Hidden Brain - Money Talks

Episode Date: November 28, 2017

How do you spend your money? On shoes, cars, coffee, fancy restaurants? You might think you use money just to, you know, buy stuff. But as Neeru Paharia explains, the way we spend often says a lot about who we are, and what we want to project. We use money to express our values — by going to the local coffee shop instead of Starbucks, or by boycotting — or buycotting — Ivanka Trump shoes. In this April 2017 episode of Hidden Brain, we explore the way we use money to tell stories about ourselves, and to ourselves.

Hey there, Shankar here. I'm guessing you've gotten the memo. It's that delightful time of year when we're encouraged to express our love for friends and family by buying them stuff. We love black bread! Yes, the first of the Black Friday shoppers are pitching tents. Jonas, a little bit more. Despite several people falling to the ground, shoppers charged ahead, fixated on door buster deals. Look at that line.

More than 100 million people expected to turn up between now and Sunday either. If you find shopping as exhausting as I do, but the psychology of shopping as fascinating as I do, today's episode is for you. It's a conversation from April that looks at how we use money to express and sometimes ignore our values. Here's the show. Hope you enjoy it.

This is Hidden Brain. I'm Shankar Vedantam. Americans have long expressed their political views with their wallets. In recent months, this has ramped up, with boycotts and with buycotts. That's why people express support by buying a company's products. For a month now, Nordstrom has been on a list of Trump-affiliated companies to boycott. This is just, it's a wonderful line, I own some of it. I fully, I'm going to just give it, I'm going to give a free commercial here, go buy it today everybody. I deleted Uber recently due to what happened at JFK Airport when it appeared that Uber

was essentially trying to break the strides, fueled the outrage and led to some people to call for a boycott of the airline. It seems like people are a little fed up and disillusioned with sort of conventional political channels where they would normally sort of conventional political channels where they would normally sort of express their political views. And so in the absence of that legitimacy, there's been sort of a rise in political consumerism. Neuropeharia is a marketing professor at Georgetown University. She studies how consumer behavior often serves psychological needs rather than economic

needs. When we think about the way we spend money, we may think about the comfort of a nice pair of shoes or the pleasure of a great meal. But money also serves a deeper purpose. We use money to express our feelings, to project our status, to defend our values. The products we buy tell stories, stories that we tell others, stories that we tell ourselves. For a small coffee shop, people don't really think much of the political situation, but as soon as you put a large competitor in next door, say you put a Starbucks in next door,

all of a sudden it becomes a fight between the little guy and the big guy. How money can talk? This week on Hidden Brain. Nero Paharia says she first became interested in the psychological power of consumer products because of the diamond industry. The diamond engagement ring. How else could two-month salary last forever? A diamond. I studied economics as an undergraduate, and one thing they tell you as an economics major

is that people are rational. But as far as nirical tell, there was nothing particularly rational about buying a diamond. Now you can argue that diamonds are beautiful, but there are cheaper stones that are just as pretty. So then the question is, why are people spending so much money on these shiny rocks that have no intrinsic value, and you know there's effectively a perfect substitute. And then it seemed like it was all this kind of psychological stuff that people wanted

to express their status, people wanted to kind of fit in with sort of the normative practices in terms of marriage. And it's just sort of dawned on me that products have all this psychological value and that's worth real money. I mean, a whole industry is based on just sort of pure kind of signaling and psychological value. And I found that to be really interesting and sort of at odds with this notion that people are rational. This idea made Neeru think about the other ways we use money as a signaling

device to express our beliefs and our values. We enact our political will usually by voting or supporting different kinds of legislations and things like that. So it's kind of interesting when people start taking that civic actions, these kind of civic actions into the market and then start by-coding or boycotting a certain brand or a certain company in order to express their view. And you can kind of think about it in terms of what ends up being more tangible. So if we think about voting, it's sort of an abstract process, it's not very public.

Whereas when you buy a product or avoid buying a product, it's very tangible. If you're someone who doesn't buy flashy jewelry, you may say, okay, I'm not one of those people who uses money to talk. Maybe. Or maybe you just don't use diamonds to talk, you use coffee. I've studied the situations between small coffee shops and large coffee shops, and so I have a paper where we show that for a small coffee shop, if it's just sitting there by itself, people, you know, people don't really think much of the political situation. They just think more about the coffee, sort of about the more rational, economic features and attributes of the product. But as soon as you put a large competitor in next door, say you put a Starbucks in next door, all of a sudden it becomes a fight between the little guy and the big guy.

