Hey, I’ve been busy writing my thesis.

I’ve also been setting up a guinea pig-style experiment with two of my friends from HKU. Sophie and Sylvie are undergoing a challenge to moderate their spending in real life and see whether shifting consumption to virtual worlds works.

Check their blog out at — I’m the moderator, site admin, and contextualizer. But it’s really more about them, and they’re really sweet girls.

So please check it out.



Americans are hunkering down and saving more. For a recession-battered economy, it couldn’t be happening at a worse time.

Economists call it the “paradox of thrift.” What’s good for individuals — spending less, saving more — is bad for the economy when everyone does it.

Some experts say consumers have been so shaken by how fast their wealth has shrunk, so burned by credit card debt, that they might not resume their robust spending for years, if ever.

“People are not saving; they are building financial bomb shelters,” said Mark Stevens, who runs a management consulting firm, MSCO, in Rye Brook, N.Y.

This article pertains directly to my master’s thesis: first, choices made by the individual that benefit the individual are not the same as those that benefit the economy and vice versa. Secondly, don’t frame the question as saving — frame the question as ‘not buying shit they don’t need and don’t have the money for.’ Americans had a negative savings rate on average for several years. We paid for stuff with credit card debt and leveraging against our houses, and I would receive six calls to refinance my mortgage per day. Every day. The article quotes Cornell’s Robert Frank, who mentions that this frenzy of consumption was unsustainable. Building a fortune on rampant consumer spending, in order to spend more yourself? Just another illusionary bubble that got popped.  And illusions die hard.

Now we’re saving hard to make up for it, and because the media tells us we should be worried (just like it told us to spend spend spend — and the ads are still there) — it reinforces the perception that we are in trouble, and that everyone else is saving, and that conformity effect is a subtle nudge towards not spending — even though the gist of the information here is that you should be spending for the good of our consumer society. Shades of 2001 with buying as a civic duty.

I don’t think that is going to work this time. This Prisoner’s Dilemma is brutal, and humans are conditioned to react twice as strongly to the idea of loss as to the idea of gain.

Matthew Conrad, a financial manager at Complete Wealth Management in Orange County, Calif., says he knows of people who drive a BMW or Mercedes and eat macaroni and cheese for dinner several nights a week. That suggests some are making an awkward shift from free-spending habits and are reluctant to give them up.

Grant McCracken theorized a remarkable idea about consumption, which he called the Diderot effect. The story goes that Diderot had a cozy little study, somewhat ramshackle but pleasing, and then he received a gift of a marvelous dressing gown from a dear friend. This dressing gown, of red velvet, made the rest of his study look shabby in comparison, so Diderot began to replace his study piece by piece until he had a fantastic room that matched the gown. And then he wrote about it.

The Diderot unity is a masterpiece of psychological connection: it asks that objects which are invested with similar qualities and meanings become grouped together and associated with each other, even if there is no actual linkage between them. For example, the BMW has more in common with the Rolex and the Bang & Olufsen coffeemaker than with Kraft Dinner; it implies that someone with a BMW should not be having to eat mac and cheese.

The Diderot effect is when the consumer decides that they need to obey the need for psychological consistency and commitment: when they choose to replace their existing goods with ones that match their lifestyle — or alternatively, reject new goods because they do not fit the existing Diderot unity. If you go down to the local farmer’s market and look for the people buying organic produce, you are going to find more Priuses than Hummers.

Diderot Unity Exhibit A: If I had a million dollars

But we would eat Kraft Dinner. Of course we would, we’d just eat more. And buy really expensive ketchups with it. That’s right, all the fanciest Dijon ketchups! Mmm. Mmm-hmm.

Diderot Unity Exhibit B: Stuff White People Like.

Vance Packard (no relation to Packard Motor Co.) wrote a book called Hidden Persuaders in 1957. It was deeply critical of market research and advertising and marketing, and topped the NY Times Best Sellers list. Reading his book (and the sequels The Status Seekers and  The Waste Makers)  is heartbreaking, because what it shows is that we’ve come so far, and yet we haven’t learned a thing. Women in 1956 bought 80% of consumer goods for the household, but marketers still aim ads towards men. A bigger car makes people feel safer, and people are ashamed to drive a car beyond three years old. Marketing put Eisenhower in power as the big daddy of the US, and fought the brand war between Republicans and Democrats with Nixon and Agnew. And advertisers aim their marketing to children on a reprehensible scale.

Packard identifies the usage of psychology in advertising, and catalogues the ways in which advertising markets things people do not need by manipulating desire. There are three things of particular note.

1.People don’t say they want what they really want. You can’t trust people to say ‘I want a smaller, more fuel-efficient car’ and then actually buy the damn thing.

2. Americans are peculiar because they automatically assume that bigger = better. They are also unable to stop working, and even during leisure time they must feel as if they are doing something. Hobbies and tours are big business. (This is particularly true, looking at the rise of virtual business in There, Second Life, WoW etc. The biggest dream of many people in virtual worlds is making a living from playing a game.)

