The example of finishing a meal you dislike it not a sunk cost. Finishing the meal, even if you dislike it, means you won’t have to buy something else to eat to compensate.
If a nasty meal you already bought is worth $1 to you and a new tasty meal would cost $5, then it is only the value of that new meal that matters. If the new meal would be worth $8 to you, then you would come out $2 ahead by throwing the old meal away and buying the new one.
Timothy Schmidt but you’d come out even further ahead by eating the $1 meal and saving the $5 for the following day. Otherwise you could argue that someone buying a Lamborghini at 50% off is ahead (in terms of financial savings) of someone buying a Corolla at 20% off. Which is ridiculous. One costs far more than the other, even after discounts.
“If it’s on sale but you don’t need it, it’s still expensive.” Edit: Wow! I just realized how many likes this comment got! Thanks! And I hope most of you didn’t spend too much on things you don’t need last Black Friday.
@@surajsharma1992 and that is one of the reasons for the 2008 house market bubble. People bought houses they could not afford, later they expected to sell those houses at a higher price, but there was no market to sell those houses. In recent history, look at the bitcoin bubble.
@@andersonandrighi4539 then sell it later when it's of more value, just like the pokemon card in the video and since we are talking about discounted items, you already bought it for cheap and even if you don't need it someone will definitely pay you the same price or more, of course all this will depends on the item.
@@surajsharma1992 you're not considering opportunity cost Investments cost money too, since the time while you have that money tied up in something means you cant spend that money on something else. Also not everything appreciates in value like the charizard card.
My sister-in-law talked a traffic warden out of giving her a ticket (by playing 'silly me' and flirting with him) and decided she 'saved' € 63. She used that money to buy shoes.
My wife used her big breast implants and flirting to get out of a ticket. She had a dress on and pulled it down to show a lot of cleavage and the top outline of her bra. She streamed it to me. It was hilarious 😂🤣🤣. He could hardly focus and gave her a verbal warning after she asked for his number 🤣🤣🤣. She threw it away after he left. She told me that these milk cannons are worth every penny lol
1:23 Endowment effect (A product whether you are looking to purchase or already own is of same value) 2:51 Sunk Cost Fallacy (Needn't get your money's worth of something that you don't need or enjoy just because you paid for it, the money is already lost and isn't coming back) 4:08 Transaction Utility (just because it's a good deal doesn't mean you need a product, all that matters is what it's worth to you) 5:31 Mental Accounting (fun money = free money = expected money = serious money) 7:00 Conclusion (Knowing the mental shortcuts used by our mind, it's less likely to rely on them) 7:21 Book Suggestion (To know more about behavioral economics)
Hey just one question, doesn't it say in the title that there are 5 ways. But they explain only 4 in the video. Though I loved all of them I was wondering if the title is inaccurate?
@@OriginalCovfefe ...If they can't figure out their parents can't do their shopping in a few years, they are probably terrible students anyways. They are going to waste so many thousands of dollars in their lifetime. Easily way over 100,000 dollars. People are so naive. Even basic tricks like eye level lesser value grocery products, still works. There are literally hundreds of other tactics used by stores, service companies, manufacturers and more providers. Yes...hundreds of tactics.
@@jusayenso8186 I went to walmart the other day, and I instinctively only look at the bottom shelves. Anything at eye level is just tuned out by my brain, because I've learned that I'm never gonna buy that overpriced fancy brand stuff anyway.
@@adeelrehman7692 ...It's nice to hear from someone who actually reads comments! Most actually don't. Yes, name brands are often a total waste of money. It's interesting you mentioned walmart. Hmmmm....oh ya!...Isn't that the store that came out of nowhere...and quickly rose to such popularity to become the largest dollar volume retailer ......in the country! Hahahaha...what does this tell you about so many shoppers? What do they really know about doing this basic problem solving task? What do they really know about brand name advertising on all those thousands of tv commercials? What do they know about blind taste tests and double blind taste tests? I can't possibly list way more details. Yes...the video is right about how people are dumb with money. Most of these people will never learn exactly how many excess dollars they are handing over to businesses. Don't even get me started on overcharging tricks! Freedom of speech has limitations on social media.
I once bought a scratchcard to pass the time while waiting for my laundry to finish at the laundry mat. I won 5$, which paid for the lottery and the laundry. That made me feel like the boss!
True story I was passing thru Lake City Florida after a conference and bought a $5 scratcher out of bordom and won $500. It took me finding a Pubilx be able to redeem it for cash.
I admire your dedication to educating your audience. We all aim for financial stability and a better life. Achieving this is possible through wise investments, frugal living, and careful budgeting. I'm grateful that I learned the importance of working hard for financial freedom at a young age.
Even though I engage in investing, I feel disheartened by my lack of expertise in assessing the performance of individual companies and determining the optimal timing for stock purchases. The erosion of my financial reserves due to inflation adds to my concerns. At this point, I require precise market trajectory information, but I find myself unsure about the appropriate course of action.
that's the more reason I prefer my day to day investment decisions being guided by an asset manager seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not outperform, been using my manager for over 2 years.
The asset manager that guides me is Sonya Lee Mitchell. most likely the internet is where to find her basic info, just search her name. She's established.
High level idiocy: spending on depreciating assets Medium level idiocy: saving a depreciating asset (money) and calling it "net worth" Medium level intelligence: spending on appreciating assets to the point your liquidity is nearly all used up High level intelligence: multiplying a depreciating asset (money) at 15% - 1500% (depends on your networth and trading/investing style) and using proceeds to buy appreciating assets as a % of total networth, and having some ammo, armor, guns and defenses (appreciating assets) on the side to defend all of it.
@@manictiger Correct me if I am wrong (not being sarcastic). If I spend my money on a car (depreciating asset) is that decision idiotic. A lot of people need cars, I can barely get any groceries without one and considering I have lived without a car in the US for close to 3 years. Its an absolute chore not having one. I understand not buying a 2021 Mercedes Gwhatever but a nice reliable Corolla sounds like a good idea.
@@karoosogba8900 I'd consider a house a more important necessity than a car. I actually spent quite a few years just cycling and using buses, while I got my first million. Then I got my first house. Even then, it was near a hardware store. Only when I got my second property, did I get a car.
I realised that the secret to making a million is making a better investment. I always tell myself that you still don't need that new car or that vacation and that mindset helps me make more money by investing. For example, last year I invested 70k in top stocks and crypt0s (with the help of my advisor of course) and I made around 380k, but guess what? I put it back and traded with her again and now I'm rounding up close to a million. Delayed gratification always pays off.
According to Warren Buffett, dividends are less valuable for growing businesses and more suitable for established ones. Investing in companies that offer dividends might be seen as parking capital for steady returns, especially for those relying on portfolio income. This approach resembles bond investing, serving as a means of generating consistent earnings.
A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve not withstanding inflation.
I understand that tomorrow isn't promised to anyone, but investing today is hard for me now because I have no idea of how and where to invest in. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.
By investing, they secure wealth for future generations, highlighting the importance of financial literacy and stock market investing for building a better financial future.
The common belief that a stable job leads to financial success contrasts with the approach of billionaires, who focus on entrepreneurship, investing, and building passive income streams through long-term strategies and calculated risks methods not typically taught in traditional career paths. Most people are unaware of these alternative principles that can lead to greater wealth
+wolfpackflt670 I think you misunderstand my comment. I don't mean to say that not opening the pack now is a foolish decision. The point is, what kind of kid FORGETS to open a pack a Pokemon cards!? That's the first thing you do when you get home, if you had the patience to wait that long.
The Pokemon Card thing actually happened to me (with a different card). I found it in an old box and realised it was worth over $500, but refused to sell it and instead framed it...
Love the honesty.. if you needed the money would you sell it though? Not a death or life situation but lets say, to pay off some debt? I am assuming you don't have over $500 cash to spare...
The example given was extremely poor. If you don't need the cash, keep it. It should only increase in value with time. Also the sentimental value because it is yours can be more valuable than $500. Also $500 really is not much money... if your current situation means $500 has alot of value then forget what I said, sell immediately and invest the money into something else that will give you faster returns
not a real science and neither is economics hence why the nobel prize for economics doesnt really exist. its called "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel" which was made almost 70 years after the nobel prize was made
@@kimjong-un8543get off your high horse with "econ is not a real science", social sciences are incredibly important. Physical sciences are not the end all be all, and Nobel categories come from history, not validity or importance. Of course an ancient award system founded by the guy who invented TNT wouldn't have much emphasis on social sciences, which were not quite as nuanced or understood at the time. Today physical and social sciences are enmeshed and feed into one another more than ever. Ex. "How should we design hospitals to improve patient mental well-being and treatment outcomes?" Could combine medicine, psychology, architecture, interior design, data analytics, horticulture / landscaping, etc.
@@kimjong-un8543 Call me weird, but I didn't think the transaction utility was a fallacy. Maybe you're only willing to save $5 for walking the distance a certain percentage of the time, and the base price is used by our head to titrate how often we're willing to do it.
Ive always been ‘good with money’ and never really thought about why, but watching this I realise that I generally avoid mental accounting, if I get given £100 I treat it the same as if Id worked a full day for it
@@KazzoKiller3890 not at all haha the other 4 mistakes in the video I recognised I do but its interesting that being able to not make just that 1 mistake of mental accounting can make such a big difference over time
Yeah. I don't understand _not_ treating all money I own as money. I can budget for certain things, but if I get surprise extra money, it goes into the same things I need in life. The extra might enable to me to make purchases I planned anyway, but earlier, or for a higher quality thing that I would otherwise not be able to get, but is absolutely worth it to me. 99% of what I buy I use, and often very extensively (over 5k hours on my ANC headphones for the past 1.5 years).
@@da14a49 Even if you're skinny, walking is still good cardio. In either case, walking 10 minutes to save $5 is worth it to me (assuming I needed either the laptop or the headphones)!
'5 Ways People Are Dumb With Money' 1. Endowment Effect @2:40 2. Sunk Cost Fallacy @3:20 3. Transaction Utility @4:50 4. Mental Accounting @5:50 So, what was the 5th! :P
Hmm I've been experiencing the opposite of the endowment effect. If I want to buy something, I obsess over it and it's extremely valuable to me. Then, when I do buy it, poof, its value decreases instantly just because of the fact that I now have it and it isn't worth as much as it was before.
That's very interesting, because, for some reason, you are overvaluing something until you have it. So, the question becomes, what is it that you value about it when you don't have it? And what is lost when you do? I'm wondering how many external factors contribute to that feeling. Like, how something is marketed, if your friends or other people around you have it, etc.
@logoslive Yeah exactly. I guess it's mostly tech-related. I really want an external HDD and a high-end computer rig but when I do get them, I know they won't be as valuable to me as they are now. :D
@@feynstein1004 Same, I'd constantly obsess about a new laptop and dream about all the cool things I could do with it. But ultimately, i'll just end up treating it like shit, like all my other laptops.
@@64account33 yup i have a 900€ notebook thin, touchscreen, ssd and all that. but i dont care about it now and dont really use it. i just plug it into my tv sometimes and watch movies
I literally sat there and saw that it was $5 either way, but immediately said no to walking for the laptop. That blew my mind. Please keep making these videos, they are going to be so helpful as I try to get my life in order money wise.
Patrick Jeffrey I feel like it was the right decision still. Falacy or not. 5 dollars off over $600 is basically nothing. 5 dollars off of 15 dollars like she said was over 33% off. Ur getting a better deal w/ the headphones than u are for the laptop. The $5 difference is more negligible in the case of the laptop where it become debateable weather u wanna waste 10 mins walking or not; whereas in the case of the headphones $5 is more than a third of the whole cost, which is well worth the 10 min walk.
Yea but how often do you buy a laptop? Every couple years or so. If you are buying shitty ear buds for $10 you'd have to continuously go to the store and buy new ones, making that $5 saving add up over time.