And then buying your cup of coffee is really meaningful. All of a sudden it's a spite between the little guy and the big guy, and then buying your cup of coffees really meaningful. All of a sudden it's a symbol of what you believe in. It's a symbol of you supporting the little guy, of you supporting the underdog and trying to stick it to the man. And it's so tangible, and I just find it so fascinating that that's sort of how we kind of express our political views on a daily basis, and we feel powerful in a sense that we have a say in this situation.

Companies pay attention to what consumers want. They understand that people don't just want to buy a cup of coffee or a computer, they want the right story to go with that cup of coffee or computer. This is why so many Silicon Valley companies that are worth billions of dollars spend so much time telling us about their origin stories, how two kids dropped out of college to explore a dream in someone's garage. So this is what we call, we have another paper around underdog brand biographies and this sort of idea of kind of starting in a garage from humble beginnings, but overcoming obstacles to kind of fulfill your dream.

That's a really compelling narrative, especially to Americans. I think because of the whole kind of pull yourself up from your bootstraps and this whole notion of the American dream. And so companies that take advantage of that narrative, and if they use it effectively, even as they grow, can kind of remind consumers

that this was a small company and they might identify with it more and penalize them less for being a large company. There tends to be a kind of an aversion or a disdain for large companies. People tend to identify a lot more with smaller companies. And you tell the story of Nantucket Nectors, which also has the same sort of start-up story. A lot of companies, they talk about how Nantucket Nectars in particular talks about how they started with a blender and a dream and Cliff Bar talks about how they started in their garage with,

with he was living with his dog and his skis and you know know, was cooking and is, you know, it's a sort of underdog narrative that makes use of the sort of external disadvantage, but really, you know, trying hard. And I think people really, really find that story resonating because I think we all on some level feel like underdogs and so it sort of is, can be motivating to us. Companies are also extremely skilled at selling us things that are tied to a certain sense of identity. I remember this set of ads that Apple was running some years ago where they basically suggested that people who bought Macs were hyper and cooler than people who bought PCs.

Hello, I'm Mac. And I'm a PC. I'm a free desk. Well, I was sitting on my desk. Yeah, someone walked by, carelessly tripped over my power cord, yanked me straight down to the ground. Bam!

Mac would come with this power cord that connects magnetically, so when it gets pulled, it just pops right off. Everything's just kind of thought out. You know, like the tiny built-in-ice I can't find. My life is flashing before my eyes. I see a sunset in a field of beautiful wheat. Isn't that your screensaver? Yeah.

They were basically saying, if you buy this kind of computer, it sends a signal of the kind of person you are. It's not so much about your status, but how cool you are. Yeah, and I think being cool is also a form of status. You know, you want to, you want to, and there's actually recent research on this by Warren and Campbell. And they talk about how coolness is essentially another way of kind of signaling your status,

which can be very compelling to certain groups of consumers. You want to signal their autonomy, that they're not just drones and just kind of following the masses but they that they're autonomous that they have kind of control and and are kind of independently minded. There is some irony here in an advertising campaign by a major company trying to convince people that if you buy products made by that company, you're actually acting independently and autonomously. When in fact the advertising is actually making you do what the company wants you to do. Yeah, it is interesting.

I mean, I remember in high school that there was a whole group of kids who would wear Metallica shirts and they were trying to show how different they were, but yet they were all wearing Metallica shirts and so they were were sort of, it sort of defeated the purpose on some level, but it wasn't immediately apparent to them. One thing that Neurohus found is that consumers are attracted not just to high-end brands, but to powerful brands. Walmart can be a status symbol. Yeah, it's kind of interesting, so there is this relationship between status and power.

And so status is a way, it's sort of what we get when we have power. And so when we think about power, we can think about Walmart as being a really powerful brand. It has a lot of strength in the marketplace. And so that strength, that kind of access to power, having a lot of resources as a brand in itself, even though it's kind of a low-end brand, if you compare it to other low-end brands, that can be kind of attractive to people who care about status.

When we come back, I'm going to speak to Nero about how we use money not just to express our values, but to ignore them. Stay with us. This is Hidden Brain, I'm Shankar Vedantam. Many of us understand the economic choices we make and have real ethical consequences. The products we buy can adversely affect the environment, or take advantage of poor people in distant countries. We can buy stuff from stores that treat their employees well, or we can buy things sometimes at a cheaper price from stores that treat their employees poorly.

Often after a big new story about conditions at sweatshops or the use of child labor, this public outrage, but as Nuru Paharia has explored, our actions don't always match our rhetoric. She wants to throw the paper on the subject title, Sweatshop Labour is wrong unless the shoes are cute. The idea there is that you kind of decide how much you like something and so you really like a pair of shoes and so then kind of the moral reasoning starts from there. It doesn't start from kind of a neutral place where you're like, you say, oh, sweatshop labor is wrong.

