We automatically feel pleasure or pain when we connect a thing, situation or individual with an experience we’ve had in the past.
1. Ivan Pavlov
Russian scientist Ivan Pavlov studied the digestive system of dogs. In one experiment he rang a bell just before giving food to the dog. He repeated this several times. After some point the dog salivated with the ring of bell alone without any food. The dog associated the bell with the food.
2. Bill Paley and Persian Messanger Syndrome
If someone tells us what we don’t want to hear, we have an automatic reaction of hatred towards them. It is better to train ourselves out of this behavior. What do we gain by shooting the messenger? From Poor Charlie Almanac
Television was dominated by one network – CBS – in its early days. And Bill Paley was a god. But didn’t like to hear what he didn’t like to hear, and people soon learned that. So they told Paley only what he like to hear. Therefore, he was soon living in a little cocoon of unreality and everything else was corrupt – although it was a great business.
This behavior of not telling the bad news was present in the ancient days. This tendency is called as the Persian Messenger Syndrome. From Poor Charlie Almanac
Ancient persians actually killed some messengers whose sole fault was that they brought home truthful bad news, say, of a battle lost. It was actually safer for the messenger to run away and hide, instead of doing his job.
Do you think this is not happening these days? I see it happening all the times. In fact I have been the messenger several times. What about you?
Advertisers know about the power of association. Have you ever seen a coke Ad associated with bad events? Of course not. All the coke ads picture life as happier than reality. Why? From Poor Charlie Almanac
The brain of man yearns for the type of beverage held by the pretty woman he can’t have. For as long as we are in business, our beverage and its promotion must be associated in consumer minds with all other things consumers like or admire.
Moreover, Pavlovian effects from mere association will help us chose the flavor, texture and color of our new beverage. Considering pavlovian effects, we will have wisely chosen the exotic and expensive sound name “Coca-Cola”, instead of a pedestrian name like “Glotz’s sugared, caffeinated water.”
4. Black Pearls
Do we know what is the value of Black Pearls? We do not. When black pearls were first introduced in the Jewellery market, people did not know their worth. At that time white pearls were famous and people valued it much more than the black pearls. In order to boost the sales of black pearls, they were displayed next to the more precious gems like Rubies, Sapphires and so on. What happened? Black Pearls got valued more than the white pearls. Simple association did the trick. Enjoy the video by Dan Ariely on Black Pearls.
Charlie Munger on association in Human Misjudgment
Talking about economics, you get a very interesting phenomenon that I’ve seen over and over again in a long life. You’ve got two products; suppose they’re complex, technical products. Now you’d think, under the laws of economics, that if product A cost X, if product Y cost X minus something, it will sell better than if it sells at X plus something, but that’s not so. In many cases when you raise the price of the alternative product it’ll get a larger market share than it would when you make it lower than your competitor’s product. That’s because the bell, a pavlovian bell — I mean ordinarily there’s a correlation between price and value – then you have an information inefficiency. And so when you raise the price, the sales go up relative to your competitor. This happens again and again. It’s a pure pavlovian phenomenon.
5. Associations all around me
Several years back I went to a Benefit fund to invest some money. What is a Benefit fund?
- They take money from the public and pay them X% interest. I was one of them.
- Lend the money at (X + Y)% to those who are in need of money. Gold is usually taken as collateral.
I evaluated the company in the following way
- They used computers for their business operations. In those days very few companies had computers.
- The office was furnished and it was ultra modern. I have not seen anything like that before.
- They had beautiful fish tanks.
I concluded that the company’s business should be excellent. I invested all my money.
Few years later the company went bankrupt. I paid a huge price for association.
My elder son is 10 years old. Few days back I asked him the following questions about Sachin Tendulkar. Sachin is one of the greatest cricketer.
- Is he a generous person
- Is he a kind person
His answer was Yes. I asked him why? His answer was
Sachin Tendulkar is an excellent cricketer.
My younger son is 2 years old. While giving food to him my wife uses iPhone to play videos. He eats faster while watching videos. These days whenever he is given food, he searches for iPhone and without it he does not eat.
He has strongly associated food with iPhone.
Why do we associate
Human brain consists of two systems; System 1 and System 2
- System 1 – Imagine you are an experienced car driver. You are driving to work in the route you have gone for the last 10 years. You are under the control of System 1. It is effortless and it operates very quickly.
- System 2 – Imagine you are learning to drive a car. You are under the control of System 2. It is slow and requires extraordinary mental effort. It is lazy and gets tired very soon.
Most of our associations happens in System 1. Is this Bad? No. In order to navigate the complex world, we need to take decisions effortlessly and that is what System 1 is good at. But System 1 is full of biases and it jumps to conclusions very easily. This is what happened in the examples
- Black Pearls
- How I analyzed the Benefit fund
- How my son rated Sachin Tendulkar.
Excerpt from Thinking Fast and Slow
System 1 is gullible and biased to believe System 2 is in charge of doubting and unbelieving, but System 2 is sometimes busy, and often lazy. Indeed, there is evidence that people are more likely to be influenced by empty persuasive messages such as commercials, when they are tired and depleted.
Keep in Mind
- Avoiding associations is very hard. For crucial decisions in life do not just depend on System 1 and its associations.
- Use checklists for all the major decisions.