3. People are irrational. Ridiculously, stupidly, easily manipulated irrational. But irrationality, Packard concludes, is luxury, and it makes people feel better that they can afford to  make irrational choices. He’s just suspicious of the amount of manipulation that goes on to influence people to make these choices.

Critiques of Packard basically state that it’s not that easy to manipulate people, and sometimes advertising doesn’t work, and our understanding of psychological buying is not perfect.

Sometimes advertising doesn’t work for particular products. But the world we live in is mad for buying and planned obsolescence, its economy is dependent on buying more and more, and that’s the world advertising and marketing helped make. Some dude got trampled to death at a Walmart during the Christmas rush by a mob that just wanted to buy a $388 flatscreen TV. This is a metaphor for all of us: we’re the security temp and the mob and the store and the Black Friday sale.

The way to make people happy in two simple steps: Underpromise, overdeliver.

Here’s Louis CK on Conan talking about how everything in our world today is so AWESOME that when the slightest thing goes wrong we feel DESPAIR.

One of my friends, Dan, worked at a discount retailer when on hiatus from his PhD program. I still remember his rant about how cheap a box of Ralph Lauren shirts were, and how stupidly marked up the prices were. A $20 dress shirt is made in Bangladesh for 20 cents. A $200 dress shirt is also made in Bangladesh for 50 cents, and then they mark the price down by 50% and you think you’re getting a fantastic deal.

Fashion is bullshit, and everyone in the fashion industry knows it.

What seems inevitable is that the pain will worsen as the price reductions provoke questions among consumers of how stratospheric profits must have been when the economy was riding high. How great, really, was the surcharge to consumers for participating in fashion fantasy?

“I was in Saks last week, and there were these staggering discounts and it’s not even Jan. 1,” Tim Gunn, the “Project Runway” host and chief creative officer of Liz Claiborne, said Tuesday, before a discussion on “Redefining the Rules of Fashion in Today’s Economy,” sponsored by the textile manufacturer Dow XLA. “I was told by easily half a dozen sales associates that if I opened a Saks credit card, I’d get another 15 percent off. What I wonder is, “What are the real margins?’

All right, it’s been a while since I last posted. The reason is that our class was supposed to work on a blog for class. Once that assignment was finished, we moved on to a new assignment. I don’t think the others are even updating, since they work us like dogs in this course and it has finally let up a bit.

However, the more you suffer to get into something, the more valuable you find the experience or the group. This is why aboriginal peoples have rites of passage to adulthood, and why fraternities haze new recruits.

The new assignment Hein gave us is to reinterpret Edward Bernays’ 1928 book, Propaganda, as a website. Bernays was the father of Spin and PR, and he was the first to translate the psychological theories of his uncle, Sigmund Freud, into advertising and propaganda. Bernays helped companies adapt the tools of mass communication to benefit mass production, and gave them the tools to turn needs into wants, turning America into a nation of consumers. Bernays is responsible for the success of IHOP and Denny’s, because he cast ‘bacon and eggs’ as the quintessential American meal and sold it to the public.

On November 20th, my colleague Melissa and I went to the Creativity World Forum in Antwerp, Belgium. It was a good set of speakers, particularly with David Heath and Chris Anderson.

I also discussed my ideas and background with Arjen Mulder in Amsterdam last week, in preparation for the December presentation of our thesis topics.

In short: I am interested in why people make choices. Logical self-interest, it turns out, is not the determining factor in decision-making.

For that, we go to James March’s Decision-making tree:

  1. What kind of person am I?
  2. What sort of situation is this?
  3. What does a person like me do in a situation like this?

Identity is the most important factor. So if you change the person or the situation, you can change the effects.

Body-Swapping as Psychotherapy

The evidence that inhabiting another’s perspective can change behavior comes in part from virtual-reality experiments. In these studies, researchers create avatars that mimic a person’s every movement. After watching their “reflection” in a virtual mirror, people mentally inhabit this avatar at some level, regardless of its sex, race or appearance. In several studies, for instance, researchers have shown that white people who spend time interacting virtually as black avatars become less anxious about racial differences.

VIDEO: Apollo Robbins at The Association for the Scientific Study of Consciousness convention

I’ve recently become a bit obsessed with Apollo Robbins. 

Robbins is a pickpocket and Las Vegas magician turned security consultant; he’s featured on the US version of the TV show The Real Hustle on TruTV (formerly CourtTV). His magic is distraction and manipulating human behaviour.

Here are two articles from the New York Times: one a recent link describing the Science of the Five Senses convention; the other article a year old, written by the science writer Robbins steals blind in the video up top.

Also included: link to “Attention and Awareness in Stage Magic” in Nature Neuroscience. Authors include Stephen L. Macknik, Mac King, James Randi, Apollo Robbins, Teller, John Thompson & Susana Martinez-Conde. Watch the others — Teller talks!

Let’s go back to pickpocketing and the science of cognition. Robbins explains that pickpockets have an advantage over stage magicians in that thieves prey on the unsuspecting; magicians do tricks with everyone watching. 

Magic is about playing with basic human nature: attention/inattention, de/sensitivity, attraction/distraction.

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