Thinking is difficult and sometimes unpleasant.
In life we encounter many people who, in some way or another, try to tattoo our faces.
The problem is that people basically dangle debt in front of us. And the cost for the poor of course is much higher than for the wealthy.
Disasters are usually a good time to re-examine what we’ve done so far, what mistakes we’ve made, and what improvements should come next.
In a world where everyone is behaving honestly, any dishonesty constitutes a big infraction. But, in a world where many people are behaving dishonestly, and the news is filled with stories of their infractions, even big infractions can feel small to the perpetrator.
It is helpful to think of people as having two fundamental motivations: the desire to see ourselves as honest, good people, and the desire to gain the benefits that come from cheating – on our taxes or on the football field.
While we somehow understand revenge on an intuitive level between individuals, I do suspect that companies, assuming that people are rational, completely miss and underestimate the motivation people have for revenge.
Imagine you owe on five credit cards, you owe five debts. So which debt should you pay first? And the answer is very simple: You should pay the one with the highest interest rate first. But that’s not what people do.
What people do is they pay the small loans first. Why? Because they enjoy making the number of loans smaller. But of course it is a very ineffective way to pay debt down.
It was shocking to realize how many low-income Americans don’t have savings accounts.
Money is a wonderful invention. It lets us save, it lets us specialize, right? I couldn’t be a professor if there wasn’t any money. Every day I would have to raise chicken and bread and broccoli and go ahead and spend all my time trading. So, money is a wonderful mechanism.
Money are very difficult to think about. So, we think about money as the opportunity cost of money. So, we at some point went to a Toyota dealership and we asked people, what will you not be able to do in the future if you bought this Toyota?
We don’t really want a huge house, but we want the house to be slightly bigger than our neighbors, and a car that is bigger than our neighbor’s, and they’re going on vacation that’s slightly more expensive, and this escalation happens that things got out of hand.
If I gave you now, $10 as a gift, how happy would you be? Would you be happy, is the marginal $10, the best use of $10 you can use? Of course not. If I have you a CD, you know exactly what you are getting and you will have a value for it. So, money has lots of problems with it.
Believing you are a bad person leads to a slippery slope.
Once you break the social norm and create a new social norm, all of a sudden it can stay with us for a long time.
Not all debt is bad. From time to time we should get into debt when there’s a good reason for that.
A very simple bad decision is to get into debt. And that is very expensive.
I don’t want to say that the poor are inherently cognitively diminished, but at the end of the day of making difficult, tough decisions, it’s very hard to have the energy to think about things with the right mindset.
I don’t know what exactly the translation is but when we do consume something now, something else has to give at some point.