Is Santa Claus Real?

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As the holiday season rolls around, nostalgia strikes the hearts of even our coldest grinch listeners.  Looking back at the innocence of youth, we all remember the traumatic experience of learning that jolly old St. Nic, might not be real.  In this podcast, the good guys take a critical look on the age-old holiday question: Is Santa Claus real?  We start by examing the historical figures that gave rise to the modern day shopping mall Santa Claus and finish up by using physics to examine whether or not Santa could feasibly deliver Christmas presents to all of the good girls and boys.  Thanks for listening and Happy Holidays from Chad, Geo, Mitch and Perek!

Find the all of Santa’s calculations at http://www.mapleprimes.com/maplesoftblog/7059-The-Physics-Of-Santa-Claus

The Good Guys’ Guide to Choosing

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Scenario:

Imagine yourself with $1000, you go to the store and there is one beautiful flat-screen 60-inch TV for $899.  How do you feel?  Now imagine that you have $1000 and you walk into another store, where you see a wall full of 20 beautiful flat-screen TVs, all between $799 and $899, but with different features.  How do you feel?

 

The Paradox of Choice:

The paradox of choice is a theory by American psychologist Barry Schwartz claiming that, after a certain threshold is reached, an increase in the number of choices will cause a significant amount of psychological distress. This distress, according to Professor Schwartz, can manifest itself in many ways. One way is through buyer’s remorse. The theory states that buyer’s remorse is created through increasing opportunity costs associated with increased choices. Opportunity costs associated with alternate choices compound and create strong feelings of dissonance and remorse.

As the number of choices increase, it is easier to imagine a different choice that may have been better than the one selected. The constant comparison to one’s expectations induces regret, which reduces the satisfaction of any decision, even if it fills the individual’s needs. When there are many alternatives to consider, it is easy to imagine the attractive features of rejected choices and there is a decrease in overall satisfaction.

Consider the amount of choices in a simple supermarket. There are likely to be hundreds of different options of a single product. With so many options, expectations are as high as possible. It is the expectation that the product is perfect for an individual and will have no drawbacks.  This leads to expectations rarely being met, a significant psychological issue. In the example of a supermarket, a wrong product choice can be immediately put into perspective. However, for more involved decisions, the consequences of a wrong decision are significant.

 

Scenario:  

You need to buy a box of ping pong balls for your annual christmas tournament.  You know that the typical price per ping-pong ball is 5 cents (and thus you know that Mitch has been overcharging you this whole time).  One box advertises: 33% cheaper!  The other box advertises: 33% more balls!  Which is a better deal?  

 

Assuming one ball holds 20 balls:

33% off give you 20 balls for 66 cents.  That’s 3.3 cents per ball

33% more gives you 26.67 balls for $1.  That’s 3.75 cents per ball

 

So…. They’re not equal!  Choose the discounted price rather than the increase in quantity.

 

 

Buyer’s Remorse

The anxiety may be rooted in various factors, such as: the person’s concern that they purchased a current model now rather than waiting for a newer model, purchased in an ethically unsound way, purchased on credit that will be difficult to repay, or purchased something that would not be acceptable to others.

In the phase before purchasing, a prospective buyer often feels positive emotions associated with a purchase (desire, a sense of heightened possibilities, and an anticipation of the enjoyment that will accompany using the product, for example); afterwards, having made the purchase, they are more fully able to experience the negative aspects: all the opportunity costs of the purchase, and a reduction in purchasing power.

Also, before the purchase, the buyer has a full array of options, including not purchasing; afterwards, their options have been reduced to:

  • continuing with the purchase, surrendering all alternatives
  • renouncing the purchase

Buyer’s remorse can also be caused or increased by worrying that other people may later question the purchase or claim to know better alternatives.

 

Cognitive Dissonance

theory of cognitive dissonance, a state of psychological discomfort when at least two elements of cognition are in opposition, and which motivates the person to appease it by changing how they think about the situation. Psychologists have focused on three main elements that are related to cognitive dissonance and buyer’s remorse. They are: effort, responsibility, and commitment. Effort is the resources invested in a purchase (material, intellectual, psychological, and others) and effort is directly related to the importance of the purchase. Purchases that require high amounts of effort but don’t bear high rewards are likely to lead to buyer’s remorse. Responsibility refers to the fact that the purchase is done out of free will. Buyers that have no choice on the purchase will be less likely to feel dissonance because it was not out of their own volition. Commitment refers to the continuing of an action. The purchase of an automobile has high commitment because the car must be driven for usually a long duration. Purchases with higher commitment will lead to more buyer’s remorse.

