Coffee or Health Insurance?

Topic: The “drop in the bucket” problem

Dan Ariely: So, part of the problem is the "drop in the bucket" problem. Right? So if I don't have money for health insurance, which is $5,000, what will $5.00 today be. And that's a problem of procrastination. Its $5.00 today and today and today and today, and the problem is, we can't envision to ourselves how this money would accumulate. We have to see where it's coming from. And I think we need visualizing tools. I think actually the banks role is to help us think about money better, and sadly, nobody is doing it because everybody wants us to spend more and more.

I was actually getting a little bit optimistic when the recession hit because banks were becoming interested in getting people to be more responsible. But sadly, I don't see this happening these days. There are a couple of startups, there are a couple of ideas kind of forming around, and I hope there will be some progress, but if you think about a person who is facing this dilemma, it's not humanly possible for him to think about the compound interest and the long term ramification of a latte a day, we need help in that and I hope that software will provide this help.

I also think that the iPhone is a wonderful idea for that. If you think about it, we all have good intentions. Even you friend who is spending the $5.00 on the lattes, they have good intensions for the long term, only in the short term, it's very hard to act on these good intentions. And I find this interesting because it can be with us when we have long term plans and when we have short term failing. And if you think about the phone as a time machine in this case, I think it could help you.

Topic: Taking the outside perspective

Dan Ariely: I'll tell you one more application. This is the first app we're going to have out, we'll have it up, I hope in two weeks if Apple approves. And you go on the iPhone and you pick four people that you admire, that you respect and you pick them from your address book. And then when you're tempted with something, you say what you are tempted with and then you pick one of those people and you say, what will they have told me to do? Now, what's the idea here? The idea is that when we are in a situation, it's very hard for us to take the outside perspective. But if you say, what would your mother tell you to do? And then you click, "I'm tempted to buy coffee; I'm picking my mother -- what would my mother tell me. I think my mother would tell me "No." And then it also sends it to your mother to verify. Now, you don't have to wait for your mother to verify to figure it out, the idea is to give people the outside perspective, to get them to think a little bit about, as advisors to themselves.

What we find, not in this app, but in general in experiments, is when people take the role of advisors, they become more rational. They see the long term more than the short term, they are less committed to the emotion of the moment, and they can do better.

Now, will w have one solution? No, I don't think so. I think we will have lots of solutions, but I think we are at the start of developing some software, some pre-commitment devices, some more awareness, and I'm actually optimistic that we will become better and better at this.

Topic: The problem with loans

Dan Ariely: There is another question about how people decide what loans to pay first. So, we're assuming right now in this discussion that people have money and it's a question of saving versus spending, what happens to people who have lots of loans?

So we recently did this study that asks the question of how do people decide what loans to pay first? And sadly what we found out was that people paid the small loans fore they paid the big loans. So, imagine you have six loans, small to huge. People want to close loans and because of that, they try to pay off the small loans, but that's not the right strategy. The right strategy, of course, is to pay the loan with the highest interest rate. People make this mistake and it costs them lots and lots of money, it's a very expensive mistake because interest rates accumulate and become very, very expensive very quickly.

We also find in our experiments that too many people these days, when they have cash, they keep too much cash in reserve. And it actually looks like a two stage process. People decide how much cash to keep, for a rainy day, and then the rest they allocate between loans, and over time, they learn a little bit about how to allocate the loans so that they pay first the high interest rate, they don't learn perfectly, but a little bit. But they still keep too much in cash and interestingly these two mistakes are connected. The people who keep more cash also tend to be more mistaken in how they allocate loans. And this, I think is a couple of really big mistakes. First of all, people should figure out very quickly how to pay loans fast and they should do it well because it's so expensive to have loans.

The second thing is I think at this time in history, when we are so uncertain about everything and everybody gives us advice about keep six month’s salary in cash. This is good advice to some people, but it's not good advice to people who have loans. Because, if you have loans, the first thing you want to do is say, "Okay, look I have a credit card, if I really need to borrow, I have this emergency money that I can get, but for now there is no reason for me to keep cash at zero percent interest rate and at the same time, pay all of this money out. So, I think people need to figure out quickly how to pay loans and how much cash they should really keep.

Recorded on November 16, 2009

We all have those friends who are cheap when it comes to some things, and spend a lot on other things. Dan Ariely explains the root of their problem.

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Political division is nothing new. Throughout American history there have been numerous flare ups in which the political arena was more than just tense but incideniary. In a letter addressed to William Hamilton in 1800, Thomas Jefferson once lamented about how an emotional fervor had swept over the populace in regards to a certain political issue at the time. It disturbed him greatly to see how these political issues seemed to seep into every area of life and even affect people's interpersonal relationships. At one point in the letter he states:

"I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend."

Today, we Americans find ourselves in a similar situation, with our political environment even more splintered due to a number of factors. The advent of mass digital media, siloed identity-driven political groups, and a societal lack of understanding of basic discursive fundamentals all contribute to the problem.

Civil discourse has fallen to an all time low.

The question that the American populace needs to ask itself now is: how do we fix it?


Discursive fundamentals need to be taught to preserve free expression

In a 2017 Free Speech and Tolerance Survey by Cato, it was found that 71% of Americans believe that political correctness had silenced important discussions necessary to our society. Many have pointed to draconian university policies regarding political correctness as a contributing factor to this phenomenon.

It's a great irony that, colleges, once true bastions of free-speech, counterculture and progressiveness, have now devolved into reactionary tribal politics.

