[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:02.74,0:00:07.05,Default,,0000,0000,0000,,Imagine a person who always \Nmakes the right financial decisions.
Dialogue: 0,0:00:07.05,0:00:09.02,Default,,0000,0000,0000,,Let's call her\N"Penny."
Dialogue: 0,0:00:09.02,0:00:13.36,Default,,0000,0000,0000,,Penny approaches every money \Nproblem with perfect logic and reason.
Dialogue: 0,0:00:13.36,0:00:15.96,Default,,0000,0000,0000,,She never gets emotional\Nor impulsive
Dialogue: 0,0:00:15.96,0:00:19.30,Default,,0000,0000,0000,,and always knows \Nwhat's in her own best interests.
Dialogue: 0,0:00:19.30,0:00:23.35,Default,,0000,0000,0000,,You're probably thinking that Penny sounds\Nimaginary (and kind of obnoxious).
Dialogue: 0,0:00:23.35,0:00:25.01,Default,,0000,0000,0000,,But for over\Na hundred years,
Dialogue: 0,0:00:25.01,0:00:29.63,Default,,0000,0000,0000,,most economists believed that \Nthe world was made up entirely of Pennys.
Dialogue: 0,0:00:29.63,0:00:31.91,Default,,0000,0000,0000,,That you and I \Nand everyone you know
Dialogue: 0,0:00:31.91,0:00:35.98,Default,,0000,0000,0000,,always made the best decisions\Nto maximize our happiness.
Dialogue: 0,0:00:35.98,0:00:39.29,Default,,0000,0000,0000,,As crazy as that sounds, \Nthat was the conventional wisdom...
Dialogue: 0,0:00:39.29,0:00:42.68,Default,,0000,0000,0000,,until a small group of economists\Nand psychologists
Dialogue: 0,0:00:42.68,0:00:46.35,Default,,0000,0000,0000,,started to question whether\NPenny actually existed at all.
Dialogue: 0,0:00:46.35,0:00:49.80,Default,,0000,0000,0000,,One of them, Richard Thaler,\Nwon the Nobel Prize last year
Dialogue: 0,0:00:49.80,0:00:53.16,Default,,0000,0000,0000,,for showing that not only\Ndo humans make financial mistakes,
Dialogue: 0,0:00:53.16,0:00:55.34,Default,,0000,0000,0000,,they make \Npredictable mistakes.
Dialogue: 0,0:00:55.34,0:00:59.14,Default,,0000,0000,0000,,He joked about calling his research \N"Dumb Stuff People Do,"
Dialogue: 0,0:00:59.14,0:01:01.81,Default,,0000,0000,0000,,but today it's called \N"Behavioral Economics",
Dialogue: 0,0:01:01.81,0:01:04.84,Default,,0000,0000,0000,,and it has changed public\Npolicy across the world.
Dialogue: 0,0:01:04.84,0:01:08.14,Default,,0000,0000,0000,,Thaler showed that humans can't\Nquite remove their emotions
Dialogue: 0,0:01:08.14,0:01:09.71,Default,,0000,0000,0000,,from the decision-making\Nprocess,
Dialogue: 0,0:01:09.71,0:01:15.65,Default,,0000,0000,0000,,but being able to predict these money\Nmistakes might help YOU avoid them.
Dialogue: 0,0:01:23.63,0:01:26.23,Default,,0000,0000,0000,,Let's say you're helping\Nyour mom clean out the garage
Dialogue: 0,0:01:26.23,0:01:28.26,Default,,0000,0000,0000,,and you find a pack of\NPokémon cards
Dialogue: 0,0:01:28.26,0:01:30.94,Default,,0000,0000,0000,,that you must've bought when\Nyou were a kid and forgot to open.
Dialogue: 0,0:01:30.94,0:01:33.45,Default,,0000,0000,0000,,So you go through them\Nand HOLY COW
Dialogue: 0,0:01:33.45,0:01:36.81,Default,,0000,0000,0000,,there's a first edition \NCharizard in mint condition!
Dialogue: 0,0:01:36.81,0:01:40.24,Default,,0000,0000,0000,,Even though you could easily\Nget $3,000 on eBay for it,
Dialogue: 0,0:01:40.24,0:01:44.75,Default,,0000,0000,0000,,you decide to buy a frame \Nand keep it on a shelf in your apartment.