 

How do marketers use buyer’s remorse?

Buyer’s Remorse is a powerful experience for consumers. For years, marketers have been attempting to reduce buyer’s remorse through many different methods. One specific technique employed by marketers is the inclusion of a coupon towards a future purchase at the point of sale. This has many benefits for both the consumer and retailer. First, the consumer is more likely to return to the store with the coupon, which will result in a higher percentage of repeat customers. Each successive time a purchase is made and is deemed satisfactory, buyer’s remorse is less likely to be experienced. Customers can justify their purchases with product performance.

Another technique used is the Money Back Guarantee, a guarantee from the retailer that the product will meet the customer’s needs or the customer is entitled to a full refund. This technique is highly successful at lessening buyer’s remorse because it immediately makes the decision a changeable one. The unchangeability of an “all-sales-final” purchase can lead to a larger amount of psychological discomfort at the point of the decision.  This makes the stakes higher, and poor choices will cause significant buyer’s remorse.

 

Imagine yourself in preschool: 

One marshmallow now or 2 in 15 minutes?

 If postponed, had greater self-esteem, higher SAT scores, better educational and economic achievements as adults (Mischel et al., 2011)

 

Ever bought something when you’re depressed?  Was it a good choice?

An excerpt from “The Financial Cost of Sadness” by Lerner, J.S., Le, Y., and Weber, E.U.:

 

Experiment 1

We randomly assigned 202 participants (116 females, 86 males; ages ranged from 18-63 years, with a mean of 25) to a neutral-, sad-, or disgusted-mood condition. Participants were students and local residents from the Harvard Decision Science Laboratory participant pool who responded to an advertisement offering $15 for participation. Each participant sat in a private cubicle within a laboratory. Drawing on established methods (Gross & Levenson, 1995; Lerner,

7 THE FINANCIAL COST OF SADNESS

et al., 2004), our emotion-induction procedure was the same in all three experiments. Participants first watched three-minute video clips about the death of a boy‘s mentor (Gross & Levenson, 1995) in the sadness condition, about an unsanitary toilet (Lerner, et al., 2004) in the disgust condition, and about the Great Barrier Reef (Lerner, et al., 2004) in the neutral-state condition. Depending on condition, participants next wrote an essay about a situation during which they had experienced sadness or disgust, or an essay about their nightly activities. Both before the emotion-induction procedure and immediately after the choice task, participants reported how intensely they felt 19 emotions, including emotions measuring sadness, disgust, and a neutral state.

Participants then made 27 choices between receiving cash amounts today (between $11- $80) and larger cash amounts (between $25-$85) at points in the future ranging from one week to six months (Kirby, Petry, & Bickel, 1999). Following standard behavioral-economics procedures (Weber et al., 2007), we incentivized participants to express their true preferences by randomly selecting one of the choice pairs for one of the participants in each session (median of 13 participants per session) and paying out that person‘s preferred alternative. Choices of a reward that day were paid at the end of the session in cash. Later rewards were paid by a check mailed at the later time.

The emotion-induction procedure was effective in both magnitude and specificity. Sad- condition participants reported feeling more sad (M = 3.72) than feeling neutral (M = 1.66), t(78) = 6.72, p < .0001, disgusted (M = 1.00), t(78) = 13.68, p < .0001, or any other measured negative emotion, including anger (M = 1.30), t(78) = 13.50, p < .0001, and fear (M = 1.31), t(78) = 13.12, p < .001. Comparable specific effects were found for the neutral and disgust conditions. All

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results hold if we control for pre-induction emotions. Although we will not report the results, these procedures were equally effective in Experiments 2 and 3.

From a rational perspective, there should have been no carry-over of the incidental emotions induced by the video-watching and essay-writing to the financial decisions. Nonetheless, substantial carry-over occurred. Sad participants were more impatient than neutral participants in their choices, i.e., more willing to forego larger rewards in the future to obtain smaller rewards now. We used maximum-likelihood estimation to fit each participants‘ choices to an exponential discounting function, D(t) = δt, where smaller values of δ (the annual discount factor) indicate more impatience.1,2 Sad participants were more impatient, discounting more (Mδ = .21, medianδ = .04) than neutral participants did (Mδ = .28, medianδ = .19; Mann-Whitney Z = 2.04, p = .04).3 In monetary terms, whereas the median sad participant accepted $37 today rather than wait 3 months to receive $85, the median neutral participant required $56 today. Importantly, disgusted participants (Mδ = .31, medianδ = .24) discounted about the same as neutral participants did (Z = .46, ns) and less than sad participants did (Z = 1.87, p = .06). Thus, sadder was not wiser for these intertemporal choices. Even though the induced sadness was incidental to these decisions, it actually increased preference for immediate rewards whereas disgust did not.