That's 5 dollars difference either way in the given example. Doesn't matter if it's a pair of earphones or a laptop or how often you buy a new one. It's always 10 minutes in exchange of 5 dollars. Treating it differently, because it is a different proportion of the price is the fallacy here, or the illogical thing to do.
I know it easier said then done, but finding other amazon addict shoppers to share cost with you would be great. I share with my sister and absolutely enjoy prime but would not pay $100 for it but sure would pay over $20-30 if i was a heavy Amazon buyer, the shipping delivery is unbelievable, I often order on Late Saturday and get my stuff by Monday!!
I prefer amazon than driving to stores and wasting time on long lines. Also I only buy what I need from amazon. Went I go shopping I always over spend Plus amazon is sometimes cheaper than stores.
The difference between finding and not selling your 1999 first edition Charizard (actually valued in more than $200k) and not buying a new and encased one is not that you don't value the same monetarily. Instead, in the first scenario, you are simply deciding you don't actually need the extra cash and, in the latter, you are deciding you don't have the extra cash to buy one. There's absolutely nothing irrational about it. I don't think that's a proper example of the Endowment effect.
4 года назад+75
I feel encouraged to watch this videos because it makes me feel like I'm avoiding getting ripped off by society. And that's a great price
One lesson I've learnt from billionaires is to always put your money to work, and diversifying your investments. I'm planning to invest about $30k of my savings in stocks this year, and I hope I make profits.
You are right. The best approach I feel is to diversify investments- by spreading investments across different asset classes like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown.
That makes sense. I’ve been using a financial market expert for two years now and I own a six-figure diversified portfolio from investing in stocks. I want to diversify more this year, though.
Vivian Jean Wilhelm is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Vivian Jean Wilhelm is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I just stumbled across this channel today, I have already watched several videos. You guys are extremely informative, the infographics are aesthetically pleasing, and the diversity in talks styles is perfect. So what I mean is....I really enjoy your stuff.
That is really true. My father once thought his credit card useless as he doesn't have much use of it.he went to return the card but came home with another card with higher fees just because of perks.corporate rules
*You know what.....my asian parents taught me how to be a good penny.* When the gas prices went down to 2 dollars- all I can think of is stockpile and sell later....the thought of buying higher grade gas to spend the same amount made me throw up.
Also.....don't just cancel Amazon prime bc the video told you so...the service of having things shipped to you within 2 days is worth it in many cases. If you are poor and barely order anything anyways- then cancel...)
My car makes slightly more power and gets slightly better mileage if I put premium in it. Gas prices dropping have NEVER made me even remotely consider actually getting premium. The power difference can't be felt (4 HP) and mileage difference is 1.5-2% at best. Not worth it!
A real Penny would consider the costs of storing large amounts of a flammable material. Suppose you save a bit on gas, and something happens and the house goes up in flames... asians are penny wise and pound foolish sometimes.
People value different things. It is useful to try to construct a model for why apparently disparate (yet predictable) actions are, in fact, rational (given a set of values.) The rare card the person finds cleaning the garage has a connection to his past that he may value. The one on offer for sale has no such connection. The problem in the "sunk cost fallacy" is that people are assigning value to not admitting they made a mistake. But that is saying their desires are irrational, not how they go about achieving them.
Starbucks? More like "Bye Bucks 👋". Only idiots drink at Starbucks in India 😅. Way cheaper and efficient to order good quality coffee beans online and make a good cuppa at home. 👍My bro and I calculated that even Nescafe was much costlier than premium ground coffee powder online. We took the leap and now we get better coffee at lower price 😆
I think this is part of the issue. IMO, I think it's more so what I call, the microtransactions that add up over time that get people in trouble. For example, I once had a coworker who every day went to the store in the morning to buy water and/or coffee, something to eat etc. Costing anywhere from $5-$15 just in the morning. That's just talking about his morning routine. Times that by 5-6 days a week. All that guy did was complain about never having any money. Yet, when I explained the reasoning to him it didn't register in his head what I was saying. He justified the purchases as "it's only like $5." (let's go halfway down the middle and say $10/morning. That's almost $3000 a year just for water/coffee/snack lol) He only sees the instant charge not thinking instead of going to the grocery store to purchase food and filling up a reusable water bottle with something that's FREE instead of paying for it was the root cause of his money problems. Use that in any of person's budget. Just look at your local Starbucks in the morning, etc. All these people spending thousands a year on things you can easily do at home by waking up 30 mins earlier, etc. It's these compounding charges that end up adding up over time and causing people not to have money. It not only compounds to food/routine, it all adds up with charges everywhere else, from Amazon, cell phone charges, etc. It pushes that mentality, of it,'s okay it's only this much more. Exactly what these companies want you to think. Just as saving works, saving a bit here and a bit there routinely for an extended time compounds your savings. The same to does spending a bit here and a bit there. It all adds up over time. Money management is only taught in college to people who plan to go into careers in finance. Hmmm...why do you think that is?
By waking up 30 mins earlier. What if I told you I’ll take 1260 dollars, give you a coffee and you get to wake up later every work day? I would do it. It is all about what is worth it or not.
@@magneto1992 Well you can't just slap that like a label maker and it works for everyone. Life isn't this way. This is directed towards people who struggle living paycheck to paycheck. There are even people making over 100k who are living paycheck to paycheck. The issues are, if you don't have money management skills, it doesn't matter how much you make. You will always struggle with money.
Your problem is that you think these people are wasting money, but they are buying time, making your own breakfast costs up to an hour per day, or even more, considering you have to go to the supermarket, cook the breakfast, etc. buying time with money aint wrong, its just a personal descision, that many studies suggest makes you happier
@@marcogarcia7944 boy this is flying right over your head. The video is about being dumb with money and being broke. Most people who are living paycheck to paycheck and are struggling are those who are doing exactly what I said. 🤦🏻♂️ I highly doubt they are happier when they are broke and are barely making it every month praying no emergency comes up.
Jonassoe charitable activity is self interest too. It depends on the utility function of charitable activity and the utility function of wealth, Penny will compare the marginal benefit of both utility functions until she gets the exact same benefit on every dollar she spends or saves. Thats how microeconomics work.
vicente benjamin yañez That is how micro works, but we need to determine whether penny cares about the social marginal or private marginal costs and benefits. As an individual, penny might not want to donate to charity because it incurs a private marginal cost and gives only social marginal benefit, rather than benefit to herself as a private individual
tacos mexicanstyle it might certainly be the case, but maybe she gets a private benefit by donating it depends on her utility function. She might feel good about herself by donating or i dont know. But donating money might be a completely rational thing to do, just like buying every item, with the only difference is that donating is a luxury good.
@@auby3901 exactly, you're not a failure because you're impulsive or struggle to maintain self discipline. We're just toddlers with credit cards and jobs.
Behavioral Economics in a nutshell: cherry-pick only data that matches your theory -> declare all other data points irrelevant/mistakes -> ignore the fact that there are millions of complex reasons why people make even the most mundane decisions -> collect your Nobel prize (bonus points if you declare the theories of all previous economists outdated).
For the 4th one, my explanation is the Weber Law - basically, as things get bigger, you need a bigger range to feel a difference between x and y. For example, take weights - you can easily tell the difference between 10 and 20 grams but not 1kg and 1.01kg.
The scenario of the Pokémon card is a scenario where you immediately sell a potentially appreciating asset. Is always immediately selling every asset you have a good idea? Instead, you could a little research and determine if your $3000 could be even more next year or if you should actually sell.
That's called speculation. See their Bitcoin episode. You can only sell it for more if a bigger sucker comes along to buy it. And it's just as likely to be worth less as it is more.
That doesn't really change the outcome. If you believe it is an appreciating asset then wouldn't you buy it for $3k and hold onto it, just like you would hold on to it instead of trading it for $3k?
It depends on your financial situation. If you have $300k in the bank, then you can probably do what you want with that card. If you have $3 in the bank, then sell the damn card. And consider all of the things that could happen to that card to destroy the value; unless you live in a perfectly controlled environment, like the special collections room at my university library, just the humidity alone could ruin the card. Spots of fungus, for example. Or a visitor steals it. Any number of things can happen. Therefore, if you don't have big wads of cash already ( in which case, why are you here?), then it's the responsible thing to do to sell the card.
@@Excalibur2 just look up smpratte, literally worth millions of dollars because of Pokemon cards. Pokemon cards are not in a bubble like bitcoin was, they are more akin to collectible comics, coins or gold.
Imagine actually having that Charizard back then and sold it for 3k (and making the rational decision) instead of holding it till today. Its Worth at least 50k today...
Their point was that if you would hold onto a $3,000 trading card from your garage to hope it appreciates you should be equally likely to buy a $3,000 trading card to hold it and hope it appreciates.
I really do love and appreciate how accurate these videos are, not overzealously fake or overreacting. I have taken a few classes in behavioral economics and yeah this video is a really good summary.
I completely understand you it took me 2weeks to decide to buy a hat I like once I rationalized hey its hat that will keep me warm then I brought it so I won't feel bad
TheLaziestPersonEver I never use cash but that would be so cool to have. Like a huge mason jar where I collect all my spare change for a whole year and then cash it in. But I use my debit card for everything so🤷🏾♀️
Yutube SuspendedMyAccount that can be a good thing tbh. Of course some people can go overboard like on the show extreme cheapskates but there’s so many people in our country who overspend and buy more and more stuff they don’t need. If I had to pick one of both extremes I’d rather be a penny pincher than be tens of thousands of dollars in credit card debt that I got from impulse buying and not thinking consciously about my money. Ideally we would al like to be in the middle tho. But being such a penny pincher allows me to distinguish my needs from my wants and then distinguishing my wants even further. I may want those $35 cushionaire lanes but what am I gonna do with a brand new pair of sandals in the middle of November?🤷🏾♀️ taking that amount of time to think about every little purchase let’s u realize that >90% of the time you don’t need it and sometimes don’t even want it. It lets you get read of the impulse buys and think rationally. Which translates to more money in the back account by the end of the month.
Every week I buy more of whatever is the lowest percentage of my portfolio and try to keep everything around 10%. Please what could be my safest buys with $400k to outperform the market in 2024?
I would avoid the index funds, mutual funds, or specific stocks for the time being. The 5% fixed incomes are the safest bet for now. Save your cash for when the market actually shows sign of recovery.
This is why I've entrusted a fiduciary with my investmnt decisions. Many underestimate advisors until emotions lead to losses. My advisor crafted a tailored strategy aligning with my long-term goals, guiding entry and exit points for the equities I focus on. This has grown my portfolio to over $850k. My personal best so far
How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?.
Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
I really like the idea you're sharing about the MSRP. I manage at a retail store. The kind where our price tags are all made up. Everything is on sale always. I find myself trying to explain to my high school aged associates that the tag may say $100 but it isnt a deal and I'll challenge them sometimes with "when was the last time you priced these out to know if it's a good deal?" I see it daily with my kids they try to impulse buy because we write whatever silly number we want on the tag and throw up "LIMITED OFFER" and a week later we offer the same exact sale or one very similar.
Clothes at the Nordstroms rack that you think you're getitng a steal on but you're actually getting ripped off. OMG $300 msrp for only $80 Dollars! Meanwhile at Target or Fred Meyers its $29.99
My husband bought a iPhone at Walmart last year on black Friday for $100. Looked at blackfriday deals this year saw Sam phone for $135. BTW he ended up saling that phone a couple months ago for the same price he paid. Coz the guy buying it didn't have change.
In Denmark we got some very strict rules for sales, you always have to put the price lower than the normal sales price and it means the normal sales price have to had been offered over an extended period before you can put a sales price on it and it have to be a lower amount than the lower price it have actually been for sale for over a longer period first. It’s illegal to write a higher msrp price and then put the normal price as a sale so it looks like you get a bargain when you are not. It goes under the false advertising law for that reason it’s scamming people. But luckily now a days you can google most prices but now in the old days
Hey, I want to help traslate this video! I'm a native spanish speaker, and I really think this videos need to have traslations to all languages! Anyway, thank you guys! Awesome video!
