I took an economics class once in college thinking it would be boring as the Dickens, and I remember being pleasantly surprised at how much I liked it. NPR’s Planet Money has helped keep that interest in economics alive by doing really interesting stories that require almost no prior knowledge about the subject, only an interest. I think they do a great job of explaining principles of economics without talking down to you, like in this piece that I saw last week:
Most of their stuff is for radio, but the above is a video piece. If you want to spoil the ending, you can skip to the next paragraph. If you’re just waiting for it to buffer, I don’t have a fun story for you to help you pass the time, sorry. But think about this: the Minnesota Wild have either the most or the least intimidating team name. On the one hand, the Wild? What? On the other hand, it’s the Wild. There could be literally anything out there, like panthers and bears, and hypothermia, or debilitating loneliness, or a creeping sense that you are a tiny speck in the great forest that is the universe, so what does it really matter if I throw myself over this waterfall? Anyway, your video’s loaded, go check it out.
The video names two contributing factors to the cost of the dress, asymmetric information and signaling. Asymmetric information is when the person you are buying the product from knows way more about the product than you do, which makes you, the consumer, more likely to pay more for something you don’t understand. Most transactions are an asymmetric relationship, but there are different levels. You buy groceries every week from a cashier, so while they may know a bit more than you about the business, you have a pretty good idea of what eggs and bread should cost and if you’re being ripped off. At the other end, you only buy a car (hopefully) every once in a long while, and a wedding dress (again, hopefully) only once ever, which makes it hard to know if you’re getting a good deal or not. Signaling is when you are buying something as a statement to mark a big moment in your life; you are willing to pay more to make that moment more special.
I know what you’re thinking, “Ray, when do you have to have a dress picked out by? Is that enough time for you to lose enough weight? You are going to try to lose weight, aren’t you?” In order: never, no, and shut up. I think there are some parallels here to the building industry. Most people will never hire an architect, so when you do, you’re likely to be overwhelmed by all the things you didn’t think about. Same deal with signaling; most people are content to live in a house they bought off the market, or put their business into an existing tenant space. When you make the decision to build new or make major renovations, you are saying something important your lifestyle or your business. Both of these are uncomfortable situations. Think about how shitty it feels to be at the mechanic thinking, “It’s an air filter, isn’t it supposed to be dirty? Why do I need a new white one?”. It’s important not to lose perspective on these things so that you don’t end up alienating someone who is interested in hiring you.
That last part was so when I read this in the future, it’s like I was talking to myself from the past. Spooky.