Ankur Warikoo Profile picture
Oct 2, 2020 14 tweets 3 min read Read on X
This right here, is almost all of consumer psychology summarized.
This picture is a real-life proof (take it for what it's worth) of the Prospect Theory - which was presented by Dan Kahneman and Amos Traversky in a seminal paper in 1979
bit.ly/2Gsq7i2

They (actually only Kahneman) went on win the Nobel prize in 2002.
A layman summary of the theory is
Pain from loss >> Pleasure from gain

It said
People are willing to take a sure shot than gamble on getting higher gains (another form of loss aversion) - which is shown in Poll 1
(60% took the sure shot Rs. 500)
You increase the amount to 1L - this 60% will become even higher.

You increase it to 1Cr - and almost everyone will take the sure shot.

Mathematically, the expected outcome is the same
100% of sure shot amount = 50% of double the sure shot amount

But people are not rational
It also said
People are far likelier to gamble to avoid sure shot loss (another way of describing loss aversion)
Which explains poll 2 results
70% would spin the wheel rather than take the sure shot loss

You increase the sure shot loss amount and even more people will gamble.
Which in other words means,
so called Risk averse people (in Poll 1 who took the sure shot) become risk loving when it comes to avoiding loss.

This seems very intuitive and obvious, but when described with data in 1979 was path breaking.

We used to use this a lot at nearbuy
If a deal had 2 choices
Option 1: Pick from 1 starter, 1 main course and 1 dessert (equivalent to sure shot option)
Option 2: Get X% off on the entire bill (equivalent to spin the wheel)

People opted for Option 1.
Because they didn't know beforehand what they would order.
If a deal said
Get Rs. 500 off
That was better than saying Get 50% off - even if both options gave the same results
If we showed deals that had already expired in the search results, that would drive higher conversion, than if we only showed live deals.

Because people realized they lost out on something. The pain from that was greater.
The biggest impact I saw though was in running the company

If people had a fixed salary of 100 and variable expected pay of 10, their CTC was 110
If we announced the variable pay has been increased to 30, people were happy.
Their CTC was now 130
But if we didn't do well as a company and had to cut down the variable pay from 30 to 20, thus bringing the CTC to 120, people were far angrier than they were happy when it went from 100 to 130

The drop from 130 to 120 affected them more
Than the gain from 100 to 130
I can spend a lifetime on how this paper changed so much about how I saw the world, from the point I read the paper.

There is a great book
Thinking fast, Thinking Slow which is a wonderful introduction to this concept (and a lot of powerful concepts)
amzn.to/34koqeH
The book that I loved more though was
The undoing project
It the story of how Kahneman and Tversky came together, how they fell apart and how their research changed the world in such meaningful ways.
(I am a sucker for stories)

amzn.to/3imm1Fj
I hope you pick up these 2 books, read the paper and realize this deep embedded loss aversion human mind of ours and how it is constantly at work in so many ways :)

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More from @warikoo

Sep 9
20 books that taught me more than school and college ever did.

For those who can't afford, I am giving away these books for free (read below)


1/ Rework
by @jasonfried @dhh
The book changed me. Threw open a different way of looking at the world.

Remains my most gifted book of all times.amzn.to/3MBqdmb


2/ Better Under Pressure
by Justin Menkes

This book saved me in 2016, when I was down and about during the worst phases of my startup life.amzn.to/3XzE6aM
Read 25 tweets
Sep 7
I received an email recently which broke my heart.

(Trigger alert - this email can cause a lot of distress by simply reading it!)Image
Imagine:
Salary of 1.2L pm + 20K pm from brother + 30K pm pension from mother.

BUT:
Has a 25L loan.
12L credit card debt.
Personal loan of 17L with 36K EMI.
Home loan of 70K EMI.
This is not a rare case.
This is a common phenomenon.

1/ Easy access to credit.
2/ Pressure to buy a house in the 20s itself.
3/ Pressure for a grand wedding.

Household income of ~18L, and yet, being unable to pay for even food!
Read 7 tweets
Aug 28
1995
I was 15.
Papa had just lost his job.
We were down to our last few thousands in the bank.
He went to the bank to withdraw 10K.
On his way back, someone robbed him of it. Image
We plunged into chaos.
Financial debt.
Personal favours.
Collectors at our doorstep.

I remember days where ma papa would skip a meal, because we didn't have money.
Ma's salary of Rs. 1000 as a primary school teacher was supporting us.
At the peak of this crisis, we received news that the government would pay compensation for Papa’s house in Kashmir, which was destroyed by now.

Accepting the compensation meant he would never, ever have the home he grew up in.
But that money would save us.
And it did.
Read 6 tweets
Apr 29
Fat-free at 43!
How I shed only 10kgs in a year to get to this shredded look.

The 3T Model
1. Track
2. Train
3. Transform

(long post alert - you might want to bookmark this for future reference)
1/ Track

Track your calorie-in (how much you eat) and calorie-out (how much you burn).

An average adult burns/spends around 2000-2500 calories a day.
One can use a smart-watch/ring to figure this out.

However, our food intake is rarely tracked.
Which makes all the difference.Image
The ONLY way to lose fat/weight in the body is to get to a calorie deficit.
Which means, you consume lesser calories than you spend.

When we get to a 7000-7500 calories deficit, we lose ~1kg of fat.
(the reverse is also true - 7.5K calorie excess = 1kg fat gain)Image
Read 25 tweets
Mar 10
20 years back, at the age of 24, I got my first ever job.
It paid me Rs. 14,746 per month in hand.

In 2 years, at 26, I was earning 12L per annum.
Another 3 years, it reached 33L per annum.

Here is how it happened...
In Mar '04, at the age of 24, I dropped out of my PhD program at Michigan State University and came back to India.

What made the decision easy was the 100% scholarship I was on.
There was no tangible loss of money.
Just the intangible burden of letting down everyone in my world.
With no goals, no plans and no visibility over my future, the first thing I needed was financial independence and stability.

I had to get a job.
Any job.

I tapped into my (limited) network, spoke to my friends, applied through newspaper adverts, went for walk-in interviews.
Read 26 tweets
Mar 5
Do you know which animal kills most humans every year?

If you are thinking wild animals — lions, elephants, tigers — no.
If you are thinking snakes — good guess, but not the right one.
If you are thinking mosquitos — great guess. That's #2.

Do you know what's #1?
Humans :)

WE kill more humans than any other animal every year.
War, violence, fights, terrorism.

We somehow believe that the world is split into us and them.
And we feel that for someone to win, someone else has to lose.
That's what we have been fed every day.
That the world is finite — its wealth, growth, and opportunities.
And the only way one gets wealth, growth or opportunity is to snatch it away from someone else.
Read 12 tweets

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