We'd love your help! If you can email us a copy of the transcript, we can add it to this episode and any episode you would like to add CC for! You can send it to "twocentspbs@gmail.com". Thanks! -- Philip :)
2:19 these scenarios are entirely different if your bank account isn't infinite though. The marginal utility of money goes down as you have more, so there's a point where it makes sense to keep an object worth 3k, but not to buy one.
@darkfuji You do have a point; however, I think that the overall point is that given the windfall is large enough compared to current assets, then selling it becomes the better option. Replace the Pokemon card with a giant deposit of oil shale in your backyard. Although you technically own the very valuable shale, you have no way to extract the value directly from it, kind of like putting a Pokémon card on display rather than playing with it. Now you have a choice: own rights to a “valuable” shale deposit for bragging rights, or sell the rights to someone else who values it similarly. You’d probably overcome the endowment effect and sell the shale and buy a nicer home somewhere else (Or maybe you’ll try your hand at being an oil magnate. Good luck with that.) Similarly, if you had no shale but were to come across a valuable oil shale deposit that someone else was selling, you probably wouldn’t buy for the same reason as before: it doesn’t hold enough value for you apart from bragging rights… unless it only cost a pittance to you, as you’ve pointed out. The only real effect between the Pokemon and the oil shale scenarios is the scale of the windfall. Consequently, one could probably measure the threshold where the windfall : asset ratio overcomes the endowment effect.
In Dobelli's "The art of thinking clearly" he uses this example (paraphrasing): You buy a brand new BMW for $90,000. You drive the car for the first day and on the second you stop to buy petrol. A man sees your BMW and offers you $115,000 for the car. You are not inclined naturally to sell the car because our minds value the things we already own higher than things we do not. "You" could have made an immediate $25,000 profit on a depreciating asset but did not in this example because of the endowment effect.
The first one feels a bit off the mark, now that I'm looking back at it. The situation isn't really a fair comparison. The decision is constrained by the implication that there are limited resources to spend, being compared to a situation were those limited resources aren't a factor in the decision. Finding a card doesn't take any skin off your nose financially, where as buying it does. If you're financially stable, then having the card doesn't affect your basic needs and only what your desires are. If your desires include having a $3000 card, then it'd be the same as finding $3000 at the store where the card's being sold.
Also, finding the card and selling it is a potential gain of 3000, it is likely that nobody will be willing to buy it. At the same time, by not selling it, you are not losing 3000, but rather having 3000 in a different form.
I suppose that even with all these other factors taken out, or compensated for, the effect would still exist. But you'll need to read the scientific paper (or the book) instead of a RUclips summary.
It isn't so unreasonable to keep a Charizard card you dug up even through you wouldn't buy one. Having pulled the card from some old pack you found makes for a better story. It's just a piece of cardboard anyway, so all that matters is the novelty, and it's more novel in the first case. Honestly, I think sentimental value is a fair justification in many situations like this.
Plus you can eventually sell it at any point in the future. The presenters make it seem like framing it is a permanent solution and permanently throwing away $3k. Not really a logical observation.
I’m not going to walk 10 min down the street to save $10 because the hamburger that I just ate costed me $12; and I need that energy for the rest of the work day! You need to think about the TOTAL cost including TIME. Time also cost money.
10 min to save $10 is equivalent to a wage of $60/hour. That's WAY WAY WAY higher than what most people in this country earn, so unless you earn more than that, its worth doing. The number of calories you burn in the process is maybe 100 calories, which is the equivalent of a 50 cent bag of chips. That brings the wage down to $54/hour, still ridiculously high. You should walk.
Adeel Rehman You’re sort of right, but really it depends more on what you would to with the 10 minutes otherwise. You wouldn’t leave work 10 minutes early to go buy those. In my case I would spend less time watching RUclips videos or TV wich earn me no income at all. So it’s even more of a no brainer to go the distance and save the money.
Adeel Rehman The video says it's a $5 saving, and for a 10 min walk you'd have to be earning less than median wage to justify it... most people are earning enough to not walk!
4:45 Logically, I would still more likely to choose walking in the case of $15/$10, given the product qualities are surely the same, because I just don't like supporting shops which are ripping off customers for that much margin. If it's the case of $675/$670, maybe the customer service can justify that $5 difference; when I buy a ~$670 laptop, I would care about the shop/retailer 's reputation more than $5 anyway, regardless of walking.
Surely the "abusive store" which rips off clients will go bankrupt by your decision. And about the reputation you mention, you're giving an imaginary edge to the comparison to justify what you would do. Your point won't make sense if you are talking about same product, same quality, same service, same store reputation in both cases.
@@tylerpeterson4726 maybe he doesn't have extra $3000 to spend. If you want something and can't afford it, it's rational not to buy it. But if you got it for free, why would you sell it?
@@tylerpeterson4726 Endowment effect can be good. If someone gave you a free Bitcoin when it was worth $100 you would have held onto it instead of selling at $100 since it's free. Nothing was lost if it went to $0. Now you'd be glad you kept it even though you'd have never actually bought one. You wouldn't have wasted a day working for it. The effect is greater if it was a few thousand dollars and a whole month of wages would be wasted if the price crashed after buying it versus getting a free Bitcoin.
@@tylerpeterson4726 If he bought that pack of cards originally, he probably paid less than $3 for it. I'm sure if the card was on sale for a few dollars maybe he'd have bought it.
Well, he couldn't have known what bitcoin would do... If you actually think bitcoin is going to increase then you should buy more but if you don't believe in it enough to buy it then you should sell your bitcoin and buy something else that will appreciate more in value. Use other cryptos today as an example, keeping one etherium versus selling it and buying s&p 500 instead. Yeah sure etherium might go to 15000$ or something crazy, but you can say that about anything, and the rational decision is still probably to sell your coin and buy something else if you don't trust it enough to buy more of it.
Thanks guys, awesome video. Definitely learned a lot. Trying to recap the 5 ways people are dumb with money: 1. Endowment Effect 2. Sunk Cost Fallacy 3. Transaction Utility 4. Mental Accounting and ? What is the 5th one?
Endowment effect in practice is technically incorrect. In your example the card is technically worth more if you already own the card than it is before purchasing due to the costs of selling the card. High priced cards have a very small market of people willing to pay that price, in most auctions for these cards only 2 or 3 people bid them up to high prices so it would be very difficult to sell in person with cash and if you sell online you will have to pay fees to the site you sell on and taxes meaning on a $3000 card you may only get $2500, however holding onto the card will have negligible costs and the price of the card will likely increase over time.
This is pretty true, therefore smart people take advantage and understand how the system works. But why would smart people tell others about this.... then they don't earn money anymore.
@@HermanWillems Because delivering information to dumb people is pretty much futile . While providing uneducated people with valuable information in certain area is a good deed and contribution to a better society, after all you were also the "uneducated" one at certain point.
@@WTFIWFYDB The problem mostly is that alot people are bad with classifying certain information as valuable or garbage. For example, poor people mostly don't learn this very well, therefore are more prone to for example take part in a lottery, or fall for a multi level marketing scam. Rich parents, mostly learned this because you mostly need a constant source of valuable information to be succesfull or to become rich, therefore the kids of these type of people are learned how to filter out information and classify something as garbage or valuable.
@@HermanWillems You can tell all the people. Only the top 10 % has discipline to execute it. It is the same like the recipe for weight loss. It is simple, eat less and excercise. Still, most of the people rather look for expensive diet plans, buy clothes that makes you look slim or complain about fat-shaming on twitter. Most people are truly dumb.
A Boring Revolution but he’s not holding it b/c of its massive financial value tho, the whole point is that he’s not letting it go because it has a connection to his childhood and he’s keeping it for emotional value. It can be worth 10grand in 10 years but does that mean he’s gonna give it up even then? For me, my likelyness to hold something valuable simply for nostalgia and emotional reasons goes down sharply if the price of that item increases, screw nostalgia, I’m buying myself a ‘brand new’ used car with that 5 grand
@@leilanidru7506 I have an Acorn Computer - many games. It's gone from £140 up to £800 in less than 4 years. i'll sell it for £1,500 but it'll be very hard to do so. If I only paid £60 for it - what does it matter if I hold onto it??? It's not costing me money every month. However if you own a motor bike that requires work every month - i'd sell it. Hold assets "long term" like Pokemon cards, Games, Old Coins, Comics e.t.c Sell for a 9x or 10x return!
A Boring Revolution no I understand the point you made. I’m saying the motivations of the guy with the card isn’t to hold on to the card as an asset and wait to sell it for a higher value later, he is simply holding on to it for its emotional value to him. The card could go up in value over the years but will he let it go tho?
I was given money about 1 year ago, and was thinking about how to use it wisely. I paid down the balance of my mortgage on my principle residence as my first expenditure. I have also been investing in my properties by way of capital improvements, thereby, increasing the value and enjoyment of said properties. I think I am being penny wise!!
I disagree saying if we sell the Charizard card for $3000 that we also think it's worth $3000. in fact I think it's the opposite we sell it for $3000 exactly because we think that to us it is worth LESS than having $3000. which makes not chosing to buy one for $3000 also completely rational
@@SeanFrancisNBallais Kind of like if you buy something cheap to save money vs the more expensive option and it breaks or doesn't work as well and you have to sink more money into the problem to fix it or replace the original purchase, when buying something more expensive and better quality would have not given you these problems. You would have saved money in the long run.
I LOVE to cook so when this pandemic hit, it really didn't phase me too much as far as eating out was concerned 😂 One things for sure, we are saving so much money now since we are not eating out, and now that I'm stuck at home it gave me the oppertunity to start my cooking channel, something I had always wanted to do 🤗 needless to say I am enjoying every minute of it 😁
My sister was always obsessed with buying things that are on discount, even if it was something she'd never use. I couldn't understand her, but this video explains a lot!
Thanks for teaching us things we should learn in primary school! I tanked the first half of my life and it’s because nobody prepared me. You guys rock! Now that I know, I’ll do better.
It's not really a school's job to teach you how to live - It's your parents job to prepare you for life. It's school's job to prepare you for a career. and keeping you away from child labour. Stop putting all responsibility on the schools. Parents and caretakers need to prepare their kids for the world which includes how to deal with money.
@@CoffeebeamzSomeone wise said that one task of the schooling system is to save unfortunate children from their parents. If I had followed my parents' example in personal finance, I'd be flat broke.
Hmm, but a lot of these examples don't take into effect the liquidity consumers have. For example, a $100 won in a scratch off for a low income consumer can be safely spent on a luxury item, but in a normal circumstance, that low income consumer might have to take on debt to be able to spend $100 on a luxury item, which means they incur both the borrowing cost (interest rate) along with the risk of being unable to repay the loan
Side note - unless it is specified by your manufacturer, high octane gas makes your car run worse, not better. So don't use premium unless you have too. If you don't know, read your manual. Which you should do anyways.
Using gas with a higher octane rating than your car needs won't make it run worse, you'll just be spending more money on something that you don't need. Now if your vehicles has a higher compression ratio you should probably be using gas with a higher octane rating to avoid preignition which can damage your engine. Where I live a lot of the higher octane gas doesn't have ethanol mixed in, which is important if your vehicle has a carburetor because ethanol turns into a yellow sludge if left to sit for too long. This sludge is good at clogging up jets and passageways in carburetors.
I've been researching investment brokers and I'm really interested in working with someone trustworthy and reliable. With the recent market downturn I'm looking for a broker who can help me turn things around and make a profit Can anyone tell me about their experiences with any investment advisor..
I've seen some excellent reviews online about Dustin Dwain King. While I haven't personally worked with him, the feedback from others seems overwhelmingly positive. It might be worth giving him a try based on what I've seen online.
I can vouch for Dustin Dwain King as well. I was skeptical at first, but I followed his advice, and within the first 6 months, I made around $380k. His strategies are solid, and he's been reliable.
