Applying Prospect Theory on Emotions

Prospect theory is generally used to describe the investment habits and in short it says that people are more likely to negatively value losses than positively value gains of similar value. Yes, I know I lost you there. So let me explain with the below graph.

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So the pain you feel at the loss of 50 dollars is a lot more than the pleasure you get for the same gain. In terms of investments, let me quote an example from Investopedia

Say one investor was presented with the same mutual fund by two different financial advisors. The first tells the investor that the mutual fund has had an average return of 7% over the past five years. The second advisor tells the investor that the mutual fund has seen above-average returns in the past 10 years but has been declining in recent years. According to prospect theory, even though the investor is presented with the same mutual fund, he or she is more likely to buy the mutual fund from the first advisor, who expressed the rate of return as an overall 7% gain, rather a combination of both high returns and losses. [1]

Most of my readers are smart and already know where I am going with this in terms of personal relationships but let me finish it anyhow. I promise you, I will try to make this as interesting as possible.

In relationships, especially when there is a fight, each person shouts out all the bad things that the other one has done. It is so weird that they remember each negative incident so well and the good ones maybe not that well. In essence, being the best person you have ever been can easily be negated by being an asshole for a single day. Because people tend to judge you positively very slowly but negatively almost instantly.

Not just personal relationships, even in an employee/manager situation, the list of negative feedbacks usually exceeds the list of positive ones. Another example, is when you are about to write anonymous feedback about a product that you used, the first things that enter your mind are all the problems with it. Why do we tend to focus much more on negative things than on positive things? It could be a human nature but the question is can we train ourselves to judge more positively or at least be neutral? (Treat positives and negatives on the same scale). I have been exploring this for the last few months and I still am not where I want to be but now, people are very less capable of annoying me because when someone is irritating me, I don’t remember all the help that person has done for me and realize that a momentary situation cannot speak or weigh down on long term closeness. All the best to me.

Hmm, should this go on Facebook or LinkedIn? It has both professional and personal aspects to this, so I guess I will post it in both places.

[1] http://www.investopedia.com/terms/p/prospecttheory.asp#ixzz3bnMZRCJ4

Partying in Poland

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A journey has to begin with a bang and in my case, bang usually means something bad happening to me. This time, two incidents happened

  1. I was super hungry at the airport. So went into a    store and bought some cake and came back and sat near the boarding gate. Some lady was announcing something in the loudspeaker at the airport and I was like, who the hell even listens to that. Then comes Raksheet who said he heard my name being called in a very bad pronunciation over the speaker and that I was supposed to visit the information centre. Well, that can’t be good. I quickly went through the checklist – Passport, check; Residence permit – check, boarding pass – check, debit card –check.. oh wait.. no check. Can’t find it. I run back to the information centre the poor lady had already announced my name three times by that time. I apologized took my card and came back.
  2. Well that wasn’t the only airport incident. The next one happened in Krakow while exiting the airport, I left my second bag at a place where we were standing for a while. So I entered through the exit gate, running in full speed (obviously I didn’t want someone to steal it) and the security ran towards me and stopped me. It took me a second before I realized what must be going on their minds and I assured that I wasn’t a bad person, showed them my boarding pass and explained that I forgot my bag. They were kind enough to be understanding.

We got our cars, drove towards the salt mines which were amazing. At 130 meters deep, I was reminded of Assasin’s creed game and the hobbit movie. The tour guide was a cute polish girl, trust me, polish people are beautiful. And one other thing I remember here was that Daniel and I had a tough time explaining Jera how 65 divided by 2 was approximately 32.

Next we went to the hotel, checked in and then went out to the oldest restaurant in Krakow (built in 1600s I think) where we had a super expensive meal. Jun wanted vodka with nothing less than 100% alcohol in it and someone had to convince him that drinking ethyl alcohol (C2H6OH) was deadly. After that we walked towards the city centre and at 2 am in the night, the area was bustling with activity with food stalls, couples walking in arms etc. While we were already full, Jun bought some street food and I loved it.

I managed to wake up on time and was feeling proud that I was up so early despite sleeping so late when I get a whatsapp text that everyone was already ready and waiting for me. I quickly shower, go down, grab some food, steal some apples for lunch (it was a buffet and the apples were just lying around there) and then we drove out towards Auschwitz.

Stephan, Raksheet and I got into one car and we enjoyed a very manly drive (no talking, just sitting and staring at the road) with an occasional joke or two. I loved it, yep, sometimes you need peace. And as usual with me, by the time we reached the place, the tickets were sold out for the morning entry and we could only go there in the afternoon at 3.

Okay, we decided to go to the home town of Pope John Paul and eat his favourite dessert there. It was an okayish dessert and the most amazing part of the trip was Jera feeling nauseous because of the long road journey and still eating ice-cream, coffee and dessert together.

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We headed back to Auschwitz and I don’t want to talk much about this except that it was a very depressing place.

And yea, at some point before now, Nidhi, Saby’s wife joined as well. Now we drove towards Zakopane, where we had to trek. The road was super foggy and at one point I couldn’t see more than 10 meters ahead of me. Then we reached our hotel and boy was it a hotel. The easiest way to describe how amazing the hotel was by the number of “Oh my God”s that Binita said when she looked at it. I think I counted 23.