Dialogue: 0,0:01:44.75,0:01:48.06,Default,,0000,0000,0000,,Okay, let's rewind and consider\Na different scenario:
Dialogue: 0,0:01:48.06,0:01:50.41,Default,,0000,0000,0000,,Instead of helping your mom\Nclean out the garage,
Dialogue: 0,0:01:50.41,0:01:52.70,Default,,0000,0000,0000,,you decide to go to the comic\Nbook store.
Dialogue: 0,0:01:52.70,0:01:58.08,Default,,0000,0000,0000,,There in a glass case you see a first\Nedition Charizard card priced at $3,000.
Dialogue: 0,0:01:58.08,0:01:59.79,Default,,0000,0000,0000,,Even though you \Nused to love Pokémon,
Dialogue: 0,0:01:59.79,0:02:02.36,Default,,0000,0000,0000,,you would never dream of \Nshelling out that kind of dough
Dialogue: 0,0:02:02.36,0:02:04.96,Default,,0000,0000,0000,,for a playing card, \Nand you leave the store.
Dialogue: 0,0:02:04.96,0:02:09.62,Default,,0000,0000,0000,,This may seem like understandable\Nbehavior, but it's completely irrational.
Dialogue: 0,0:02:09.62,0:02:10.78,Default,,0000,0000,0000,,In the first \Nscenario,
Dialogue: 0,0:02:10.78,0:02:15.33,Default,,0000,0000,0000,,you're deciding that a Charizard\Ncard is worth giving up $3,000 for,
Dialogue: 0,0:02:15.33,0:02:16.71,Default,,0000,0000,0000,,but in the second \Nscenario,
Dialogue: 0,0:02:16.71,0:02:21.33,Default,,0000,0000,0000,,you're deciding a Charizard card \Nis not worth giving up $3,000 for.
Dialogue: 0,0:02:21.33,0:02:24.14,Default,,0000,0000,0000,,To a perfectly rational\Nbeing like Penny,
Dialogue: 0,0:02:24.14,0:02:26.22,Default,,0000,0000,0000,,whether or not \Nyou already own the card
Dialogue: 0,0:02:26.22,0:02:28.64,Default,,0000,0000,0000,,should be irrelevant\Nwhen judging its value,
Dialogue: 0,0:02:28.64,0:02:32.81,Default,,0000,0000,0000,,but clearly to humans \Nlike you and me, it's very relevant.
Dialogue: 0,0:02:32.81,0:02:35.80,Default,,0000,0000,0000,,Thaler called this \Nthe "endowment effect,"
Dialogue: 0,0:02:35.80,0:02:40.08,Default,,0000,0000,0000,,our tendency to assign more value\Nto the things we already own
Dialogue: 0,0:02:40.08,0:02:42.38,Default,,0000,0000,0000,,than the things \Nwe could own.
Dialogue: 0,0:02:42.38,0:02:45.21,Default,,0000,0000,0000,,Any time you refuse to sell\Nsomething for an amount
Dialogue: 0,0:02:45.21,0:02:47.37,Default,,0000,0000,0000,,that's more than\Nyou'd pay for it,
Dialogue: 0,0:02:47.37,0:02:50.70,Default,,0000,0000,0000,,you are experiencing \Nthe endowment effect.
Dialogue: 0,0:02:50.82,0:02:53.14,Default,,0000,0000,0000,,Ugh, this movie is awful!
Dialogue: 0,0:02:53.14,0:02:54.03,Default,,0000,0000,0000,,I know.
Dialogue: 0,0:02:54.03,0:02:55.35,Default,,0000,0000,0000,,Why don't we watch something else?
Dialogue: 0,0:02:55.35,0:02:56.29,Default,,0000,0000,0000,,We can't.
Dialogue: 0,0:02:56.29,0:02:57.22,Default,,0000,0000,0000,,Why not?
Dialogue: 0,0:02:57.22,0:02:59.18,Default,,0000,0000,0000,,I paid 6 bucks to rent this movie!
Dialogue: 0,0:02:59.18,0:03:00.82,Default,,0000,0000,0000,,We can't just throw that money away!
Dialogue: 0,0:03:00.82,0:03:01.73,Default,,0000,0000,0000,,Ugh!
Dialogue: 0,0:03:01.73,0:03:02.82,Default,,0000,0000,0000,,You burned the popcorn!
Dialogue: 0,0:03:02.82,0:03:04.23,Default,,0000,0000,0000,,We have to finish it.
Dialogue: 0,0:03:04.23,0:03:07.10,Default,,0000,0000,0000,,That bag cost us 89¢.