For the endowment effect keeping it rather than selling is still rational because not only can you have the card…for free but you can also sell it at any time for more or less the same price
About the sunken cost fallacy: careful, there is some kind of ethical reasoning associated with not wanting to waste food, even if it taste bad. But yeah, it's extremely hard to avoid in my opinion, even while knowing about it. About the endowmend effect: Often, when you see a price on internet, it's for something that *didn't sell yet*. Selling can require quite a bit of effort and give off a lower amount of money than what you saw, +the fees of transports and plateform. On the other hand, there is an infinite amount of purchase decision/possibility, so it's logical to be more careful on the way you spend, given that there might be more thing that "are worth" than what you can spend. Good video though! For me the worst irrational decision I make is because of FOMO/limited time availability of goods, especially through kickstarter...
About the pokemon card thing. Realized something while watching this video for the 1000th time. Say you have X amount of money, when you find the charizard in the garage and frame it and don't sell it X has no change. But if you buy it from the comic book store it's X - 3000 even though you still have the card the cost has subconscious weight, if that makes sense.
I must have no emotions, because I've been doing everything right according to your videos for years. I bought a 30 year old pickup, because I can repair everything myself (still have it... i estimate it's cost me less than $100/mo purchase price and repairs.) I'll sell something valuable (but not to me) in a hot second, and "surprise money" goes in the bank. I weigh the time it takes me to get a bargain vs. the $/hour I make, so If I'm working a lot, I won't take the 10 minutes for $5, but will if I'm not working much. I like your videos, b/c I'm seeing how far I've come, given that I didn't always do so well.
Nice Monty! Great to get confirmation of good habits! Glad you joined our channel, and hopefully watching our videos can give you additional language and perspective to help others along on their journey! -- Philip :)
I am in a similar situation. Like you, I am good at controlling money as taught by grandparents and parents. However, it took me years to find an answer until I started exploring entrepreneurial ways to make money. I found this short thought "It is not about saving money but how fast you can make them".
Wise man. If you have had to earn money by the sweat of your brow, and not by lifting the phone and 'doing-a-deal', then that person will be, or should be, more cautious over spending.
I’m glad I’m not the only one watching this thinking, “uh, no, it doesn’t make any sense to believe that nonsense.” Rational behavior with money is the best predictor on whether or not someone will get out of poverty or better themselves. “Regular” people need to put on their adult pants and stop making emotional decisions. Logic isn’t hard.
I prefer buying a low mileage used car that won't need major repairs. Last time I bought a 5 year old car that lasted over 13 years before I replaced it. After the trade-in credit, it was less than $1000/yr. Not to mention the time saved by not needing repairs.
Words of wisdom I learned from someone “If an item you don’t absolutely NEED is on sale for $500 instead of $1,000 then you didn’t save $500 you lost $500”
Basic summary: -Endowment effect ( you typically put loss of current positions at a higher priority than gain) -Sunk cost fallacy ( the phenomena that you wish to "squeeze out all your money" out of a product that you buy, regardless of it being satisfactory or not, which can cause subscriptions and other promotional methods to convince the consumer that they should consume more because they already have invested in their product -Transaction utility (the amount of pleasure or pain one gets from paying less or more than something's really worth. such as a fake discount (what other examples do you guys know? reply and i'll add them here) -mental accounting ( separating money into imaginary categories in your mind, removing the philosophy of though that all money regardless of how it's earned, has the same value. Leaving you more susceptible to more frivolous products or liabilities when you "earn easy money". reminds me of the lottery and how so many people blew it all)
I’m a successful “modest/small” investor. Somehow I knew some if these things and I applied them in my life, but never knew the terms that describe them. Thx so much!
I just want to point out that in the first scenario when you find the card you’ve acquired $3000 of value, or at least the situation is just like it, while purchasing the card you net 0 in value. If I would’ve thought “yeah, I’ll buy that card” if I had $3000 more in my account then the behavior is totally reasonable, not to mention that the selling not only loses fees and such but also requires effort, so while I do think the point is super valuable to get across I don’t think the situations are equivalent.
It is great that economists do not think we all are hyper-rational Pennies anymore but I do believe the next step is to stop call these behaviors "irrationalities" or "fallacies" and instead try to understand them.
Every time I go shopping for clothes ... it’s all based on my emotions... It’s a substitute for so many things... And I know many people are like that ... It’s a sad world we are living in ...
The first one in particular is a terrible example (though they all have gaping flaws) - not gaining $3000 is not the same as refusing to lose $3000. It only really makes sense as an example (barely) if you have that much easily disposable money in the first place- in which case it renders the whole scenario moot. Also... OPENING a vintage original Pokémon booster pack may have been the first mistake (honestly, that's the direction I thought the example was going to go) since, a sealed original booster will likely hold more scarcity value (and growing, as more are opened by others) than any card you can draw from it- only something truly special like the Charizard example might make opening it worth it, so right from the beginning, doing so was a MASSIVE gamble, from a purely financial perspective, if resale was always an intention.
I'd argue opening the pack was like playing lottery. "Huh, a Pokemon pack, it probably is not very valuable, might as well open it for fun". But yeah, the example is a bit flawed. You may need to spend some considerable effort to sell the card, you may possibly hold on to it to let its price increase, etc; it would make more sense if it was something that can be directly converted into money.
The point here is that rationally speaking "worth owning" is "worth buying" assuming available cash. A rare card could be viewed as a valuable asset and worth holding for its investment value but then in that case why isn't it worth purchasing one? Yes, there could be transaction costs involved in buying and selling but the example still works if you assume transaction costs are zero.
The example of finishing a meal you dislike it not a sunk cost. Finishing the meal, even if you dislike it, means you won’t have to buy something else to eat to compensate.
Depends on if your utils matter. A Whopper gives me vastly more utils than porridge. Lol.
AmyX it doesn’t because it will lead to more health problems than porridge.
If a nasty meal you already bought is worth $1 to you and a new tasty meal would cost $5, then it is only the value of that new meal that matters. If the new meal would be worth $8 to you, then you would come out $2 ahead by throwing the old meal away and buying the new one.
Timothy Schmidt but you’d come out even further ahead by eating the $1 meal and saving the $5 for the following day. Otherwise you could argue that someone buying a Lamborghini at 50% off is ahead (in terms of financial savings) of someone buying a Corolla at 20% off. Which is ridiculous. One costs far more than the other, even after discounts.
AmyX what are “utils”?
“If it’s on sale but you don’t need it, it’s still expensive.”
Edit: Wow! I just realized how many likes this comment got! Thanks! And I hope most of you didn’t spend too much on things you don’t need last Black Friday.
If you bought something you didn't need worth $100 on sale for $50, you didn't SAVE $50, you SPENT $50.
@@TPixelAdventures aaand if you're smart you can sell it later for some profit
@@surajsharma1992 and that is one of the reasons for the 2008 house market bubble. People bought houses they could not afford, later they expected to sell those houses at a higher price, but there was no market to sell those houses. In recent history, look at the bitcoin bubble.
@@andersonandrighi4539 then sell it later when it's of more value, just like the pokemon card in the video and since we are talking about discounted items, you already bought it for cheap and even if you don't need it someone will definitely pay you the same price or more, of course all this will depends on the item.
@@surajsharma1992 you're not considering opportunity cost
Investments cost money too, since the time while you have that money tied up in something means you cant spend that money on something else. Also not everything appreciates in value like the charizard card.
My sister-in-law talked a traffic warden out of giving her a ticket (by playing 'silly me' and flirting with him) and decided she 'saved' € 63. She used that money to buy shoes.
So, your sister-in-law got new shows from flirting with a traffic warden...
My wife used her big breast implants and flirting to get out of a ticket. She had a dress on and pulled it down to show a lot of cleavage and the top outline of her bra.
She streamed it to me. It was hilarious 😂🤣🤣. He could hardly focus and gave her a verbal warning after she asked for his number 🤣🤣🤣. She threw it away after he left. She told me that these milk cannons are worth every penny lol
@@michaelh5055 Lol, I'm sure that you are really proud of your wife's skills. 😂
women moment
she should have used it to pay bills or put in her 401k.
1:23 Endowment effect (A product whether you are looking to purchase or already own is of same value)
2:51 Sunk Cost Fallacy (Needn't get your money's worth of something that you don't need or enjoy just because you paid for it, the money is already lost and isn't coming back)
4:08 Transaction Utility (just because it's a good deal doesn't mean you need a product, all that matters is what it's worth to you)
5:31 Mental Accounting (fun money = free money = expected money = serious money)
7:00 Conclusion (Knowing the mental shortcuts used by our mind, it's less likely to rely on them)
7:21 Book Suggestion (To know more about behavioral economics)
❤️
Thank you!!
So, here's that guy we all looking for...
The endowment effect isn't all that irrational. It's just hypocritical. We expect others to shell out the cash because it benefits us.
Hey just one question, doesn't it say in the title that there are 5 ways. But they explain only 4 in the video. Though I loved all of them I was wondering if the title is inaccurate?
This should be part of a Highschool economics class. They'll actually learn something.
Kittzy only high school seniors will need that class. Anyone younger wont care because they are under their parents’ money.
@@OriginalCovfefe ...If they can't figure out their parents can't do their shopping in a few years, they are probably terrible students anyways. They are going to waste so many thousands of dollars in their lifetime. Easily way over 100,000 dollars. People are so naive. Even basic tricks like eye level lesser value grocery products, still works. There are literally hundreds of other tactics used by stores, service companies, manufacturers and more providers. Yes...hundreds of tactics.
@@jusayenso8186 I went to walmart the other day, and I instinctively only look at the bottom shelves. Anything at eye level is just tuned out by my brain, because I've learned that I'm never gonna buy that overpriced fancy brand stuff anyway.
@@adeelrehman7692 ...It's nice to hear from someone who actually reads comments! Most actually don't. Yes, name brands are often a total waste of money. It's interesting you mentioned walmart. Hmmmm....oh ya!...Isn't that the store that came out of nowhere...and quickly rose to such popularity to become the largest dollar volume retailer ......in the country! Hahahaha...what does this tell you about so many shoppers? What do they really know about doing this basic problem solving task? What do they really know about brand name advertising on all those thousands of tv commercials? What do they know about blind taste tests and double blind taste tests? I can't possibly list way more details. Yes...the video is right about how people are dumb with money. Most of these people will never learn exactly how many excess dollars they are handing over to businesses. Don't even get me started on overcharging tricks! Freedom of speech has limitations on social media.
no this should not be part of a highschool economics class as it is full with bad advice
-"Mom, I want to watch Ryan Gosling in the big short"
-"We have Ryan Gosling and economics at home"
He looks like Ryan Gosling with a fake 'stash😜
@@TheFreeLanguageProject so from The Nice Guys, lol.
stop 💀
LOL
Wrong. He’s the air delivery guy from the Lorax
I once bought a scratchcard to pass the time while waiting for my laundry to finish at the laundry mat. I won 5$, which paid for the lottery and the laundry. That made me feel like the boss!
Wow that must've been in the 80s or something.
@@daliacapellan why do you think so?
John Lester ya he looks like he could have been alive then...
The little things that matter
True story I was passing thru Lake City Florida after a conference and bought a $5 scratcher out of bordom and won $500. It took me finding a Pubilx be able to redeem it for cash.
I admire your dedication to educating your audience. We all aim for financial stability and a better life. Achieving this is possible through wise investments, frugal living, and careful budgeting. I'm grateful that I learned the importance of working hard for financial freedom at a young age.
Even though I engage in investing, I feel disheartened by my lack of expertise in assessing the performance of individual companies and determining the optimal timing for stock purchases. The erosion of my financial reserves due to inflation adds to my concerns. At this point, I require precise market trajectory information, but I find myself unsure about the appropriate course of action.
that's the more reason I prefer my day to day investment decisions being guided by an asset manager seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not outperform, been using my manager for over 2 years.
How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings
The asset manager that guides me is Sonya Lee Mitchell. most likely the internet is where to find her basic info, just search her name. She's established.
Impressive, I took a look at her page. I set up an appointment. I’m looking forward to her reply, I hope she sees my message.