 

 

 

 

 

 

Lots of factors go into your decision and your satisfaction with your decision.  My advice:  

1) Only put a great deal of research into something that has the potential to give major rewards

2) When you’ve decided to buy something, consider buying from an environment that has fewer options rather than more

3) Only make large purchases when you’re in a good mood

4) Always choose the 33% cheaper.

5) Embrace your psychological defenses – you DEFINITELY made the right decision.

Swearing

Hello loyal listeners! This episode we discuss the history and theory of swearing. Why do we swear, why shouldn’t we swear? It would be great to listen now right? Unfortunately, due to an unforeseen technical difficulty (my house getting robbed), this episode will be delayed until Monday night the 26th. Please check back and we’ll hit you up then, thanks for listening!!

It’s Monday night and we’re back in action – thanks again for listening!

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Running Mate

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Our guest on today’s podcast is Matt Anderson, author of Running Mate: In Order to Form a More Perfect Union. It’s a fictional thriller about a modern day presidential race where the Republican candidate shocks the establishment by choosing the Democratic nominee as his potential vice president. What follows is a thoughtful and exciting exploration of how the country scrambles to digest this bombshell, and along the way, forces the reader to really think about whether the current ultra-partisan political climate is really what the founders intended, or if there could possibly be another way…

We also talk about the writing and publishing process. Get the Running Mate eBook at Amazon, Barnes and Noble, and Itunes. Order a softcover and learn more at runningmatebook.com. Thanks, Matt!

***************ALSO**************

As promised, here is the Dollar Menu challenge video!

 

Men’s Fashion and Style

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The quickest way for you to set yourself apart from the pack at the workplace, at a party, or at a job interview, is to be well-dressed.  In this episode the good guys dive into uncharted territories by discussing fashion tips that can be used by all guys who are looking for a leg-up on the competition.  Do you think you are a fashion forward fella?  Have a listen to this podcast to see if you follow the rules of male fashion and style.  Thanks for listening!

 

Rule 1:  Good tailoring is crucial!  Find a good tailor and put him to work making your clothes fit you like they should.

Rule 2:  Wear a tie when you are asking for money.

Rule 3:  Dark skies = dark clothes

Rule 4:  Ties should run button to button.  They should cover the top button on your shirt and the top button on your pants.  Nothing more, nothing less.

Rule 5:  Listen to the podcast for many more male style tips

 

Aquatic Civilization

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How do we find enough room for our ever-expanding population?  Eventually, it’ll be time to invest in some real estate under the waves, and we’re not talking about Disney’s The Little Mermaid here.  Imagine huge domes containing farms, houses, movie theaters, gyms and the like, all on the ocean floor.  Recent scientific breakthroughs have moved this dream a little closer to reality, and society is already taking the first steps toward aquatic life.  Check out this hotel nearing completion off the coast of Fiji.  Listen up as the Good Guys discuss the merits and challenges of extending our civilization into the other 70% of the planet.

Jules’ Undersea Lodge

Energy Islands

More technical discussions of underwater civilization

 

 

 

 

             

 

Massive weight loss

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Most of us think we need to lose a couple Elle Bees, right?  But what about 170?  Seems crazy right?  Friend of the show Zach gave us a great interview about his incredible journey from 350 to 160.  If you want more, he’s blogging at http://zachisrunning.com.  Check him out and follow his amazing journey.  Here is a before and after to give you an idea…

 

 

 

 

 

 

 

 

 

 

More fun in the other segments as usual.  Thanks for listening!

 

 

 

Mortgage Schmortgage

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Election season is here, and one of the things we always hear about during these campaigns is tax reform. Candidates say they want to simplify the code, make it more fair, etc. Now we’ve talked about the deficit and financial problems before on the podcast in a macro sense, but for this pillar, I wanted to take a deep dive into one tax phenomenon in particular; the mortgage interest tax deduction. I got interested in it after hearing a couple other podcasts like planet money talk about it, and following the history of why it exists in the first place and where it is now was pretty eye opening.

Quick income tax history lesson:

In February 1913, the 16th amendment was ratified and put into law, allowing congress to enact a federal income tax for the first time. Inflation adjusted, this fell disproportionally on the rich, where individuals with incomes over $65K had to pay 1%. Then if you made over a half million, a few more tiers kicked in, with the highest tax bracket at 7% for those making $11M. This meant 98% of Americans paid no federal income tax at all. Yeah occupy wall street!