Dialogue: 0,0:03:07.36,0:03:10.49,Default,,0000,0000,0000,,Have you ever watched a movie \Nyou hated all the way to the end
Dialogue: 0,0:03:10.49,0:03:12.51,Default,,0000,0000,0000,,or finished a meal \Nyou weren't enjoying,
Dialogue: 0,0:03:12.51,0:03:16.08,Default,,0000,0000,0000,,just because you paid for it and\Nyou wanted to get "your money's worth"?
Dialogue: 0,0:03:16.08,0:03:20.38,Default,,0000,0000,0000,,If so, you have fallen victim\Nto the SUNK COST FALLACY.
Dialogue: 0,0:03:20.38,0:03:22.89,Default,,0000,0000,0000,,It's not like sitting through\Nthe Emoji Movie
Dialogue: 0,0:03:22.89,0:03:25.34,Default,,0000,0000,0000,,will magically refund\Nthe rental price -
Dialogue: 0,0:03:25.34,0:03:28.13,Default,,0000,0000,0000,,that money is sunk, \Nand it's not coming back,
Dialogue: 0,0:03:28.13,0:03:30.52,Default,,0000,0000,0000,,so why put yourself \Nthrough the extra pain?
Dialogue: 0,0:03:30.52,0:03:34.12,Default,,0000,0000,0000,,Most of us keep an emotional\Nbalance sheet in our head,
Dialogue: 0,0:03:34.12,0:03:36.92,Default,,0000,0000,0000,,which is less concerned with\Nactual gains and losses
Dialogue: 0,0:03:36.92,0:03:39.36,Default,,0000,0000,0000,,than the feeling\Nof gains and losses.
Dialogue: 0,0:03:39.36,0:03:41.81,Default,,0000,0000,0000,,Even though watching\Nthe movie makes you less happy,
Dialogue: 0,0:03:41.81,0:03:44.69,Default,,0000,0000,0000,,at least if you sit through it \Nyou don't have to count that $6
Dialogue: 0,0:03:44.69,0:03:46.100,Default,,0000,0000,0000,,as a loss in your\Nmental checkbook.
Dialogue: 0,0:03:46.100,0:03:49.96,Default,,0000,0000,0000,,Our fear of \Nsunk costs is so great
Dialogue: 0,0:03:49.96,0:03:53.75,Default,,0000,0000,0000,,that businesses can use it\Nto squeeze even more money out of us.
Dialogue: 0,0:03:53.75,0:03:56.19,Default,,0000,0000,0000,,Many retailers sell\N"memberships"
Dialogue: 0,0:03:56.19,0:03:59.32,Default,,0000,0000,0000,,that include perks like \Ndiscounts and free shipping.
Dialogue: 0,0:03:59.32,0:04:02.50,Default,,0000,0000,0000,,They know that some\Npeople will buy extra stuff
Dialogue: 0,0:04:02.50,0:04:04.04,Default,,0000,0000,0000,,they don't\Nreally need,
Dialogue: 0,0:04:04.04,0:04:07.56,Default,,0000,0000,0000,,just to make sure they get \N"their money's worth".
Dialogue: 0,0:04:07.56,0:04:09.61,Default,,0000,0000,0000,,Imagine that you're shopping\Nfor some headphones
Dialogue: 0,0:04:09.61,0:04:11.48,Default,,0000,0000,0000,,and you're about \Nto buy some for $15,
Dialogue: 0,0:04:11.48,0:04:13.46,Default,,0000,0000,0000,,when you find out that \Nthe store down the street
Dialogue: 0,0:04:13.46,0:04:16.12,Default,,0000,0000,0000,,is selling the exact\Nsame pair for $10.
Dialogue: 0,0:04:16.12,0:04:17.76,Default,,0000,0000,0000,,It's just \Na ten-minute walk.
Dialogue: 0,0:04:17.76,0:04:18.76,Default,,0000,0000,0000,,Would you do it?
Dialogue: 0,0:04:18.76,0:04:22.40,Default,,0000,0000,0000,,Now, same scenario, but this\Ntime you're shopping for a laptop.
Dialogue: 0,0:04:22.40,0:04:24.87,Default,,0000,0000,0000,,The first store has the model\Nyou want for $675.
Dialogue: 0,0:04:24.87,0:04:26.64,Default,,0000,0000,0000,,The second store $670.
Dialogue: 0,0:04:26.64,0:04:28.26,Default,,0000,0000,0000,,Now do you take the walk?