A bargain is something you don't need at a price you can't refuse
I’m very confused with the wording of that sentence
@@kevChess how so?…
High level idiocy: spending on depreciating assets
Medium level idiocy: saving a depreciating asset (money) and calling it "net worth"
Medium level intelligence: spending on appreciating assets to the point your liquidity is nearly all used up
High level intelligence: multiplying a depreciating asset (money) at 15% - 1500% (depends on your networth and trading/investing style) and using proceeds to buy appreciating assets as a % of total networth, and having some ammo, armor, guns and defenses (appreciating assets) on the side to defend all of it.
@@manictiger Correct me if I am wrong (not being sarcastic). If I spend my money on a car (depreciating asset) is that decision idiotic. A lot of people need cars, I can barely get any groceries without one and considering I have lived without a car in the US for close to 3 years. Its an absolute chore not having one. I understand not buying a 2021 Mercedes Gwhatever but a nice reliable Corolla sounds like a good idea.
@@karoosogba8900
I'd consider a house a more important necessity than a car. I actually spent quite a few years just cycling and using buses, while I got my first million. Then I got my first house. Even then, it was near a hardware store. Only when I got my second property, did I get a car.
Did not expect this level of quality writing. The staff really understand script writing, epic!
Snowman what makes good quality writing?
I don't think I should take the opinion of good quality writing from someone who unironically uses the word epic.
@@markcarls1896 weird flex but Ok
@@ViratKohli-jj3wj Jesus, and then he uses the "weird flex" thing. You're right, but do yourself a favor and stop typing
Um....it's PBS. They've been doing television broadcasting a long time. You think just because it's on the Internet it's not gonna be up to standards?
I realised that the secret to making a million is making a better investment. I always tell myself that you still don't need that new car or that vacation and that mindset helps me make more money by investing. For example, last year I invested 70k in top stocks and crypt0s (with the help of my advisor of course) and I made around 380k, but guess what? I put it back and traded with her again and now I'm rounding up close to a million. Delayed gratification always pays off.
According to Warren Buffett, dividends are less valuable for growing businesses and more suitable for established ones. Investing in companies that offer dividends might be seen as parking capital for steady returns, especially for those relying on portfolio income. This approach resembles bond investing, serving as a means of generating consistent earnings.
A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve not withstanding inflation.
I understand that tomorrow isn't promised to anyone, but investing today is hard for me now because I have no idea of how and where to invest in. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.
Diana Castle Lynch, a highly respected figure in his field. I suggest delving deeper into
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
Billionaires often promote the idea that money isn't the key to happiness, but in reality, money provides security and freedom.
By investing, they secure wealth for future generations, highlighting the importance of financial literacy and stock market investing for building a better financial future.
The common belief that a stable job leads to financial success contrasts with the approach of billionaires, who focus on entrepreneurship, investing, and building passive income streams through long-term strategies and calculated risks methods not typically taught in traditional career paths. Most people are unaware of these alternative principles that can lead to greater wealth
You get rich by making credit work for you. Nobody ever got rich by saving money.
That's very practical and smart goal, a wise man once said do everything you can to get outta debt, one of his tips to get rich is Investing.
Investing now will be the wisest thing to do especially with the current economic fluctuation and inflations.
Whoa, whoa, whoa. A pack of Pokemon cards you forgot to open?? That's the mistake right there.
😂
A mistake worth 3k dollars
Nope, an unopened first edition pack is worth more than that charizard.
a sealed card pack is worth more than a first edition Charizard, so by opening it you have decreased the value of it
+wolfpackflt670 I think you misunderstand my comment. I don't mean to say that not opening the pack now is a foolish decision. The point is, what kind of kid FORGETS to open a pack a Pokemon cards!? That's the first thing you do when you get home, if you had the patience to wait that long.
I love your personalities. Financial talk is usually pretty boring but you guys make this very accessible.
The Pokemon Card thing actually happened to me (with a different card). I found it in an old box and realised it was worth over $500, but refused to sell it and instead framed it...
Love the honesty.. if you needed the money would you sell it though? Not a death or life situation but lets say, to pay off some debt? I am assuming you don't have over $500 cash to spare...
I found an old Charizard last summer and promptly sold it on ebay.
What card? I have tons of them still but most aren’t selling for anything
Well you can still sell it after some years and unless Pokemon goes out of fashion it will be worth more.
The example given was extremely poor. If you don't need the cash, keep it. It should only increase in value with time. Also the sentimental value because it is yours can be more valuable than $500. Also $500 really is not much money... if your current situation means $500 has alot of value then forget what I said, sell immediately and invest the money into something else that will give you faster returns
It's sad that there isn't a Nobel prize for psychology. Behavioral economics really is psychology, much more than economy.
not a real science and neither is economics hence why the nobel prize for economics doesnt really exist. its called "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel" which was made almost 70 years after the nobel prize was made
@@kimjong-un8543get off your high horse with "econ is not a real science", social sciences are incredibly important. Physical sciences are not the end all be all, and Nobel categories come from history, not validity or importance. Of course an ancient award system founded by the guy who invented TNT wouldn't have much emphasis on social sciences, which were not quite as nuanced or understood at the time. Today physical and social sciences are enmeshed and feed into one another more than ever. Ex. "How should we design hospitals to improve patient mental well-being and treatment outcomes?" Could combine medicine, psychology, architecture, interior design, data analytics, horticulture / landscaping, etc.
@@kimjong-un8543 as any psychologist knows all psychology is biology
@@baconator-the-destroyernot really, the science is very finicky and a lot of studies are not repeatable
@@kimjong-un8543 Call me weird, but I didn't think the transaction utility was a fallacy. Maybe you're only willing to save $5 for walking the distance a certain percentage of the time, and the base price is used by our head to titrate how often we're willing to do it.
This is so useful! These types of videos are like half of my education every day and I'm so thankful to all these channels and PBS digital studios
Thanks so much Laizra. Glad you found us! - Philip 👨🏻
WORD YO
"Imagine a person who always makes the right financial decisions. Let's call her PENNY."
* laughs in Sheldon Cooper *
Get out😂😂😂😂
Same here 🤣🤣
😂😂😂😂💀
hahaha!!
I don't get it
You can almost hear the business owners across the planet screaming "Noooo! Don't tell everyone ffs!"
Facts bro.❤️
Dosent matters humans are humans
@@pinkynandi8894 I thought the sound was cats fighting outside 😆
Dont worry most people still wont listen 🤣🤣
Adapt and improve that's whathumans do. Sharks do it even better
Ive always been ‘good with money’ and never really thought about why, but watching this I realise that I generally avoid mental accounting, if I get given £100 I treat it the same as if Id worked a full day for it
Are you saying you don't make mistakes with money?
@@KazzoKiller3890 not at all haha the other 4 mistakes in the video I recognised I do but its interesting that being able to not make just that 1 mistake of mental accounting can make such a big difference over time
Cringe
Yeah.
I don't understand _not_ treating all money I own as money. I can budget for certain things, but if I get surprise extra money, it goes into the same things I need in life.
The extra might enable to me to make purchases I planned anyway, but earlier, or for a higher quality thing that I would otherwise not be able to get, but is absolutely worth it to me.
99% of what I buy I use, and often very extensively (over 5k hours on my ANC headphones for the past 1.5 years).
I’d walk 10 minute for those headphones. Not only I get it, I burn calories too.
Vintage tears If you’d walk 10 minutes for those headphones you should also walk 10 minutes for the laptop if you needed one
{StrYKePlaysMC / johnpick} Hypixel PvP If I had the money to buy a laptop.
But how about if you are skinny?
@@da14a49 Even if you're skinny, walking is still good cardio. In either case, walking 10 minutes to save $5 is worth it to me (assuming I needed either the laptop or the headphones)!
Stonks 📈
'5 Ways People Are Dumb With Money'
1. Endowment Effect @2:40
2. Sunk Cost Fallacy @3:20
3. Transaction Utility @4:50
4. Mental Accounting @5:50
So, what was the 5th! :P
5. All of the above xD
Wow great thinking
Thanks
fungibility of money? $1 = $1
@@ZombieSpliffs Fungibility of money is the reason why Mental Accounting is wrong, so not a separate reason.
Hmm I've been experiencing the opposite of the endowment effect. If I want to buy something, I obsess over it and it's extremely valuable to me. Then, when I do buy it, poof, its value decreases instantly just because of the fact that I now have it and it isn't worth as much as it was before.
That's very interesting, because, for some reason, you are overvaluing something until you have it. So, the question becomes, what is it that you value about it when you don't have it? And what is lost when you do? I'm wondering how many external factors contribute to that feeling. Like, how something is marketed, if your friends or other people around you have it, etc.
@logoslive Yeah exactly. I guess it's mostly tech-related. I really want an external HDD and a high-end computer rig but when I do get them, I know they won't be as valuable to me as they are now. :D
@@feynstein1004 Same, I'd constantly obsess about a new laptop and dream about all the cool things I could do with it. But ultimately, i'll just end up treating it like shit, like all my other laptops.
@@64account33 yup i have a 900€ notebook thin, touchscreen, ssd and all that. but i dont care about it now and dont really use it. i just plug it into my tv sometimes and watch movies
@@1yasin6 That happened to me too.. but I think it gets better as you get older. I don't even have a notebook now.
I love this channel
Damon!!
How's Ashley?
I literally sat there and saw that it was $5 either way, but immediately said no to walking for the laptop. That blew my mind. Please keep making these videos, they are going to be so helpful as I try to get my life in order money wise.
Patrick Jeffrey I feel like it was the right decision still. Falacy or not. 5 dollars off over $600 is basically nothing. 5 dollars off of 15 dollars like she said was over 33% off. Ur getting a better deal w/ the headphones than u are for the laptop. The $5 difference is more negligible in the case of the laptop where it become debateable weather u wanna waste 10 mins walking or not; whereas in the case of the headphones $5 is more than a third of the whole cost, which is well worth the 10 min walk.
Don't feel bad I wouldn't have walked ten minutes for 5 bucks in either example
Same here. I said hell to the no no, not for 5 bucks. But on the headphones I was like...hmm 5 bucks is a lot. Fk me
Yea but how often do you buy a laptop? Every couple years or so. If you are buying shitty ear buds for $10 you'd have to continuously go to the store and buy new ones, making that $5 saving add up over time.
That's 5 dollars difference either way in the given example. Doesn't matter if it's a pair of earphones or a laptop or how often you buy a new one. It's always 10 minutes in exchange of 5 dollars. Treating it differently, because it is a different proportion of the price is the fallacy here, or the illogical thing to do.
When you learn more from one RUclips video than 4 years of high school.
You either went to a shitty school or you didn't take the right classes.
@@cronchcrunch true
Facts
CR0W That crap still exists?
🏫
its called public school lmao
You know what? After watching this video I cancelled my Amazon Prime membership...
I know it easier said then done, but finding other amazon addict shoppers to share cost with you would be great. I share with my sister and absolutely enjoy prime but would not pay $100 for it but sure would pay over $20-30 if i was a heavy Amazon buyer, the shipping delivery is unbelievable, I often order on Late Saturday and get my stuff by Monday!!
Not to mention the movies, music, and other perks you get!
Good on you!
@@valoxo9467 Well being a heavy Amazon buyer probably means you spend too much money on stuff you dont need.
I prefer amazon than driving to stores and wasting time on long lines. Also I only buy what I need from amazon. Went I go shopping I always over spend Plus amazon is sometimes cheaper than stores.
The difference between finding and not selling your 1999 first edition Charizard (actually valued in more than $200k) and not buying a new and encased one is not that you don't value the same monetarily. Instead, in the first scenario, you are simply deciding you don't actually need the extra cash and, in the latter, you are deciding you don't have the extra cash to buy one. There's absolutely nothing irrational about it.
I don't think that's a proper example of the Endowment effect.
I feel encouraged to watch this videos because it makes me feel like I'm avoiding getting ripped off by society.
And that's a great price
This should be taught in school, there should be a Penny-class or something!
