produced in your tribal echo chamber.
  3. Use a human algorithm for music discovery – It may sound old fashioned but you would be amazed at how much new music you can discover just by speaking with friends.
  4. Learn the art of clarification – Seek to understand the point that the opposing view is trying to make. Just hearing what they have said is not enough.
  5. Embrace the other side – Become active in groups that have a different viewpoint from your own and be an observer, not a troll. It may help broaden your horizons.
  6. Re-evaluate your values – Is it more important for you to be right, or is it more important for you to grow and learn?
  7. Take a break from the internet – Get out and experience nature once in while. You may surprised at how rewarding the experience can be.

The “Follow Back” Button on Twitter – Who Benefits?

By | Marketing, Psychology

John Harper lives in Pine Village, Indiana.  It is a beautiful little town with lots of friendly folk who are always willing to help their neighbors or visitors in need. The population is only 217 so John knows just about everybody in town and everybody knows John.

John works at a local factory and although he enjoys his job and being with his fellow workers John has always had dreams of having a bit more. He has always had the desire to be an entrepreneur and reap the financial rewards of being his own boss. After years of being at the factory, one day the opportunity presented itself. John jumped at the chance, left his job and set his plan to put his dreams in action.

John took his savings and started a small business selling jean jackets. John stated, “I mean, everybody wears them around here, what better business to start!” He opened his shop on the main street of town. Soon everybody knew about John’s shop and was stopping by to say hello. They, of course, wanted to help out the best they could so they purchased something from John. Right off the bat, the shop was doing great sales. Jean jackets were popular in Indiana since there were a lot of farmers and that is what they like to wear. Most people in the town could be seen wearing John’s jean jackets.

After a few weeks, sales suddenly slowed to a drip. After a quick analysis of the situation John suddenly realized the problem. The main reason was that jean jackets are quite durable. Once you purchase one you can wear if for quite a while before it wears out and needs replacing. Remember the population of Pine Village was only 217 so John quickly realised he needed to go outside of Pine Village and even Indiana if he wanted to seize the chance of selling more jean jackets and grow his business.

John came to the brilliant idea of sending out a flyer with a bold message saying, “I will come to see your shop, if you come and see mine.” John thought that if these shop owners came to visit they would see the quality of John’s Jean Jackets and want to buy them. John sent this out to jewellery stores, grocery stores, hobby stores, banks, lawyers offices etc. He sent the flyers out to every business he could think of.

After a few days some replys came trickling in. “Sure John, come and check out our shop and we will come and check out yours.” You see, these stores were thinking, “If John comes to visit our shop he is going to see our quality products and services and buy from us.” Soon John was spending most of his time visiting fish stores, furniture stores, gift shops etc. In return, these people came to visit John’s shop.  There was one big problem. John didn’t need any furniture or gifts so he never purchased anything from the shops that he visited.

John’s shop in return got lots of visitors from the fish guy, the bank clerk, the grocery clerk etc. However, there was another problem. None of the visitors bought anything from John’s shop. They liked it, and sometimes complimented him on it but there were no purchases. John began to get worried because in spite of the shop being so popular and having people come and go all day long, there were no sales. Eventually John did get a couple of sales from a few farmers that lived a few hours away in another county but nothing that could help sustain the business.

After a year, John’s store had thousands and thousands of followers but no sales. John didn’t purchase from anybody else because he had no money left seeing that his business was not doing well.

After wasting all his time and effort visiting other stores outside of town and entertaining those that came to visit him John eventually went into bankruptcy. The store was hugely popular but couldn’t make a dime. John ended back at the factory.

A few months later, all the guys at the factory started opening up Twitter accounts, as Twitter started to become hugely popular, so John did the same so he could stay in contact with all his pals. As he read his Twitter feed from day to day he decided to follow a few other accounts of people that he admired in addition to some news feeds that he found interesting.

Then one day a strange thing happened. John began to have a bunch of people follow him with the request that John follow them back. John shut down his computer and began to laugh. He realised his time might be better spent hanging with the local town folk.

The Hutch Report

Performance: What does it take?

By | Psychology

Perform. This is something we all must do. This article examines, at a high level, what it takes to perform well and what differentiates those that perform exceptionally well. Performance is most typically associated with actors or musicians, athletes, or other top talents. But, it is something we all must do. Every day. Actors play a role. We all play multiple roles on any given day. Actors are given accolades when they succeed or deliver a powerful performance in a role. Likewise, when any one of us can perform any of our roles well it also usually leads to rewards. These rewards can be material or even more importantly the non-material, inner rewards.

While of course it is great to earn more money, win prizes, win accolades from our friends, those are fleeting rewards. The more fundamental and powerful rewards are the changes that happen within us. These changes can be subtle. Some examples are increased confidence in ourselves, the satisfaction of having confronted personal challenges, of pushing ourselves to grow. Even if we do not get the material or external rewards, or people laugh in our face, insult us or mock or make fun of us, if we are rooted on what really matters to us in our performance this will allow us to motor on through, to pick ourselves up, dust ourselves off and get back on the proverbial horse.