Dialogue: 0,0:04:28.26,0:04:31.47,Default,,0000,0000,0000,,Many people will answer\Nthese two questions differently,
Dialogue: 0,0:04:31.47,0:04:34.38,Default,,0000,0000,0000,,even though they are \Nessentially the same question:
Dialogue: 0,0:04:34.38,0:04:37.52,Default,,0000,0000,0000,,Is it worth $5 to take\Na 10-minute walk?
Dialogue: 0,0:04:37.52,0:04:39.84,Default,,0000,0000,0000,,All other context \Nshould be irrelevant.
Dialogue: 0,0:04:39.84,0:04:43.30,Default,,0000,0000,0000,,Yet people are more likely\Nto say yes to the first scenario,
Dialogue: 0,0:04:43.30,0:04:45.47,Default,,0000,0000,0000,,because it feels like \Nyou're getting a better deal.
Dialogue: 0,0:04:45.47,0:04:48.26,Default,,0000,0000,0000,,This is called \Ntransaction utility,
Dialogue: 0,0:04:48.26,0:04:50.43,Default,,0000,0000,0000,,the amount of mental\Npleasure or pain
Dialogue: 0,0:04:50.43,0:04:54.36,Default,,0000,0000,0000,,we get from feeling like we paid less\Nor more than something's really worth,
Dialogue: 0,0:04:54.36,0:04:56.60,Default,,0000,0000,0000,,and it's often totally\Ndisconnected
Dialogue: 0,0:04:56.60,0:04:59.60,Default,,0000,0000,0000,,from the happiness \Nyou get from the thing itself.
Dialogue: 0,0:04:59.60,0:05:03.83,Default,,0000,0000,0000,,Stores have been exploiting transaction\Nutility from time immemorial,
Dialogue: 0,0:05:03.83,0:05:09.12,Default,,0000,0000,0000,,like the notoriously inflated\N"manufacturer's suggested retail price,"
Dialogue: 0,0:05:09.12,0:05:12.28,Default,,0000,0000,0000,,which makes it look like \Nevery item is always on sale.
Dialogue: 0,0:05:12.28,0:05:15.80,Default,,0000,0000,0000,,And some shoppers are\Nso addicted to transaction utility
Dialogue: 0,0:05:15.80,0:05:18.65,Default,,0000,0000,0000,,that they'll fill their houses\Nwith stuff they don't need
Dialogue: 0,0:05:18.65,0:05:21.85,Default,,0000,0000,0000,,and will never use\Njust to chase that bargain high.
Dialogue: 0,0:05:21.85,0:05:25.88,Default,,0000,0000,0000,,Of course, it's always important\Nto shop around and find the best deal,
Dialogue: 0,0:05:25.88,0:05:28.81,Default,,0000,0000,0000,,but remember that when \Nconsidering any purchase,
Dialogue: 0,0:05:28.81,0:05:32.09,Default,,0000,0000,0000,,the only thing that matters\Nis what it's worth to you.
Dialogue: 0,0:05:32.09,0:05:36.78,Default,,0000,0000,0000,,If you won $100 on a lottery scratcher,\Nwhat would you do with the money?
Dialogue: 0,0:05:36.78,0:05:38.26,Default,,0000,0000,0000,,Buy an expensive pair of shoes?
Dialogue: 0,0:05:38.26,0:05:40.01,Default,,0000,0000,0000,,Go out for a fancy dinner?
Dialogue: 0,0:05:40.01,0:05:43.09,Default,,0000,0000,0000,,Most people say that they're more\Nlikely to spend unexpected income
Dialogue: 0,0:05:43.09,0:05:45.33,Default,,0000,0000,0000,,on something indulgent\Nor frivolous,
Dialogue: 0,0:05:45.33,0:05:47.80,Default,,0000,0000,0000,,because hey, it's not like\NI worked for that money.
Dialogue: 0,0:05:47.80,0:05:48.82,Default,,0000,0000,0000,,It was free!
Dialogue: 0,0:05:48.82,0:05:52.32,Default,,0000,0000,0000,,Thaler called this kind of thinking\Nmental accounting,
Dialogue: 0,0:05:52.32,0:05:56.81,Default,,0000,0000,0000,,which means separating money\Ninto imaginary categories in your mind.
Dialogue: 0,0:05:56.81,0:06:00.84,Default,,0000,0000,0000,,Mental accounting violates\Nthe rule that money is fungible
Dialogue: 0,0:06:00.84,0:06:02.69,Default,,0000,0000,0000,,- that is, totally \Ninterchangeable.