Many years ago, one could count on the fact that universities would be the first places where you could espouse and debate any controversial idea without consequence. The decline of staple subjects that deal with the wisdom of the ancients, historical reference points, and civic discourse could be to blame for this exaggerated partisanship boiling on campuses.

Young people seeking an education are given a disservice when fed biased ideology, even if such ideology is presented with the best of intentions. Politics are but one small sliver for society and the human condition at large. Universities would do well to instead teach the principles of healthy discourse and engagement across the ideological spectrum.

The fundamentals of logic, debate and the rich artistic heritage of western civilization need to be the central focus of an education. They help to create a well-rounded citizen that can deal with controversial political issues.

It has been found that in the abstract, college students generally support and endorse the first amendment, but there's a catch when it comes to actually practicing it. This was explored in a Gallup survey titled: Free Expression on Campus: What college students think about First amendment issues.

In their findings the authors state:

"The vast majority say free speech is important to democracy and favor an open learning environment that promotes the airing of a wide variety of ideas. However, the actions of some students in recent years — from milder actions such as claiming to be threatened by messages written in chalk promoting Trump's candidacy to the most extreme acts of engaging in violence to stop attempted speeches — raise issues of just how committed college students are to
upholding First Amendment ideals.

Most college students do not condone more aggressive actions to squelch speech, like violence and shouting down speakers, although there are some who do. However, students do support many policies or actions that place limits on speech, including free speech zones, speech codes and campus prohibitions on hate speech, suggesting that their commitment to free speech has limits. As one example, barely a majority think handing out literature on controversial issues is "always acceptable."

With this in mind, the problems seen on college campuses are also being seen on a whole through other pockets of society and regular everyday civic discourse. Look no further than the dreaded and cliche prospect of political discussion at Thanksgiving dinner.

Talking politics at Thanksgiving dinner

As a result of this increased tribalization of views, it's becoming increasingly more difficult to engage in polite conversation with people possessing opposing viewpoints. The authors of a recent Hidden Tribes study broke down the political "tribes" in which many find themselves in:

  • Progressive Activists: younger, highly engaged, secular, cosmopolitan, angry.
  • Traditional Liberals: older, retired, open to compromise, rational, cautious.
  • Passive Liberals: unhappy, insecure, distrustful, disillusioned.
  • Politically Disengaged: young, low income, distrustful, detached, patriotic, conspiratorial
  • Moderates: engaged, civic-minded, middle-of-the-road, pessimistic, Protestant.
  • Traditional Conservatives: religious, middle class, patriotic, moralistic.
  • Devoted Conservatives: white, retired, highly engaged, uncompromising,
    Patriotic.

Understanding these different viewpoints and the hidden tribes we may belong to will be essential in having conversations with those we disagree with. This might just come to a head when it's Thanksgiving and you have a mix of many different personalities, ages, and viewpoints.

It's interesting to note the authors found that:

"Tribe membership shows strong reliability in predicting views across different political topics."

You'll find that depending on what group you identify with, that nearly 100 percent of the time you'll believe in the same way the rest of your group constituents do.

Here are some statistics on differing viewpoints according to political party:

  • 51% of staunch liberals say it's "morally acceptable" to punch Nazis.
  • 53% of Republicans favor stripping U.S. citizenship from people who burn the American flag.
  • 51% of Democrats support a law that requires Americans use transgender people's preferred gender pronouns.
  • 65% of Republicans say NFL players should be fired if they refuse to stand for the anthem.
  • 58% of Democrats say employers should punish employees for offensive Facebook posts.
  • 47% of Republicans favor bans on building new mosques.

Understanding the fact that tribal membership indicates what you believe, can help you return to the fundamentals for proper political engagement

Here are some guidelines for civic discourse that might come in handy:

  • Avoid logical fallacies. Essentially at the core, a logical fallacy is anything that detracts from the debate and seeks to attack the person rather than the idea and stray from the topic at hand.
  • Practice inclusion and listen to who you're speaking to.
  • Have the idea that there is nothing out of bounds for inquiry or conversation once you get down to an even stronger or new perspective of whatever you were discussing.
  • Keep in mind the maxim of : Do not listen with the intent to reply. But with the intent to understand.
  • We're not trying to proselytize nor shout others down with our rhetoric, but come to understand one another again.
  • If we're tied too closely to some in-group we no longer become an individual but a clone of someone else's ideology.

Civic discourse in the divisive age

Debate and civic discourse is inherently messy. Add into the mix an ignorance of history, rabid politicization and debased political discourse, you can see that it will be very difficult in mending this discursive staple of a functional civilization.

There is still hope that this great divide can be mended, because it has to be. The Hidden Tribes authors at one point state:

"In the era of social media and partisan news outlets, America's differences have become
dangerously tribal, fueled by a culture of outrage and taking offense. For the combatants,
the other side can no longer be tolerated, and no price is too high to defeat them.
These tensions are poisoning personal relationships, consuming our politics and
putting our democracy in peril.


Once a country has become tribalized, debates about contested issues from
immigration and trade to economic management, climate change and national security,
become shaped by larger tribal identities. Policy debate gives way to tribal conflicts.
Polarization and tribalism are self-reinforcing and will likely continue to accelerate.
The work of rebuilding our fragmented society needs to start now. It extends from
re-connecting people across the lines of division in local communities all the way to
building a renewed sense of national identity: a bigger story of us."

We need to start teaching people how to approach subjects from less of an emotional or baseless educational bias or identity, especially in the event that the subject matter could be construed to be controversial or uncomfortable.

This will be the beginning of a new era of understanding, inclusion and the defeat of regressive philosophies that threaten the core of our nation and civilization.