Sadly school is not made for actual learning rip
if it was taught in class, our students would actually be smart. I'm sure nobody wants that!
there are classes about behavioral economics so there is, idk why people always hate on school its actually pretty good if you put in the effort
So You want to be in school even longer?
I plan on showing these to my Econ students in the coming weeks.
"first edition Charizard"
Proceeds to show a non-first edition Charizard.
*TRIGGERED*
One lesson I've learnt from billionaires is to always put your money to work, and diversifying your investments. I'm planning to invest about $30k of my savings in stocks this year, and I hope I make profits.
You are right. The best approach I feel is to diversify investments- by spreading investments across different asset classes like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown.
That makes sense. I’ve been using a financial market expert for two years now and I own a six-figure diversified portfolio from investing in stocks. I want to diversify more this year, though.
Your advisor must be really good. How I can get in touch? My retirement portfolio's decline is a concern, and I could use some guidance.
Vivian Jean Wilhelm is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Vivian Jean Wilhelm is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I just stumbled across this channel today, I have already watched several videos.
You guys are extremely informative, the infographics are aesthetically pleasing, and the diversity in talks styles is perfect.
So what I mean is....I really enjoy your stuff.
That is really true. My father once thought his credit card useless as he doesn't have much use of it.he went to return the card but came home with another card with higher fees just because of perks.corporate rules
*You know what.....my asian parents taught me how to be a good penny.* When the gas prices went down to 2 dollars- all I can think of is stockpile and sell later....the thought of buying higher grade gas to spend the same amount made me throw up.
Also.....don't just cancel Amazon prime bc the video told you so...the service of having things shipped to you within 2 days is worth it in many cases. If you are poor and barely order anything anyways- then cancel...)
My car makes slightly more power and gets slightly better mileage if I put premium in it. Gas prices dropping have NEVER made me even remotely consider actually getting premium. The power difference can't be felt (4 HP) and mileage difference is 1.5-2% at best. Not worth it!
Gas is a perishable though, and in most places it is ilegal to sell it second hand (because of safety hazards)
@@MiloTheFirst1 When there is money and a strong will to do something, the rules are more likely to bend.
A real Penny would consider the costs of storing large amounts of a flammable material. Suppose you save a bit on gas, and something happens and the house goes up in flames... asians are penny wise and pound foolish sometimes.
People value different things. It is useful to try to construct a model for why apparently disparate (yet predictable) actions are, in fact, rational (given a set of values.) The rare card the person finds cleaning the garage has a connection to his past that he may value. The one on offer for sale has no such connection.
The problem in the "sunk cost fallacy" is that people are assigning value to not admitting they made a mistake. But that is saying their desires are irrational, not how they go about achieving them.
2:32 Endowment effect
2:50 Sunk cost fallacy
4:08 Transaction utility
5:32 Mental accounting
did i see this comment b4
What's the 5th one?
Not one@@doreo-js1de
Starbucks barista: “Do you want to upgrade your drink to Venti? It’s only $1.”
When in fact it’s only extra milk that cost you less than 20 cents.
Starbucks is image marketing.
Getting Starbucks itself is a massive waste of money
Sounds like upgrading an Apple product with more disc space.
Starbucks? More like "Bye Bucks 👋". Only idiots drink at Starbucks in India 😅. Way cheaper and efficient to order good quality coffee beans online and make a good cuppa at home. 👍My bro and I calculated that even Nescafe was much costlier than premium ground coffee powder online. We took the leap and now we get better coffee at lower price 😆
@@angelas5099 Did the same here. Worked out that a nice bean to cup machine would pay for itself over 2 years, compared to instant coffee!
PBS Eons got me here. Glad i'm here
Sarah Haddad Same!
Same
I think this is part of the issue. IMO, I think it's more so what I call, the microtransactions that add up over time that get people in trouble. For example, I once had a coworker who every day went to the store in the morning to buy water and/or coffee, something to eat etc. Costing anywhere from $5-$15 just in the morning. That's just talking about his morning routine. Times that by 5-6 days a week. All that guy did was complain about never having any money. Yet, when I explained the reasoning to him it didn't register in his head what I was saying. He justified the purchases as "it's only like $5." (let's go halfway down the middle and say $10/morning. That's almost $3000 a year just for water/coffee/snack lol) He only sees the instant charge not thinking instead of going to the grocery store to purchase food and filling up a reusable water bottle with something that's FREE instead of paying for it was the root cause of his money problems. Use that in any of person's budget. Just look at your local Starbucks in the morning, etc. All these people spending thousands a year on things you can easily do at home by waking up 30 mins earlier, etc. It's these compounding charges that end up adding up over time and causing people not to have money. It not only compounds to food/routine, it all adds up with charges everywhere else, from Amazon, cell phone charges, etc. It pushes that mentality, of it,'s okay it's only this much more. Exactly what these companies want you to think. Just as saving works, saving a bit here and a bit there routinely for an extended time compounds your savings. The same to does spending a bit here and a bit there. It all adds up over time. Money management is only taught in college to people who plan to go into careers in finance. Hmmm...why do you think that is?
By waking up 30 mins earlier. What if I told you I’ll take 1260 dollars, give you a coffee and you get to wake up later every work day? I would do it. It is all about what is worth it or not.
@@magneto1992 Well you can't just slap that like a label maker and it works for everyone. Life isn't this way. This is directed towards people who struggle living paycheck to paycheck. There are even people making over 100k who are living paycheck to paycheck. The issues are, if you don't have money management skills, it doesn't matter how much you make. You will always struggle with money.
@@magneto1992exactly saving time is better than saving money. Time = money
Your problem is that you think these people are wasting money, but they are buying time, making your own breakfast costs up to an hour per day, or even more, considering you have to go to the supermarket, cook the breakfast, etc. buying time with money aint wrong, its just a personal descision, that many studies suggest makes you happier
@@marcogarcia7944 boy this is flying right over your head. The video is about being dumb with money and being broke. Most people who are living paycheck to paycheck and are struggling are those who are doing exactly what I said. 🤦🏻♂️ I highly doubt they are happier when they are broke and are barely making it every month praying no emergency comes up.
Would Penny support RUclipsrs on Patreon?
Jonassoe
Lol patreon does present a bit of a free rider problem, so probably not
Depends on the Patreon rewards associated with it. But the real question is, would Penny give to charity?
Jonassoe charitable activity is self interest too. It depends on the utility function of charitable activity and the utility function of wealth, Penny will compare the marginal benefit of both utility functions until she gets the exact same benefit on every dollar she spends or saves. Thats how microeconomics work.
vicente benjamin yañez
That is how micro works, but we need to determine whether penny cares about the social marginal or private marginal costs and benefits.
As an individual, penny might not want to donate to charity because it incurs a private marginal cost and gives only social marginal benefit, rather than benefit to herself as a private individual
tacos mexicanstyle it might certainly be the case, but maybe she gets a private benefit by donating it depends on her utility function. She might feel good about herself by donating or i dont know. But donating money might be a completely rational thing to do, just like buying every item, with the only difference is that donating is a luxury good.
1. Endowment Effect
2. Sunk Cost Fallacy
3. Transaction Utility
4. Mental Accounting
5. ???
Did I miss something, where's the fifth?
6. Profit!
There was no 5th...
I plead the fifth on that one.
They pled the fifth.
FIF !
“Adults devise a plan and follow it. Children do what feels good.”
Nah, that's an oversimplification. We're all children in this scenario, we just have to make a mental effort to be more like adults.
@@alexturlais8558 We're all children pretending to be adults
@@auby3901 exactly, you're not a failure because you're impulsive or struggle to maintain self discipline. We're just toddlers with credit cards and jobs.
Most of us are children learning to be adults and there is often one aspect where we are still children in our thinking.
@Aiden Pearce I have a detailed life/financial plan until 2035. I still stand by my statement that we're all children pretending to be adults.
Behavioral Economics in a nutshell: cherry-pick only data that matches your theory -> declare all other data points irrelevant/mistakes -> ignore the fact that there are millions of complex reasons why people make even the most mundane decisions -> collect your Nobel prize (bonus points if you declare the theories of all previous economists outdated).
For the 4th one, my explanation is the Weber Law - basically, as things get bigger, you need a bigger range to feel a difference between x and y. For example, take weights - you can easily tell the difference between 10 and 20 grams but not 1kg and 1.01kg.
Exactly!
I can't
The scenario of the Pokémon card is a scenario where you immediately sell a potentially appreciating asset. Is always immediately selling every asset you have a good idea? Instead, you could a little research and determine if your $3000 could be even more next year or if you should actually sell.
That's called speculation. See their Bitcoin episode. You can only sell it for more if a bigger sucker comes along to buy it.
And it's just as likely to be worth less as it is more.
That doesn't really change the outcome. If you believe it is an appreciating asset then wouldn't you buy it for $3k and hold onto it, just like you would hold on to it instead of trading it for $3k?
It depends on your financial situation. If you have $300k in the bank, then you can probably do what you want with that card. If you have $3 in the bank, then sell the damn card. And consider all of the things that could happen to that card to destroy the value; unless you live in a perfectly controlled environment, like the special collections room at my university library, just the humidity alone could ruin the card. Spots of fungus, for example. Or a visitor steals it. Any number of things can happen. Therefore, if you don't have big wads of cash already ( in which case, why are you here?), then it's the responsible thing to do to sell the card.
@@edennis8578 if you think like that though you probably won't ever save up that much money.
@@Excalibur2 just look up smpratte, literally worth millions of dollars because of Pokemon cards. Pokemon cards are not in a bubble like bitcoin was, they are more akin to collectible comics, coins or gold.
Damn! The 5 dollar discount got me!
This video is awesome 👍🏽👍🏽 good work
Imagine actually having that Charizard back then and sold it for 3k (and making the rational decision) instead of holding it till today. Its Worth at least 50k today...
Exactly, I thought they were saying it would be better to hold onto it and let it's value appreciate
you can make that claim towards ANY investment. You can gain or loose.
You have to take in account the general inflation as well
Their point was that if you would hold onto a $3,000 trading card from your garage to hope it appreciates you should be equally likely to buy a $3,000 trading card to hold it and hope it appreciates.
Lol it is not and never will be worth $50k
5 ways?
- Endowment effect
- Sunk cost fallacy
- Transaction utility
- Mental accounting
- And?
Exactly, why did I need to scroll that far in comments to see someone noticing this? Thank you Brandon:D
YO ME TOOO! I was taking notes and I was like...
"Theres only 4 🤔🤨"
Reason I was scrolling down the comments
And Fungibility man... pay attention! 😉
@@codesling3421 Mental accounting is the act of not treating money as fungible, so that isn't the fifth "way."
I really do love and appreciate how accurate these videos are, not overzealously fake or overreacting. I have taken a few classes in behavioral economics and yeah this video is a really good summary.
Lol I hate spending money. It takes me like a week to decide on buying something that is worth like $10.
TheLaziestPersonEver penny pincher....
I completely understand you it took me 2weeks to decide to buy a hat I like once I rationalized hey its hat that will keep me warm then I brought it so I won't feel bad
@@cancel.lgbtq.6892 Dude no joke I have a penny collection at home XD Every time I get change I look at the coins to see if they are valuable at all
TheLaziestPersonEver I never use cash but that would be so cool to have. Like a huge mason jar where I collect all my spare change for a whole year and then cash it in. But I use my debit card for everything so🤷🏾♀️
Yutube SuspendedMyAccount that can be a good thing tbh. Of course some people can go overboard like on the show extreme cheapskates but there’s so many people in our country who overspend and buy more and more stuff they don’t need. If I had to pick one of both extremes I’d rather be a penny pincher than be tens of thousands of dollars in credit card debt that I got from impulse buying and not thinking consciously about my money. Ideally we would al like to be in the middle tho. But being such a penny pincher allows me to distinguish my needs from my wants and then distinguishing my wants even further. I may want those $35 cushionaire lanes but what am I gonna do with a brand new pair of sandals in the middle of November?🤷🏾♀️ taking that amount of time to think about every little purchase let’s u realize that >90% of the time you don’t need it and sometimes don’t even want it. It lets you get read of the impulse buys and think rationally. Which translates to more money in the back account by the end of the month.