You know, under any circumstances, I don't want to subject people to these unfortunate working conditions. It actually starts at a place where you're like, well, the product's really nice. And the shoes look really good on me. And then you start reasoning about it. And that's called motivated reasoning. So rather than think about morality in terms of this kind of objective thing, we kind of think about it more like a lawyer. So we decide what we want.

And then we kind of come up with the reasons to support it. So we may say, oh, if we see a pair of shoes that we don't like, we may say, oh, switch up labor is wrong. I don't like switch up labor. I don't approve. But if the shoes are cute, you might say something like, oh, it's okay because people need jobs, their companies need to make money. So you'll be more likely to agree with these things because you're motivated.

In a sense, the shoes are really cute. You really want them. So you want to find a way to kind of reconcile your kind of distaste for this situation and the kind of the reality of it. And you've actually conducted experiments which show that people are more likely to reach for these kinds of rationalizations when they actually like a product. Yes, exactly. So if they like a product, if you show them sort of an attractive pair of shoes, they'll be more likely to agree with these economic justifications. If you show them an unattractive pair of shoes, all of a sudden they

become these kind of moral animals who say, oh no it's wrong. And so the idea is that we just decide what is moral based on, you know, how much we want something. What one thing you've looked at is that we're often willing to go along with products that are ethically problematic so long as we can come up with a way to distance ourselves from the unethical behavior that produced it. The more distance we can put between ourselves and the unethical behavior or the unethical action, the easier it becomes to perform. This goes to the idea that if I went to the grocery store and asked for a chicken and they

went out and killed a chicken for me, I would feel worse about that that if I went to the grocery store and asked for a chicken and they went out and killed a chicken for me, I would feel worse about that than if I was just picking up the chicken from a tray. And of course, in both cases, a chicken had to be killed. But in one case, I feel like I have actually asked for the chicken to be killed. In the other case, the dirty walk has already been done. Yeah.

So there's a number of things that sort of enable us to not feel so close to the harm. Essentially, you're buying a product from a company, but what you're doing is you're hiring them to do this dirty work for you. Say any clothing company, they're the ones who hire a child and maybe under some unfortunate conditions, you're not directly actually hiring that person. But I think the second thing that happens is this idea of the order of how kind of supply and demand happen. So we live in an economy where most items are produced first. And so they're already produced, they're already in the store. And so when you go

to the store, the damage has been done, so to speak. So it's already been done. It's already happened. But imagine that you went into that same store and you had to order your chicken or your clothes on demand. So if you order it on demand, they then they will put a child have them work under these unfortunate conditions.

And then you start feeling responsible and guilty for this situation where when it's already happened, you feel like, oh, well, it's already happened, and I'm not responsible for it. And I think people don't really kind of see this broader role that consumers have in creating demand for these kinds of products. They don't see that A causes B because it sort of happens backwards, that they actually make the product first. And then you decide if you want it. But if we lived in an economy that was all on demand,

then it would happen the other way. You would decide you want it, and then they would make it. And then there would be a stronger connection, kind of a stronger cause-and-effect connection that I think people would then feel a bit more responsible and a bit more guilty for these kinds of situations. I can imagine that people would feel horrible if they said I want a shirt and they have to send some poor nine-year-old kid into the basement to make the shirt for the next six hours. I mean, people would feel awful about that.

Yeah, and I think people wouldn't do it. And so then it kind of gets to this question of, does the economic structure and the structure of how goods are made, does the kind of logistical structure impact how we think about ethics and how we think about our own role in enabling these kinds of harms? The companies who make stuff for us are run by people, and those people have minds that work like our minds. So should Cummins know surprise that just as consumers would rather have companies do the dirty work for them, to distance themselves from the ethical consequences of their economic actions, companies often choose to do exactly the same thing.

Rather than run a factory that makes clothing under awful working conditions, why not outsource the dirty work to someone else? If a reporter I know it's details of poor working conditions, you can now plausibly say, but I didn't know about it. In many cases companies actually do outsource the harm, so rather than own the factory that makes the clothing under these terrible conditions, we outsource them to other firms that are owned by other entities. So a lot of these companies do try and claim that they had no knowledge of this, this did not happen within the boundaries of my firm.

It turns out that both individuals and companies often prefer to be kept in the dark about unethical practices that are further up the supply chain. So there was a really, really interesting paper by Julie Irwin and some other colleagues who wrote a paper on this idea of willful ignorance. And the idea was that you had a product and you had access to a whole bunch of different pieces of information. And one of them was the labor conditions or the environmental conditions.

