By Tony Samson
RICHARD THALER, the 2017 Nobel for economics, is considered a prime mover in the field of behavioral economics. He is the second economics Nobel in the field, the first one being the psychologist Daniel Kahneman (2002). One of Thaler’s observations involves the concept of fairness in pricing, based on what he calls “conspicuous effort.” When a locksmith is called to open the front door of your house when you’ve lost your key, his simple jiggling with a tool that takes all of five seconds is considered an easy job. If this is followed by a bill of thirty dollars even when this had already been previously agreed upon, the price is considered “unfair.”
Where was the effort to merit the price?
The fairness perception can irrationally value effort rather than outcome. It was the requisite experience, use of the right tool, and the quick assessment of what needed to be done that made the quick work achieve the desired outcome.
Still, in some fields the perception of conspicuous effort is promoted to justify a high fee.
Consultants understand that a client feels better paying an exorbitant fee if the effort is shown to be herculean — cutting the Gordian knot, cleaning the Augean stables. The situation analysis, which is the basis for calling in outside help, is depicted as dire and full of challenges. The last slide issues a warning — next week may be too late. The routine use of charts, graphs, and industry metrics (the more irrelevant, the better) projects the efforts expended to come to the conclusions being recommended. And if these recommendations entail even more complicated moves? So much the better — can we extend the consultancy arrangement?
Gym instructors put effort in the forefront. The pep talk for the first day at the gym inevitably emphasizes the long hours, perseverance, discipline and hard work to get the desired abs and to be transformed from the “before” poster (you) to the “after” poster (Richard Gutierrez). Effort is everything — no pain, no gain.
Doctors manage the expectations of patients and their families. Even routine procedures that require the use of anesthesia (like root canal work) need clearance from a cardiologist, before the procedure is attempted. In this case, however, it is outcome that is paramount, even in the pricing. Survivability, preferably accompanied by a desired quality of life, is divorced from effort. In fact, the more conspicuous the effort is, the less assured the outcome.
But behavioral economists, dealing as they do with how real people make purchasing decisions, rather than how they should be making them (getting the highest benefit for the lowest cost, given perfect information) understand the value of selling conspicuous effort.
With the penchant in our culture for using intermediaries to reach an influential person (they were classmates in law school), the chosen bridge, or influence peddler, can raise the ante (in cash or in kind) by bringing up even nonexistent hurdles — Bro, I had to convince him to take you out of his shit list where you have languished all these months now.
In Olympic competition, events like figure skating or gymnastics consider “degree of difficulty” in granting higher points. Successfully executing tricky, especially not previously attempted moves, get high scores from the judges. It is these complex moves that then redefine the new standards. Adding one more somersault in freestyle aerials sets the bar higher for the rest of the field. But even in these competitive events, the difficult routines need to be executed with effortless grace. Grunts, missed half-step landings, and untimed bending at the waist deduct points from the player.
Talent which is much sought after, as in a performer or an artist, does not need to display conspicuous effort. Is a Picasso pen-and-ink sketch dashed off in less than three minutes to be worth less than a three-month-long work of a second-tier artist? Or is this just a branding issue? Still, the combination of talent, years of experience, and muscle memory can deliver even an astonishing result without any huffing and puffing.
We commend conspicuous effort for losers and call it fighting spirit. But it’s the winner that gets to bring home the prize, even when he is not sweating.
Tony Samson is chairman and CEO, TOUCH xda
ar.samson@yahoo.com