After checking in, we went to a restaurant to eat. One thing about these restaurants, there are people playing music, it’s warm and the food is amazing.

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The funniest part was when we ordered food. I found a meat platter which contained fish, pork, beef, chicken, eggs and almost every daily animal you could think of. I asked how many wanted to share and I counted 6 people. So I was going to order the 6 people one, when Federico in his Italian style, said “COMMON….. Order the 8 people one”. Well, here goes nothing, I thought and ordered and boy was it a meal.

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More amazing than the meal itself was the fact that we cleaned it. And more amazing than that was a look at Raksheet’s plate once he finished his turkey. Someone said, “that dead turkey can be proud of itself” and I couldn’t agree more. Only bones remained and they were squeaky clean.

That night we didn’t buy enough beers – only about 4 big cans for everyone and the obvious happened, we ran out of beer. Stephan called a taxi service on phone and told them we wanted beer. The lady on the other end politely told us that it was a taxi service and not a beer shop before hanging up. We looked around and found some more cans in the fridge which we finished before heading for bed.

The next day we went trekking. The long trek made us sweat a lot. I had to remove my jacket about half way through and carry it though it was very cold outside. Daniel saw an opportunity here – Binita hadn’t got her jacket and she was slightly cold. So he offered his jacket to her like a gentleman while the true story was that he was sweating too and wanted to get rid of the jacket. Damn, why didn’t I think of that first.

Unfortunately it was way too foggy and I couldn’t see the beautiful view that would be otherwise there. Now, if you are thinking no misadventure happened this day, you were wrong again. Saby, left the car lights on and it was dead by the time we reached back. Some friendly Polish tourists helped us kick-start the engine and for many of us this was the first time seeing it.

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We headed back to the hotel and then walked to another restaurant. This time it was vodka shots. We managed to find 75% alchohol and went crazy about it. But we weren’t the crazy ones. There was another group of girls who were extremely drunk and three girls were trying to lift one of their friends who wished to sleep on the pavement that day. I told Saby that maybe I should go help before he dragged me away. We walked back and we were walking in the middle talking loudly and making a lot of jokes. We were told that the “Police people arrest only the Polish people” so we didn’t calm down.

This time we had more than enough beer and I feel ashamed to admit that we couldn’t finish them all. Again, I couldn’t find my card holder (a small box which contains all my cards – debit, residence permit, license etc) and I was pretty sure I left it at a McDonalds where we stopped for a coffee the day before. But yea, the next day I found the box on the window pane. I swear there is a naughty ghost that stays beside and does all these things invisibily.

Well, on the final day, we finished our journey and headed back towards Rotterdam and if I remember correctly, by some amazing karmic intervention, nothing bad happened.

Project Pakoda – Whatsapp style

It all started with me posting a picture of mirchi bajjis in the college whatsapp group.

It rained properly for the first time since January and not just drizzle, proper India-wala rain. I wanted Mirchi Bhajji’s and Irani chai. And the rest is below. Read Left to right. There is one fake picture here.

 

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Sunk cost

Sunk Cost is the money that you have already spent on a venture which in no way can affect the future decisions you make. For example, let’s say you went to a movie and 20 minutes into the movie, you realize the movie sucks. You have two options – continue to suffer through the rest of the movie or understand that the ticket price was a sunk cost and walk out of the theatre to do something better. This applies in business context as well, for example, just because you spent so much money training an employee doesn’t mean you can’t fire him if he doesn’t perform well.

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Anyway, what I am going to talk about is how this sunk cost can be applicable to non-monetary cases as well. I wrote about how I messed up one of my open-book exams by not registering for a laptop and ended up writing it as a closed book exam. (FYI, I passed the test and didn’t do so horrible). When the examiner told me I couldn’t use my tablet because I hadn’t registered for it, I panicked for a second but the next instant, I realized what happened was sunk cost and I shouldn’t continue to spend time worrying about it. Before I came to the exam, my goal was to be able to score 80% something in the test but under the new circumstances, I re-adjusted my goal to just pass the test. Now thinking back, I am very proud of myself for being able to do that. (Yes I wanted to write about this back then itself and I waited till I get the actual grades before typing this out)

With the above example, I am trying to drive home the point about how powerful this concept is. In other words, you could extrapolate the sunk cost to things like emotions, luck, injury and many other things. You got dumped? Yes it would hurt, but what happened is sunk cost, no point worrying about it. You lost your wallet (and didn’t find it after a reasonable amount of time), it’s a sunk cost, get a new wallet. You injured your leg two before a marathon? Again sunk cost, stop feeling sad and see what else you can do instead.

Now before I conclude, let me give you my current situation which can be related to sunk cost. I bought a second hand bike for 75 euros. Now it’s broken and the repair guy is asking for 35 euros to fix it. Now even if do that, I am not sure what is going to happen in another couple of days. I asked him, how much he would give for the bike, he said 20 euros. Tomorrow, I am going to try and fix the bike myself and if I can’t, I am going to call it sunk cost and sell the bike for 20 euros instead of throwing good money after bad.