Every week I buy more of whatever is the lowest percentage of my portfolio and try to keep everything around 10%. Please what could be my safest buys with $400k to outperform the market in 2024?
I would avoid the index funds, mutual funds, or specific stocks for the time being. The 5% fixed incomes are the safest bet for now. Save your cash for when the market actually shows sign of recovery.
This is why I've entrusted a fiduciary with my investmnt decisions. Many underestimate advisors until emotions lead to losses. My advisor crafted a tailored strategy aligning with my long-term goals, guiding entry and exit points for the equities I focus on. This has grown my portfolio to over $850k. My personal best so far
How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?.
Google Sonya Lee Mitchell and do your own research. She has portfolio management down to a science
Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
I really like the idea you're sharing about the MSRP. I manage at a retail store. The kind where our price tags are all made up. Everything is on sale always. I find myself trying to explain to my high school aged associates that the tag may say $100 but it isnt a deal and I'll challenge them sometimes with "when was the last time you priced these out to know if it's a good deal?" I see it daily with my kids they try to impulse buy because we write whatever silly number we want on the tag and throw up "LIMITED OFFER" and a week later we offer the same exact sale or one very similar.
Clothes at the Nordstroms rack that you think you're getitng a steal on but you're actually getting ripped off. OMG $300 msrp for only $80 Dollars! Meanwhile at Target or Fred Meyers its $29.99
My husband bought a iPhone at Walmart last year on black Friday for $100. Looked at blackfriday deals this year saw Sam phone for $135. BTW he ended up saling that phone a couple months ago for the same price he paid. Coz the guy buying it didn't have change.
In Denmark we got some very strict rules for sales, you always have to put the price lower than the normal sales price and it means the normal sales price have to had been offered over an extended period before you can put a sales price on it and it have to be a lower amount than the lower price it have actually been for sale for over a longer period first. It’s illegal to write a higher msrp price and then put the normal price as a sale so it looks like you get a bargain when you are not. It goes under the false advertising law for that reason it’s scamming people. But luckily now a days you can google most prices but now in the old days
Lmao eb games 😂
Jedidiah Young don't feel bad, People are Cattle, take advantage of them every chance you get.
Hey, I want to help traslate this video!
I'm a native spanish speaker, and I really think this videos need to have traslations to all languages!
Anyway, thank you guys!
Awesome video!
Hey, I'm also a native Spanish speaker 😃
We'd love your help! If you can email us a copy of the transcript, we can add it to this episode and any episode you would like to add CC for! You can send it to "twocentspbs@gmail.com". Thanks! -- Philip :)
@@TwoCentsPBS OMG!
Allright, I'll do that!
Thank you for your work!
@@leelya6272 me too 😊
@@gilberthjimenez431 - let me know if you need any help.
2:19 these scenarios are entirely different if your bank account isn't infinite though. The marginal utility of money goes down as you have more, so there's a point where it makes sense to keep an object worth 3k, but not to buy one.
Yeah that example was pretty weak
plus, by saving it in a frame in mint condition for another 10 years, it will likely be worth even more when you *do* sell it
@darkfuji You do have a point; however, I think that the overall point is that given the windfall is large enough compared to current assets, then selling it becomes the better option.
Replace the Pokemon card with a giant deposit of oil shale in your backyard. Although you technically own the very valuable shale, you have no way to extract the value directly from it, kind of like putting a Pokémon card on display rather than playing with it. Now you have a choice: own rights to a “valuable” shale deposit for bragging rights, or sell the rights to someone else who values it similarly. You’d probably overcome the endowment effect and sell the shale and buy a nicer home somewhere else (Or maybe you’ll try your hand at being an oil magnate. Good luck with that.)
Similarly, if you had no shale but were to come across a valuable oil shale deposit that someone else was selling, you probably wouldn’t buy for the same reason as before: it doesn’t hold enough value for you apart from bragging rights… unless it only cost a pittance to you, as you’ve pointed out.
The only real effect between the Pokemon and the oil shale scenarios is the scale of the windfall. Consequently, one could probably measure the threshold where the windfall : asset ratio overcomes the endowment effect.
Either way, I think it's a good idea to ask yourself if you would've bought it. Great way to realize if it's actually worth it or not.
In Dobelli's "The art of thinking clearly" he uses this example (paraphrasing): You buy a brand new BMW for $90,000. You drive the car for the first day and on the second you stop to buy petrol. A man sees your BMW and offers you $115,000 for the car. You are not inclined naturally to sell the car because our minds value the things we already own higher than things we do not. "You" could have made an immediate $25,000 profit on a depreciating asset but did not in this example because of the endowment effect.
The first one feels a bit off the mark, now that I'm looking back at it.
The situation isn't really a fair comparison. The decision is constrained by the implication that there are limited resources to spend, being compared to a situation were those limited resources aren't a factor in the decision.
Finding a card doesn't take any skin off your nose financially, where as buying it does. If you're financially stable, then having the card doesn't affect your basic needs and only what your desires are. If your desires include having a $3000 card, then it'd be the same as finding $3000 at the store where the card's being sold.
Also, finding the card and selling it is a potential gain of 3000, it is likely that nobody will be willing to buy it. At the same time, by not selling it, you are not losing 3000, but rather having 3000 in a different form.
I suppose that even with all these other factors taken out, or compensated for, the effect would still exist. But you'll need to read the scientific paper (or the book) instead of a RUclips summary.
I'm so happy that my parents taught me to hold money, respect and love them and do right decisions if I need to buy something.
It isn't so unreasonable to keep a Charizard card you dug up even through you wouldn't buy one. Having pulled the card from some old pack you found makes for a better story. It's just a piece of cardboard anyway, so all that matters is the novelty, and it's more novel in the first case.
Honestly, I think sentimental value is a fair justification in many situations like this.
Plus you can eventually sell it at any point in the future. The presenters make it seem like framing it is a permanent solution and permanently throwing away $3k. Not really a logical observation.
I’m not going to walk 10 min down the street to save $10 because the hamburger that I just ate costed me $12; and I need that energy for the rest of the work day! You need to think about the TOTAL cost including TIME. Time also cost money.
jim liu true, but if you invested in a Snickers bar....
Time is way more valuable than money
10 min to save $10 is equivalent to a wage of $60/hour. That's WAY WAY WAY higher than what most people in this country earn, so unless you earn more than that, its worth doing. The number of calories you burn in the process is maybe 100 calories, which is the equivalent of a 50 cent bag of chips. That brings the wage down to $54/hour, still ridiculously high.
You should walk.
Adeel Rehman You’re sort of right, but really it depends more on what you would to with the 10 minutes otherwise. You wouldn’t leave work 10 minutes early to go buy those. In my case I would spend less time watching RUclips videos or TV wich earn me no income at all. So it’s even more of a no brainer to go the distance and save the money.
Adeel Rehman
The video says it's a $5 saving, and for a 10 min walk you'd have to be earning less than median wage to justify it... most people are earning enough to not walk!
This is probably one of the most beneficial money education videos I've watched on RUclips. If only school taught this stuff
Thanks for comments dont forget to hit the subscription button
+①④①②⑥⑨⑤⑥③④⑨......
=whatsap//++...............
4:45
Logically, I would still more likely to choose walking in the case of $15/$10, given the product qualities are surely the same, because I just don't like supporting shops which are ripping off customers for that much margin. If it's the case of $675/$670, maybe the customer service can justify that $5 difference; when I buy a ~$670 laptop, I would care about the shop/retailer 's reputation more than $5 anyway, regardless of walking.
Surely the "abusive store" which rips off clients will go bankrupt by your decision. And about the reputation you mention, you're giving an imaginary edge to the comparison to justify what you would do. Your point won't make sense if you are talking about same product, same quality, same service, same store reputation in both cases.
because real life is more complicated than they're examples so her answer is valid
I think everybody misses the health aspect of the walk itself.
Your missing the point of the hypothetical. Lol
He's not giving up the $3000, he framed it in the form of the card. It will only go up in value, theoretically.
Except if he really believes that the card will appreciate then he would have bought the framed card in the store.
@@tylerpeterson4726 maybe he doesn't have extra $3000 to spend. If you want something and can't afford it, it's rational not to buy it. But if you got it for free, why would you sell it?
@@tylerpeterson4726 Endowment effect can be good. If someone gave you a free Bitcoin when it was worth $100 you would have held onto it instead of selling at $100 since it's free. Nothing was lost if it went to $0. Now you'd be glad you kept it even though you'd have never actually bought one. You wouldn't have wasted a day working for it. The effect is greater if it was a few thousand dollars and a whole month of wages would be wasted if the price crashed after buying it versus getting a free Bitcoin.
@@tylerpeterson4726 If he bought that pack of cards originally, he probably paid less than $3 for it. I'm sure if the card was on sale for a few dollars maybe he'd have bought it.
Well, he couldn't have known what bitcoin would do...
If you actually think bitcoin is going to increase then you should buy more
but if you don't believe in it enough to buy it then you should sell your bitcoin and buy something else that will appreciate more in value.
Use other cryptos today as an example, keeping one etherium versus selling it and buying s&p 500 instead. Yeah sure etherium might go to 15000$ or something crazy, but you can say that about anything, and the rational decision is still probably to sell your coin and buy something else if you don't trust it enough to buy more of it.
Thanks guys, awesome video. Definitely learned a lot.
Trying to recap the 5 ways people are dumb with money:
1. Endowment Effect
2. Sunk Cost Fallacy
3. Transaction Utility
4. Mental Accounting
and ?
What is the 5th one?
That's a good question. Maybe they worked on the "fungibility" of money to the count.
The fifth one is people can't count.. and it's true :)
Endowment effect in practice is technically incorrect. In your example the card is technically worth more if you already own the card than it is before purchasing due to the costs of selling the card. High priced cards have a very small market of people willing to pay that price, in most auctions for these cards only 2 or 3 people bid them up to high prices so it would be very difficult to sell in person with cash and if you sell online you will have to pay fees to the site you sell on and taxes meaning on a $3000 card you may only get $2500, however holding onto the card will have negligible costs and the price of the card will likely increase over time.
"Dumb people power the modern economy" - Old Klingon Proverb
This is pretty true, therefore smart people take advantage and understand how the system works. But why would smart people tell others about this.... then they don't earn money anymore.
@@HermanWillems Because delivering information to dumb people is pretty much futile . While providing uneducated people with valuable information in certain area is a good deed and contribution to a better society, after all you were also the "uneducated" one at certain point.
@@WTFIWFYDB The problem mostly is that alot people are bad with classifying certain information as valuable or garbage. For example, poor people mostly don't learn this very well, therefore are more prone to for example take part in a lottery, or fall for a multi level marketing scam. Rich parents, mostly learned this because you mostly need a constant source of valuable information to be succesfull or to become rich, therefore the kids of these type of people are learned how to filter out information and classify something as garbage or valuable.
@@HermanWillems You can tell all the people. Only the top 10 % has discipline to execute it. It is the same like the recipe for weight loss. It is simple, eat less and excercise. Still, most of the people rather look for expensive diet plans, buy clothes that makes you look slim or complain about fat-shaming on twitter. Most people are truly dumb.
This video just made me more aware of how bad I am with money
And now you know what to do to improve!
That Pokémon card will be worth $5,000 in 5 years... hold assets!
A Boring Revolution but he’s not holding it b/c of its massive financial value tho, the whole point is that he’s not letting it go because it has a connection to his childhood and he’s keeping it for emotional value. It can be worth 10grand in 10 years but does that mean he’s gonna give it up even then? For me, my likelyness to hold something valuable simply for nostalgia and emotional reasons goes down sharply if the price of that item increases, screw nostalgia, I’m buying myself a ‘brand new’ used car with that 5 grand
@@leilanidru7506 I have an Acorn Computer - many games. It's gone from £140 up to £800 in less than 4 years. i'll sell it for £1,500 but it'll be very hard to do so.