Actors, athletes, musicians and other public performers often have relatively clearly defined roles. And they often have the luxury, once they get to a certain level, to be able to focus specific time training to improve and deliver their performance. It becomes a virtuous cycle of success. In his book, Outliers, which was first published in 2008, Malcom Gladwell contends that practice is a key indicator of performance. A widely quoted and restated premise in the book is that ten thousand hours of practice in a particular field will enable the practitioner to become a world-class expert in that field. Gladwell holds out examples of the Beatles, who before becoming huge had spent over ten thousand hours touring in Germany, or Bill Gates who had early access to computers as an adolescent and teenager. While clearly it is a great advantage if one has tons of time to practice for a certain role it is not the whole story.  Certainly, the folks cited in Gladwell’s book are successful  outliers that benefited through tons of “practice” time. So, can anyone of us become an outlier through ten thousand hours of deliberate practice? It turns out, not really. This theory has now been largely debunked in a 2014 research study conducted by Princeton University, Michigan State University, and Rice University.

The abstract from that university study reads:

“More than 20 years ago, researchers proposed that individual differences in performance in such domains as music, sports, and games largely reflect individual differences in amount of deliberate practice, which was defined as engagement in structured activities created specifically to improve performance in a domain. This view is a frequent topic of popular-science writing—but is it supported by empirical evidence? To answer this question, we conducted a meta-analysis covering all major domains in which deliberate practice has been investigated. We found that deliberate practice explained 26% of the variance in performance for games, 21% for music, 18% for sports, 4% for education, and less than 1% for professions. We conclude that deliberate practice is important, but not as important as has been argued.”

While there are clearly statistical benefits for practice, particularly in games, sports and music, practice is not the only pillar for success and even less so in education and professions. So if we want to continue improving our games, sports, music or other specific skills, for example public speaking, writing … by all means we should continue to put in the work and practice. You don’t get results without putting in the work, except when playing the lottery. While “hope” is great and good to have, “hope” itself is not a great strategy for success.

So, if it is more than just practice to succeed, particularly in education and other professions, what do those that perform well do better or differently than the others?

About education, I have an intelligent teenager who is struggling in highschool. Like any good parent, I did a bit of googling to see what the Internet had to say about how to help your kid and what do successful students do that is different. Are they just more intelligent? While of course being intelligent does not hurt, thankfully even those of us with average intelligence can be successful students. I stumbled across this Ted Talk which discusses research that was done among UK students to determine what methods the successful students in this group exhibit that helps them be successful, more successful than their peers.  The two main takeaways that I took out of this are that two important items are a) good comprehensive scheduling habits and b) practicing on test questions. These were two of the most important elements of behavior exhibited by successful students. Comprehensive scheduling means scheduling everything ahead, not just classes and revising for tests, but also scheduling in breaks and fun activities. Memorization is also important, however, more important was how to use and deploy the memorized information, hence using practice exam questions to study proves to be a key for success on developing a good understanding of the material being studied. Implementing this so far with my teenager has not been easy. For example, when asked to start planning, the initial plan and schedule was not very detailed. It would just say study at 7pm, relax at 8pm. So we hit upon the idea of planning in reverse. In order to get to a better level of detail and view on how time was being spent on which specific activities, we found it was easier to start by simply writing down the time for activities retrospectively. This approach seems to have served as a good stepping stone to learning how to develop a good forward-looking plan and schedule. Thinking in advance about what you want to do, planning when you are going to do it are two very powerful techniques for any endeavor whether it is in school or anything else.

A book that greatly resonated with me when I was beginning my career in the business world was The Corporate Athlete by Jack Groppel. Maybe this sounds a bit corny or smacks of new-ageism, but it really brought home the fact that in order to really perform any role well – parenting, investing, writing, working, bitcoin speculation  etc – the basic foundation needs to be in place for mind, body, and spirit. It comes down to basics, eating right, exercise, sleep, and mental and spiritual preparation. By spiritual I do not necessarily mean religious, but more strengthening one’s inner spirit through, for example, mindful mediation and increasing will power as discussed in our earlier article The Will Power Battery.

Thirty some odd years later, I am still striving towards that goal as a north star of getting everything in balance, and still going through ups and downs, not always doing what is good for me even though I know better. Here is a handy list that can be used as a great set of reminders that came across my Twitter feed from Vala Afshar (@ValaAfshar), currently as of this writing, the Chief Digital Evangelist at Salesforce.

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We’d love to hear from you and any of our readers on what their path has been, what struggles they have faced or are facing and how they are working on overcoming them.

The Hutch Report

Bitcoin and the Bandwagon

By | Cryptocurrency, Psychology

Bitcoin and the blockchain have been around since 2008 when the elusive Satoshi Nakamoto presented his/her white-paper to the world outlining its structure. Since its core is based on cryptography and mathematics, in the beginning it only attracted the attention of those in that area of research. However, because it was proposing a new medium of exchange that could not be altered and promised anonymity, the dark side of commerce quickly joined in. From here, the value of Bitcoin has begun to increase, as has the attention. After 9 years in existence, the mainstream media has begun to chime in and before you know it, Bitcoin charts and quotes have been all over the news.

