[TWILT #5] Transaction Costs, IKEA, and the Relationship Between Materialism and Loneliness

  • SumoMe

IKEA Sign Lit Up in the Dark

This Week I Learned That…

  1. In the year 2000, transaction costs accounted for over half of the total GDP in the United States. In other words, we spent more money negotiating deals than we did on the products and services for which we negotiated. In his book Trust-Based Selling, trust expert Charles Green suggests that data like this research collected by the Boston Consulting Group reveals a large amount of distrust between contemporary buyers and sellers. Green goes on to argue for a more transparent and collaborative framework for complex business transactions.
  2. We value things more highly when we build them than we do when we buy them. Priceonomics describes an experiment conducted by researchers at Harvard Business School. The researchers divided participants into two groups: one that was instructed to assemble a storage box from IKEA and another that was simply given the storage box preassembled. Then, each group was asked how much they would be willing to pay for their respective storage boxes. The average amount people were willing to pay from the group who had been given preassembled boxes was $0.48. And the average willingness to pay among those who had built the boxes? $0.78–an increase of 60%! The researchers dubbed this peculiarity, quite fittingly, “The IKEA effect.”
  3. In most cases, the more materialistic people are the more lonely they become and, vice versa, the more lonely they are the more materialistic the become. Researcher Maria Popova tells of a study in which subjects were measured on levels of loneliness and materialism. After survey results were collected, subjects were categorized into three kinds of materialism: 1) buying things sheerly for the pleasure derived from acquiring and owning them, 2) buying things with the expectation of increasing social status, and 3) buying things with the hope for achieving happiness and personal fulfillment. People high in levels of #2 materialism and #3 materialism were also high in levels of loneliness. However, people from group 1 were actually lower in levels of loneliness. So, if you buy stuff to impress other people or to find meaning, you’re going to be disappointed. But, if you buy stuff just because you think it’s cool stuff, you might be okay.
  4. The idea of the “baker’s dozen” dates back to 13th century England under the reign of King Henry III. In his book, What’s Your Purple Goldifsh?, marketing expert Stan Phelps tells of the history of giving something a little extra. At the time of the concept’s origin, people were becoming increasingly skeptical about whether or not they were getting what they were paying for. Regulations were put into place to monitor weights in transactions in order to avoid fraud. If bakers were found to shortchange their customers, they could be punished so severely as to lose a hand. So, just to be on the safe side, they started giving an extra pastry with each dozen.
  5. We tend to judge the quality of all a person’s traits based on a single trait that happens to stick out to us. In her book Mastermind: How to Think Like Sherlock Holmes, writer Maria Konnikova describes as experiment in which two different groups were shown a list of characteristics and asked to select the two traits that best described the person. Both groups were shown an identical list, except for one characteristic. One list included the trait, “warm,” and the other included the trait, “cold.” At the end of the study, those who were shown the term “warm” were also more likely to rate the person more wise, imaginative, and good-looking. “That’s the difference a single word can make,” says Konnikova. “It can color your entire perception of a person, even if every other descriptive point remains the same.”
  6. Apparently, there is a black market for peddling mummies. In her book Princesses Behaving Badly, writer and journalist Linda Rodriquez McRobbie talks about a series of women throughout history who have pretended to be princesses. One of these women did so after her death–and presumably against her will. In the 1990s, a mummy was intercepted during an illegal transaction. Inscribed on the mummy’s breastplate were the words, “I am Ruduamna, daughter of Xerxes, the great king.” Apparently, someone had been just about to sell the mummified remains of an ancient Persian princess. Further scrutiny revealed, however, that it was a fraud–not just the claim to royalty but also the mummy itself. The woman could not have been dead more than just a few years–and she had died of a broken neck. Someone had taken great pains to “mummify” her and put her remains on the market.
  7. The emergence of and exponential growth in autoimmune disorders within the latter half of the 20th century may be due to the possibility that we have created an environment that is TOO sanitary. In an episode of Econtalk, economist Russell Roberts speaks with science journalist Moises Velasquez-Manoff about his book, An Epidemic of Absence. According to Velasquez-Manoff, eradication of many parasites in our bodies–as much good as it has brought about–has also caused our immune systems to atrophy. For our entire history, parasites have been present in our bodies. In the latter half of the 20th century, as sanitation standards skyrocketed in the developed world, autoimmune disorders have also emerged. New treatments have arisen that actually involve afflicted people injecting themselves with parasites. For now, such “worm therapy” is strictly underground, but the idea is currently being tested by scientists in reputable labs. The conversation on the topic was so complex and interesting that I listened to it three times in a row!


featured image courtesy of kaktuslampan licensed via Creative Commons.

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