If I only paid £60 for it - what does it matter if I hold onto it???
It's not costing me money every month. However if you own a motor bike that requires work every month - i'd sell it.
Hold assets "long term" like Pokemon cards, Games, Old Coins, Comics e.t.c Sell for a 9x or 10x return!
A Boring Revolution no I understand the point you made. I’m saying the motivations of the guy with the card isn’t to hold on to the card as an asset and wait to sell it for a higher value later, he is simply holding on to it for its emotional value to him. The card could go up in value over the years but will he let it go tho?
And then you realize... Pokemon its not popular anymore
@@meilazgaming All rare assets go up in value - especially with collectors.
I was given money about 1 year ago, and was thinking about how to use it wisely. I paid down the balance of my mortgage on my principle residence as my first expenditure. I have also been investing in my properties by way of capital improvements, thereby, increasing the value and enjoyment of said properties. I think I am being penny wise!!
You are ahead of the curve. May your financial literacy continue to pay off. And most of all. God blest🙏🏾
I disagree saying if we sell the Charizard card for $3000 that we also think it's worth $3000. in fact I think it's the opposite
we sell it for $3000 exactly because we think that to us it is worth LESS than having $3000.
which makes not chosing to buy one for $3000 also completely rational
yeah, thats another way to look at it
It's more like other people would buy it for that price and it be that it's not that you value it at that price
yeah, the "net result" didn't make sense in that one. well said.
Just don't become "penny wise and pound foolish" the large purchases count too.
It'd be nice if you could elaborate.
It’s when you buy the non brand cereal but also buy a Gucci bag. Wise about saving a little here and there, but you’re prone to spending big.
@@SeanFrancisNBallais Kind of like if you buy something cheap to save money vs the more expensive option and it breaks or doesn't work as well and you have to sink more money into the problem to fix it or replace the original purchase, when buying something more expensive and better quality would have not given you these problems. You would have saved money in the long run.
@@mae2759 That's more neatly encapsulated by 'false economy'
@@SeanFrancisNBallais Saving £5 from your utility bill but failing to transfer your mortgage to save £200
I LOVE to cook so when this pandemic hit, it really didn't phase me too much as far as eating out was concerned 😂 One things for sure, we are saving so much money now since we are not eating out, and now that I'm stuck at home it gave me the oppertunity to start my cooking channel, something I had always wanted to do 🤗 needless to say I am enjoying every minute of it 😁
Thanks for comments dont forget to hit the subscription button
+①④①②⑥⑨⑤⑥③④⑨......
=whatsap//++...............
My sister was always obsessed with buying things that are on discount, even if it was something she'd never use. I couldn't understand her, but this video explains a lot!
Thanks for teaching us things we should learn in primary school! I tanked the first half of my life and it’s because nobody prepared me. You guys rock! Now that I know, I’ll do better.
It's not really a school's job to teach you how to live - It's your parents job to prepare you for life. It's school's job to prepare you for a career. and keeping you away from child labour.
Stop putting all responsibility on the schools. Parents and caretakers need to prepare their kids for the world which includes how to deal with money.
Kids don’t always have the best parents, or financially savvy ones. I think this is a great thing to teach at the high school level .
@@CoffeebeamzSomeone wise said that one task of the schooling system is to save unfortunate children from their parents. If I had followed my parents' example in personal finance, I'd be flat broke.
In the end, the root of the cause is Emotion. Being emotional with finances makes one inefficient.
There is no Cure.
Hmm, but a lot of these examples don't take into effect the liquidity consumers have. For example, a $100 won in a scratch off for a low income consumer can be safely spent on a luxury item, but in a normal circumstance, that low income consumer might have to take on debt to be able to spend $100 on a luxury item, which means they incur both the borrowing cost (interest rate) along with the risk of being unable to repay the loan
Side note - unless it is specified by your manufacturer, high octane gas makes your car run worse, not better.
So don't use premium unless you have too. If you don't know, read your manual. Which you should do anyways.
All my yes to this comment
Using gas with a higher octane rating than your car needs won't make it run worse, you'll just be spending more money on something that you don't need. Now if your vehicles has a higher compression ratio you should probably be using gas with a higher octane rating to avoid preignition which can damage your engine. Where I live a lot of the higher octane gas doesn't have ethanol mixed in, which is important if your vehicle has a carburetor because ethanol turns into a yellow sludge if left to sit for too long. This sludge is good at clogging up jets and passageways in carburetors.
Please make a video on how to properly use a credit card
Paid it off every month or don't use it at all. The End.
Oh easy. Thanks
use a debit card
Use it like a debit card. Only buying things you know you can pay off.
ApRiL3706
Debit cards don't help you with credit rating or cash flow management though
I've been researching investment brokers and I'm really interested in working with someone trustworthy and reliable. With the recent market downturn I'm looking for a broker who can help me turn things around and make a profit Can anyone tell me about their experiences with any investment advisor..
I've seen some excellent reviews online about Dustin Dwain King. While I haven't personally worked with him, the feedback from others seems overwhelmingly positive. It might be worth giving him a try based on what I've seen online.
I can vouch for Dustin Dwain King as well. I was skeptical at first, but I followed his advice, and within the first 6 months, I made around $380k. His strategies are solid, and he's been reliable.
Hello bots
For the endowment effect keeping it rather than selling is still rational because not only can you have the card…for free but you can also sell it at any time for more or less the same price
"why put myself through the extra pain"
.
.
"Cuz I paid for that pain woman!"
That’s me.
Penny-wise and pound-foolish :(
You got me at the laptop vs headphone thing
About the sunken cost fallacy: careful, there is some kind of ethical reasoning associated with not wanting to waste food, even if it taste bad. But yeah, it's extremely hard to avoid in my opinion, even while knowing about it.
About the endowmend effect: Often, when you see a price on internet, it's for something that *didn't sell yet*. Selling can require quite a bit of effort and give off a lower amount of money than what you saw, +the fees of transports and plateform. On the other hand, there is an infinite amount of purchase decision/possibility, so it's logical to be more careful on the way you spend, given that there might be more thing that "are worth" than what you can spend.
Good video though!
For me the worst irrational decision I make is because of FOMO/limited time availability of goods, especially through kickstarter...
Your top priority right now should be finding a book 25 Money Secrets From Donald Trump, reading it will change your life, trust me
Bless PBS for Arthur wishbone and this YT channel
"Wise as Penny" said no Sheldon ever 😂
😂😂
About the pokemon card thing. Realized something while watching this video for the 1000th time.
Say you have X amount of money, when you find the charizard in the garage and frame it and don't sell it X has no change.
But if you buy it from the comic book store it's X - 3000 even though you still have the card the cost has subconscious weight, if that makes sense.
I must have no emotions, because I've been doing everything right according to your videos for years.
I bought a 30 year old pickup, because I can repair everything myself (still have it... i estimate it's cost me less than $100/mo purchase price and repairs.)
I'll sell something valuable (but not to me) in a hot second, and "surprise money" goes in the bank.
I weigh the time it takes me to get a bargain vs. the $/hour I make, so If I'm working a lot, I won't take the 10 minutes for $5, but will if I'm not working much.
I like your videos, b/c I'm seeing how far I've come, given that I didn't always do so well.
Nice Monty! Great to get confirmation of good habits! Glad you joined our channel, and hopefully watching our videos can give you additional language and perspective to help others along on their journey! -- Philip :)
I am in a similar situation. Like you, I am good at controlling money as taught by grandparents and parents.
However, it took me years to find an answer until I started exploring entrepreneurial ways to make money. I found this short thought "It is not about saving money but how fast you can make them".
Wise man. If you have had to earn money by the sweat of your brow, and not by lifting the phone and 'doing-a-deal', then that person will be, or should be, more cautious over spending.
I’m glad I’m not the only one watching this thinking, “uh, no, it doesn’t make any sense to believe that nonsense.”
Rational behavior with money is the best predictor on whether or not someone will get out of poverty or better themselves. “Regular” people need to put on their adult pants and stop making emotional decisions. Logic isn’t hard.
I prefer buying a low mileage used car that won't need major repairs. Last time I bought a 5 year old car that lasted over 13 years before I replaced it. After the trade-in credit, it was less than $1000/yr. Not to mention the time saved by not needing repairs.
Words of wisdom I learned from someone “If an item you don’t absolutely NEED is on sale for $500 instead of $1,000 then you didn’t save $500 you lost $500”
It's not so much "need", but "would have bought anyway".
It's only saving money if the purchase was going to happen either way.
Basic summary:
-Endowment effect ( you typically put loss of current positions at a higher priority than gain)
-Sunk cost fallacy ( the phenomena that you wish to "squeeze out all your money" out of a product that you buy, regardless of it being satisfactory or not, which can cause subscriptions and other promotional methods to convince the consumer that they should consume more because they already have invested in their product
-Transaction utility (the amount of pleasure or pain one gets from paying less or more than something's really worth. such as a fake discount (what other examples do you guys know? reply and i'll add them here)
-mental accounting ( separating money into imaginary categories in your mind, removing the philosophy of though that all money regardless of how it's earned, has the same value. Leaving you more susceptible to more frivolous products or liabilities when you "earn easy money". reminds me of the lottery and how so many people blew it all)
This isnt highschool no need to take notes
I’m a successful “modest/small” investor. Somehow I knew some if these things and I applied them in my life, but never knew the terms that describe them. Thx so much!
I just want to point out that in the first scenario when you find the card you’ve acquired $3000 of value, or at least the situation is just like it, while purchasing the card you net 0 in value. If I would’ve thought “yeah, I’ll buy that card” if I had $3000 more in my account then the behavior is totally reasonable, not to mention that the selling not only loses fees and such but also requires effort, so while I do think the point is super valuable to get across I don’t think the situations are equivalent.
It is great that economists do not think we all are hyper-rational Pennies anymore but I do believe the next step is to stop call these behaviors "irrationalities" or "fallacies" and instead try to understand them.
The whole video feels like a personal attack. I'm everything they used as a bad example lmao!
True
And I am confused cause I'm a penny
Sounds like a terrible life.
yes
1:23 2:33 endowment effect
2:50 3:06 sunk cost fallacy
4:08 4:46 transaction utility
5:32 5:49 mental accounting
How does this channel only have 100k subs?? This is amazing quality and this duo is so cute together!
Every time I go shopping for clothes ... it’s all based on my emotions... It’s a substitute for so many things... And I know many people are like that ... It’s a sad world we are living in ...
Yep. More therapy, less clothes.
What helped me to change my behaviour was the documentary The true cost of fashion
The first one in particular is a terrible example (though they all have gaping flaws) - not gaining $3000 is not the same as refusing to lose $3000. It only really makes sense as an example (barely) if you have that much easily disposable money in the first place- in which case it renders the whole scenario moot.
Also... OPENING a vintage original Pokémon booster pack may have been the first mistake (honestly, that's the direction I thought the example was going to go) since, a sealed original booster will likely hold more scarcity value (and growing, as more are opened by others) than any card you can draw from it- only something truly special like the Charizard example might make opening it worth it, so right from the beginning, doing so was a MASSIVE gamble, from a purely financial perspective, if resale was always an intention.
I'd argue opening the pack was like playing lottery. "Huh, a Pokemon pack, it probably is not very valuable, might as well open it for fun". But yeah, the example is a bit flawed. You may need to spend some considerable effort to sell the card, you may possibly hold on to it to let its price increase, etc; it would make more sense if it was something that can be directly converted into money.
Seems like you nitpicked the example and missed the entire point.
The point here is that rationally speaking "worth owning" is "worth buying" assuming available cash. A rare card could be viewed as a valuable asset and worth holding for its investment value but then in that case why isn't it worth purchasing one? Yes, there could be transaction costs involved in buying and selling but the example still works if you assume transaction costs are zero.
❤ she said across the world, not around. Hats off to the especially smart lady.
Loved these, especially the "Is a 10 min walk worth $5" example." Put me on notice there.
Me too - transaction utility eats my lunch! -- P 👨🏻