Open Gently

Musings on the introspective life.

Why We Make Stupid Money Choices...and How Monkeys Beat Us

We're wired to our biases but can do better if we think more independently.

Are we wired to make dumb choices with money? The answer is Yes, and we can trace the origins of those mistakes in capuchin monkeys, says Laurie Santos, a Yale professor of psychology who runs the Yale Comparative Cognition Laboratory.

Monkeys, like humans, love a good bargain and dislike risk. Most of all they dislike losses. They’ll do things they wouldn’t otherwise do to avoid the possibility of a loss. These tastes aren't necessarily a problem except when they override reason--which happens all the time, and not just to other people. If you're human, you're in the club.   

In fact, there's one way monkeys are smarter than we are: they are more independent. 

Here's how the lab experiments worked: To create a monkey market, Santos and her collaborators gave monkeys metal tokens. Experimenters stood by holding grapes. It’s normal monkey behavior to try to snatch a juicy grape. In this case, when a monkey snatched a grape, the experimenter snatched the token. Once the grape-token connection was established, the monkeys quickly learned that they could hand over a token to get a grape.

To complicate things, Santos had some experimenters sell two grapes for a token—a “two for the price of one” sale. The monkeys loved the sale and flocked to those experimenters, offering tokens. Next, the experimenters began to change their prices--introducing risk. You could hand over your token and not get what you got last time, or what the last monkey got. .

Just like us, the monkeys hated risk. They'd rather hand their tokens to an experimenter who always handed over one grape than give the same token to an experimenter who might give them two grapes or none.

We dislike risk because we dislike losses. To test monkey bias against loss, the lab presented the monkeys with an experimenter who was holding three pieces of food, but during a token trade, gave the monkey only two pieces. Another experimenter held only one piece of food but in the trade would produce an extra piece. In both cases, the monkeys end up with two pieces for token. The choices should be equally attractive.

Again, just like humans, monkeys much preferred the second guy. They were annoyed when they were led to expect three pieces and only got two. That felt like a loss.

Watching monkeys act like us is useful because it reminds us to correct for our irrationality. The bias against risk and losses can hurt your bank account. People who pull their money out of the stock market when it’s falling are avoiding the painful experience of risk and loss—and over time, rack up much worse returns than people who hang tight. People who buy things that they don’t need because of sales and bargains end up with credit card debt.

You need to control your money monkey. You also need to enhance your monkey independence. It's tough to watch children behave more stupidly than monkeys, but they do,in the following experiment: 

You can teach children all over the world to perform unnecessary steps in order to open a drawer to a box and get a treat. They're obedient. Worse, they will follow the dumb instructions even when no one is watching.

In this case, the dumb instruction was to poke a stick into a hole at the top of the box. The top of the box was unrelated to the drawer. The experimenters even made the box transparent. 

When I and a roomful of adults watched one of Santos’ videos showing a little girl poking her stick into the top before she opened the door, we all laughed. I got the feeling that parents were looking at the kind of thing they'd seen their kids do. She was so cutely obedient--and dumb. 

Enter the monkeys. They did the silly stick trick when observed but if the experimenter was absent, just opened the drawer and grabbed their treats. 

Presumably adults would be less susceptible to obedience and silly rituals than children. Not so. According to Santos, adult humans are even more likely than children to perform obviously unnecessary steps they are taught.

The monkeys don't go to school the way humans do. But Santos defines the problem differently, since even kids in cultures without regular schooling behave the same way.  She cites the human tendency to conform, to follow others. We are pleasers, crowd-followers. 

So teach your children—and yourself—to try harder to think "outside-the-box," If  a monkey can think for himself, so can you. 

 

Temma Ehrenfeld is a New York-based science writer, and former assistant editor at Newsweek.

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