Dialogue: 0,0:06:02.69,0:06:05.42,Default,,0000,0000,0000,,Once you own a dollar, \Nit's the same as any other
Dialogue: 0,0:06:05.42,0:06:09.52,Default,,0000,0000,0000,,and it shouldn't be treated differently\Njust because of where it came from.
Dialogue: 0,0:06:09.52,0:06:15.03,Default,,0000,0000,0000,,For Penny, that pair of shoes is either\Nworth giving up $100 for, or it's not.
Dialogue: 0,0:06:15.03,0:06:17.74,Default,,0000,0000,0000,,Just because some money\Nunexpectedly showed up
Dialogue: 0,0:06:17.74,0:06:19.80,Default,,0000,0000,0000,,doesn't make \Nthe shoes worth more.
Dialogue: 0,0:06:19.80,0:06:23.75,Default,,0000,0000,0000,,Mental accounting can be helpful in making\Nmonthly budgets and sticking to them,
Dialogue: 0,0:06:23.75,0:06:27.04,Default,,0000,0000,0000,,but even then it can lead us\Ndown irrational roads.
Dialogue: 0,0:06:27.04,0:06:30.87,Default,,0000,0000,0000,,One study focused on how\Nconsumers reacted to a drop in gas prices
Dialogue: 0,0:06:30.87,0:06:33.23,Default,,0000,0000,0000,,from 4 to 2 dollars a gallon.
Dialogue: 0,0:06:33.23,0:06:36.03,Default,,0000,0000,0000,,This was at the beginning of\Nthe 2008 financial crisis,
Dialogue: 0,0:06:36.03,0:06:38.83,Default,,0000,0000,0000,,so you'd think that most families\Nwould've had a lot of use
Dialogue: 0,0:06:38.83,0:06:40.57,Default,,0000,0000,0000,,for that extra\N40 bucks a week.
Dialogue: 0,0:06:40.57,0:06:44.30,Default,,0000,0000,0000,,Instead, researchers found that\Npeople were surprisingly likely
Dialogue: 0,0:06:44.30,0:06:47.76,Default,,0000,0000,0000,,to squander those savings\Non a higher grade of gas!
Dialogue: 0,0:06:47.76,0:06:49.19,Default,,0000,0000,0000,,It's as if \Nin their minds
Dialogue: 0,0:06:49.19,0:06:51.39,Default,,0000,0000,0000,,they had budgeted\Na certain amount to gas,
Dialogue: 0,0:06:51.39,0:06:54.02,Default,,0000,0000,0000,,so it had to be\Nspent on gas.
Dialogue: 0,0:06:54.02,0:06:56.46,Default,,0000,0000,0000,,They couldn't treat\Nthe money as fungible.
Dialogue: 0,0:06:56.46,0:07:00.11,Default,,0000,0000,0000,,Mental accounting exists for\Nthe same reason a lot of fallacies do:
Dialogue: 0,0:07:00.11,0:07:03.07,Default,,0000,0000,0000,,because our brains \Naren't perfect supercomputers
Dialogue: 0,0:07:03.07,0:07:07.16,Default,,0000,0000,0000,,and we use a lot of mental shortcuts\Nand emotional instincts just to get by.
Dialogue: 0,0:07:07.16,0:07:09.15,Default,,0000,0000,0000,,But knowing what \Nthose shortcuts are
Dialogue: 0,0:07:09.15,0:07:12.43,Default,,0000,0000,0000,,will make you less likely\Nto rely on them in the future.
Dialogue: 0,0:07:12.43,0:07:19.12,Default,,0000,0000,0000,,You may not ever be as wise as Penny…\Nbut being pennywise is pretty good, too.
Dialogue: 0,0:07:19.12,0:07:20.93,Default,,0000,0000,0000,,And that's our two cents!
Dialogue: 0,0:07:20.93,0:07:24.49,Default,,0000,0000,0000,,If you want to hear more \Nexamples of "dumb stuff people do,"
Dialogue: 0,0:07:24.49,0:07:29.32,Default,,0000,0000,0000,,check out Richard Thaler's Misbehaving:\NThe Making of Behavioral Economics.
Dialogue: 0,0:07:29.32,0:07:32.70,Default,,0000,0000,0000,,It's a funny and fascinating\Nhistory of Thaler's research,
Dialogue: 0,0:07:32.70,0:07:35.65,Default,,0000,0000,0000,,full of surprising studies\Nthat will inspire you
Dialogue: 0,0:07:35.65,0:07:38.80,Default,,0000,0000,0000,,to think differently\Nabout money.