The other day, my father-in-law asked me if I heard about the action in Bitcoin. He used the term as loosely as he would “Google search,” however I knew that his understanding of what Bitcoin actually was, was severely limited. My neighbor stopped to chat and told me her son (15 years old) was having a friend over. I said, “To watch a movie?” and she told me, “No, to trade Bitcoin.” She had provided her son with a few hundred dollars to trade! Last night I was in a restaurant in town that I know very well. It is a small place with the tiniest kitchen. I popped my head in to say hello to the chef. The first thing he said to me was, “Hey, did you buy any Bitcoin lately?” At that moment I realized the wagon was getting very full.

The chance that people begin to adopt certain ideas or choices tends to increase when they realize that other people have adopted similar ideas and choices. This is a human cognitive bias known as the “Bandwagon Effect.”

In 1848, Dan Rice, at the time a famous and popular circus clown, decided to use his bandwagon (a wagon that carried a band during parades) and its music to gain attention for his political campaign appearances. His campaign became more and more successful and this obviously attracted the attention of other politicians who fought for a seat on the bandwagon, hoping to be associated with his success. Bandwagons eventually became a standard centrepiece in political campaigns and the phrase “jump on the bandwagon” was born.

It is a powerful principle that is used constantly in marketing. The concept describes how the increasing popularity of a product or phenomenon will encourage more people to “jump on the bandwagon.” We see it everywhere. #America’s No 1 choice, #the fastest selling product, #most wished for, #most gifted or the myriad of top 10 lists that we see everyday.

The tendency to follow the actions or beliefs of others occurs because individuals directly prefer to conform, or because individuals derive information from others. Normally, when an individual makes a “rational choice” (see our article on the Rational Price here), it is based on the information they compile from various sources with which to come to a decision. However, as information cascades, or when people start passing on information they assume to be true, but cannot know to be true, based on information on what other users are doing, they will ignore their personal information signals and follow the behaviour of others.

The phenonmenon of Bitcoin and cryptocurrencies does not stop with the bandwagon effect. The speed at which it is moving, where fortunes are being made and lost in the most unlikely areas of society has stirred a variety of other cognitive biases into action.

Closely related to the bandwagon effect, and becoming clearly evident in the cryptocurrency mania, is the “fear of missing out” or FOMO. The fear of missing out is a type of motivation that is described as a drive not to miss current or future opportunities. It’s associated with a fear of missing chances for competitive advantage, rewarding experiences or financial opportunity gains. It is considered a common and strong form of motivation that can explain a wide range of human behaviors. However, as with other similar biases,  the fear of missing out can result in excessive or compulsive behaviour and poor decisions.

Robert Cialdini, author of the widely popular Influence: The Psychology Of Persuasion, popularized the term “Social Proof.” The Social Proof Theory, affirms that a person who does not know what the proper behavior for a certain situation is, will look to other people to imitate what they are doing and to provide guidance for his actions. Uncertainty is the fuel that activates and feeds the mechanisms of social proof. This is especially fitting in the case of cryptocurrencies, as the technology and mathematics behind them is not so simple for the average person to immediately grasp. Therefore, social proof becomes more influential when the surrounding people are perceived as particularly knowledgeable about a situation or are even just slightly more familiar with the situation than the observer is.

As the price of Bitcoin and a thousand other cryptocurrencies have risen to lofty levels, so has the debate around what cryptocurrencies respresent.  Are they a medium of exchange? Do they have true value? Do you have to pay taxes on gains? Are they something else other than a tool for speculation? This debate has come to just about every financial media news outlet; CNBC, FOX, Bloomberg or CNN Money where they present daily their panels of financial experts. So where better to gain an understanding about cryptocurrencies.

The trap that many viewers are falling into is known as the “Authority Bias.” The Authority Bias is a where you defer to any position of authority to either dismiss or confirm evidence. The thought process follows the following reasoning pattern: Person X is an authority in a particular field. Person X says something about a  topic in their respective field. Person X is probably correct because they’re an expert. Because of this reasoning, the Authority Bias maintains that if you don’t know something better yourself you will likely trust the advice or information from someone who is considered an expert in that field.

The Hutch Report has been following Bitcoin and other cryptocurrencies for a while now. We recently completed our current feature report related to Gold Backed Cryptocurrencies, which can be downloaded here. We don’t profess to be experts regarding this technology but we do follow it with interest. We believe that, although a large number of opinions exist about where all these cryptocurrencies will be in the future, nobody really knows. Nobody is even certain about true identity of the originator, Satoshi Nakamoto.

We are currently living in unchartered territory so it is up to each individual to protect themselves, keep their bias in check. Don’t blindly follow and do your best to inform yourselves.