So most tax historians best guess as to why the personal interest deduction exists, is that it was simply too cumbersome and difficult to keep track of what was exactly a business (taxable income generating) expense, and a personal one. Especially when there were way more family farmers etc. Plus, since only 2% of Americans were paying income tax at all, it didn’t seem like a huge deal to allow for this deduction, as those high income entities were more likely to purchase things with credit for taxable income generation.

Fast forward to the early 1980s. Over the years the tax base had broadened considerably so a lot more people were paying personal income tax. Also, a lot more people owned their own homes, and the vast majority now financed those purchases with a mortgage. There was a big financial crisis in the early 80s much like there is now, and there was a big push to reform the tax code to get things back in line. Sound familiar? The CBO came up with a list of a bunch of things they could do to the tax code to balance the budget, and one of them was to limit the deduction for the personal interest expense.

Finally in 1986 there was a pretty big overhaul that did indeed limit the MID a bit. It no longer was able to be used on unlimited residences, could only be on your primary home mortgage, and it also made sure that you couldn’t deduct credit card interest either, as credit cards were becoming more prevalent. But in general, it still remained, and has basically stayed that way since.

So enough of the history, let’s look at where we are with the MID today. Still, the main purported goal is to encourage home ownership. So let’s think about what exactly that means and how we could measure it. In order for something to increase ownership, it has to take its effect at the margin. The ultra-rich are always going to buy homes, and the ultra-poor are always going to rent. So at the margin, we need to look at the hypothetical person/family that is deciding whether to rent or own. If, at that margin, the MID doesn’t encourage ownership, then we shouldn’t even have it. And this is the person that we are purportedly trying to help right? And the person that is going to have a horrible time if we get rid of the MID?

So today, who is taking the MID? Since 1991, only between 21 and 26% of taxpayers claimed the MID. Most of these taxpayers were in the top brackets. One of the main reasons people don’t claim it, even if they do have a mortgage, is that the standard deduction turns out to be more than the mortgage interest deduction would be.

Currently, the standard deduction for a married couple is $11,900. So anyone who is married and filing jointly gets to deduct that amount from their tax bill automatically. So in order to make it worth it for a couple to itemize and claim the MID, they would have to pay very close to that amount in mortgage interest. So I dug a step further to see if I could find what the average mortgage payment was and how much of that was interest. The most recent data I found said that the median home price in 2010 was about 220K. So let’s just assume the person put 10% down and is carrying a 200K mortgage. Chose 6% as my rate and saw that the first year of payments, $11933.29 was the interest portion.

So to sum up;

  • The MID started out as kind of a quirk in the tax code, probably there just for simplicity when we started the federal income tax in 1913. Never was there a mention of using it to encourage home ownership
  • Because of the standard deduction, people at the margin (the people that it’s supposed to encourage) aren’t taking advantage of it, and probably wouldn’t benefit from it. Only 1 in 4 Americans even claim it, and most are richer.
  • Liberal and conservative economists tend to agree that it doesn’t make sense to have this deduction anymore, but to suggest getting rid of it is a political hot potato, because of decades of rhetoric about how it symbolizes the American dream, and heavy pressure from the housing lobbies.

 

So that’s just one odd piece of the tax code that you can think about the next time people talk about simplifying the code. It seems pretty benign at first, but when you dig into it, it becomes hard to justify the 130B loss in revenue that the government loses by having this in place. I kind of wonder if there are other parts of the tax code that follow this same trend…

Life Hacks

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Life Hacks are clever, non-obvious ways to solve everyday problems. Originating from computer programmers who found new and “embarassingly” easy ways to complete tasks, the term Life Hack has blown up on the blogosphere and now hundreds of websites, blogs and reddits are completely devoted to helping you find ways to hack your life. In this podcast the Good Guys review some of their favorite Life Hacks as an introduction to a new segment for upcoming podcasts. Let us know if you have any Life Hacks that would be perfect for a GGTK! Thanks for listening!

Check out these links for other great Life Hacks!

www.HackCollege.com

www.43folders.com

www.lifehacker.com

Starting A Business

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Hey everybody! Ever wanted to start your own business? Well little did you know that one of our resident Good Guys, Mitch, has done just that. This week Mitch and his business partner Andrew give us a glimpse into how they got their business off the ground. We also spend some time going over our dreamlining challenge from last episode. Lots of good stuff in this one, thanks for listening!

Check out Vigilante Products on eBay. Mention this podcast episode and Mitch said he would throw in a discount, w00t!