And the question was, do people actually ask for this information? You can look at it if you want, but you could decide not to look at it. And it turns out people didn't want to look at that information because they didn't really want to be confronted with this kind of conflict between their beliefs and what they really wanted. And they found this effect was stronger for people who cared more about labor issues, who cared more about environmental issues.

They were more likely to avoid this information in order to kind of avoid this conflict. Think of the deep irony of what Nero just said. The folks who care the most about ethics might be most willing to turn a blind eye to unethical business practices because they know if they found out about those practices, they would feel obliged to do something about it. We've talked about the many ways in which consumers and companies play games with one another, using products to speak on their behalf, or using products behind which they can hide. But there's one dimension of economic activity we haven't explored, and that's time.

I asked Nero how some of us use our calendars to broadcast our social status. It used to be that people once broadcast their social status by being idle, but that idea has been turned on its head in the United States. It turns out nowadays that people who are busier actually seem to have more social status. So rather than somebody who is very wealthy, who could waste their time, take fancy vacations, invest in learning these kind of archaic mannerisms. It turns out the person who works really hard, who's really busy, who's very effortful, is the one who's seen to have more social status.

And I think in part, that is because we live in a society that values social mobility. So we actually conducted the study in the US, and we conducted the same study in Italy. And we found that for Italian people, they thought the person who was living a life of leisure had more status. Of course, they have so much money, they can just relax all the time. Whereas in the US, they thought the person who was working all the time actually had more status. And I think what was going on was that in the US people sort of value this sense of earned status. And I think what was going on was that in the US, people sort of value this sense of earned status. So status can be earned in the US, where I think in Italy, it's more of a society where status is inherited.

So for example, my co-author is Italian, and she's always talking about how people come from good families or not. And so there's very much this idea that your status isn't necessarily something that you earn, but you inherit. And so in that sense, working hard really wouldn't get you anywhere, whereas in America you have this sense that you can actually climb the ladder. And so celebrities, for example, might say instead of saying, you know, I make one movie every year and I get to hang out on the beach for the other 10 months of the year, they actually are suggesting, oh my god, I'm so overworked.

Yeah, so we actually looked at tweets of celebrities who were tagged with this hashtag Humble Bragg, this idea of bragging, but sort of disguising it as a complaint. And a lot of the tweets we found had to do with being busy. So I have to be in the recording studio this morning, and then I have a book meeting in the afternoon and then I have to travel to New York in the evening and Hashtag

I have no life, you know, these kinds of tweets. You're trying to say something about yourself. You're busy, you're really important. You don't have time to do other things. And so, you see that on social media that's kind of an acceptable and effective way to show your status by telling people how busy you are. Newer I want to ask about your own life, which is I understand that growing up, you came from a family that in some ways prized not demonstrating its commitment to status,

that actually prized not buying the expensive things as a way to show off. So I'm of East Indian origin and my parents immigrated to this country and it turns out in East Indian communities showing your social status is a very, very important thing. So people are really, really motivated to show their status and when I was growing up that was happening through buying really expensive cars. So a lot of my parents' friends, they had jaguires and they had Mercedes and I remember I went to a friend's house one time and they had a jaguire. She was also Indian and I asked her she was complaining about her mom kind of being frugal about different things.

And I said, oh, that's so strange because she's frugal and yet you have a jaguire. And she said, oh, well, that's just to show off. And I just, the candidness of that moment really, really, you know, sparks something in my mind. Like, wow, people are just trying to show off. And my mom also would often complain about how all her friends would buy these expensive cars and the only reason they were doing it was to show off. So I just kind of got really fascinated with this idea of showing your social status. And I think kind of an evidence of how things are shifting now towards maybe towards something

like busyness. Now all her friends are retired and they all brag about how busy they are. And now my mom complains about everyone talks about how busy they are all the time. So I think, you know, it's sort of an evolving, kind of an evolving mechanism. Nero Baharia is a marketing professor at Georgetown University. Nero, thank you for joining me today on Hidden Brain. Thanks for having me. at Georgetown University. Gnero, thank you for joining me today on Hidden Brain. Thanks for having me.

This week's show was produced by Maggie Pennman. Our team includes Tara Boyle, Jenny Schmidt, Raina Cohen, Renee Clark, and Parth Shah. Our unsung hero this week is Steven Skip. Steve's the host of Morning Edition, and he played a vital role in developing Hidden Brain on the radio. He loves learning new things and approaches every story with an enthusiasm that's infectious. Shankar, I'm so honored that you were willing to take a little bit of your very precious

time. I barely have time to say thanks to you. For more hidden brain, follow us on Facebook, Twitter and Instagram and look for our new radio show now airing on many public radio stations across the country. I'm Shankar Vidantam. This is NPR.