econlife - Why We Suffer From FOMO by Elaine Schwartz

Today, some thoughts about FOMO…

Every morning, I walk and listen to one or two economic podcasts.

Years ago, the choices were few. Because there was just Econtalk and Planet Money, my decision was an easy one. On Mondays, I listened to each new academic discussion from Econtalk. Then Tuesday, I looked forward to Planet Money. After that, This American Life and Radio Lab were Wednesday and Thursday possibilities. As for the rest of the week, having heard all the new podcasts, I could even select an episode from a Great Courses lecture series.

No more.

Ranging from Amicus to Trade Talks, and Outside/In to More or Less, and Crazy Genius to Mismatched, my podcast series library is currently at 70! I guess it makes sense that most mornings I suffer from FOMO.

FOMO

FOMO (Fear of Missing Out) and its sister symptom FOBO (Fear of a Better Option), both drive us to consider every alternative. However FOMO pushes us to do more while FOBO holds us back. The Boston Globe called the FOMO phenomenon a “hallmark of the digital age.” With social media telling us everything our friends are doing and much more, we have a slew of vacations, movies, Netflix series, restaurants to ponder. And it can be exhausting.

Legend has it that FOMO was first described by a marketing strategist in 2000. Four years later, an HBS student newspaper column spread the word and then the academics started investigating FOMO. Still now, it appears every once in a while in a headline like this one from Bloomberg: “Investing in An Age of FOMO is Hard.”

You might enjoy (as did I) this excerpt from the 2004 HBS Op-Ed that connects FOMO, FOBO, and FODA:

“…FOMO and FOBO are irreconcilably opposing forces, the antithesis of yin and yang, and can drive a person towards a paralytic state I’ll call FODA, or Fear Of Doing Anything…”

“…Notice that as a person becomes more and more FOMO, the energy needed to maintain such an active social life is tremendous. On the other extreme, practicing aggressive FOBO will only serve to alienate your friends. Poor management of the trade-off’s between the two forces leads to FODA…”

So yes, we can observe FOMO, FOBO, and FODA. But a behavioral economist would say it is really about decision fatigue.

Our Bottom Line: Decision Fatigue

Behavioral economists have concluded that too much choice can impact our subsequent behavior. Called decision fatigue, we tire from too many choices.

At a German car dealer, researchers observed consumers’ behavior. They watched them choose among four styles of gearshift knobs and 13 kinds of wheel rims. There were 25 configurations of the engine and gearbox and 56 color combinations for the interior. As the decisions accumulated, the (more expensive) default option became more attractive. They even saw that if those 56 colors were initially presented, buyers chose the default sooner.

Buying a car returns us to my massive podcast library and the stress of wondering about all of the alternatives we might not choose. Because that concern fatigues us, it affects the quality of our decision-making. It can even result in FODA…

Which then takes me to my Audible novel rather than one of 70 podcasts.

My sources and more: If you want to learn about decision fatigue, do read this excellent NY Times Magazine article from John Tierney. And, this is the HBS Op-Ed that initially popularized FOMO.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Why We Have Fewer Female CEOs by Elaine Schwartz

Talking with Freakonomics host Stephen Dubner, PepsiCo CEO Indra Nooyi created a bit of a stir. Perhaps too honestly, she said that women avoid nibbling too loudly in public while men crunch, they lick their fingers, and they pour the last bits of their Doritos down their throats. Asked if PepsiCo might create a chip for women, she said they were considering it.

Not any more.

Called the Lady Doritos controversy, the firm responded with this tweet…

We can view the Lady Doritos incident as an interesting introduction to a woman who runs a firm with 22 billion dollar brands and much more. Having become CEO in 2006, she steered PepsiCo through a major recession. As the head of a salty chips and soda firm, she responded to a junk food onslaught with healthier products.

One result was three categories of foods:

• What’s good for you (Tropicana and nuts)
• What’s better for you (Diet Pepsi)
• What’s fun for you (Pepsi and chips)

After 12 years at the top, Indra Nooyi announced that she will be retiring. To oversee the transition, she will continue to chair their board until early January. But during October a man will become PepsiCo’s president.

Fewer Female CEOs

As a departing female CEO, Indra Nooyi will join Denise Morrison (Campbell Soup) and Irene Rosenfeld (Mondelez). With the three of them gone, we drop to 23 female CEOs in the S&P 500. The remaining women include include Mary Barra at General Motors, Virginia Rometty at IBM, and Safra Katz at Oracle.

Our Bottom Line: Expectations Bias

A behavioral economist might tell us that we have fewer female CEOs because of an expectations bias.

This classic experiment is one example. During the 1960s, Harvard professor Robert Rosenthal had his class experiment with rats that were falsely labeled. Thinking the rats were either smart or dumb, his students did not know that Rosenthal wanted to see the impact of the labels. At the end of the experiment, they did indeed conclude that the “smarter” rats were tamer, cleaner, and more likable.

You can see where this is going. According to Catalyst, too much of the corporate world still assumes that women take care and men take charge. As an expectations bias, that attitude perpetuates a cycle. When there are fewer women at the top, it becomes more likely that there will be fewer women at the top.

And yes, Lady Doritos would also have perpetuated that cycle.


My sources and more: To get a firsthand impression of Indra Nooyi, the Freakonomics podcast is ideal. I also recommend the Washington Post, and the New Yorker to see her PepsiCo legacy. Finally, for the plight of the female CEO, do go to  Catalyst and for the Lady Doritos story, the NY Times.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - How We Use Our Time by Elaine Schwartz

When we see our lives as a box of jelly beans, 79 years would equal 28,835. So yes, after the first year, we’ve used up 365. Then, setting aside 8,477 jelly beans for sleeping, we still have thousands left for work, preparing our meals, watching TV.

Do take a look at this 2013 jelly bean video to see how we allocate the hours of our lives. It uses data from the annual BLS (Bureau of Labor Statistics) American Time Use Survey (ATUS):

And here is the most recent survey from June 2018:

Where are we going? To a closer look at our leisure time.

Leisure

Since the 2017 ATUS, Americans increased their leisure time by seven minutes. The reason though is that we are older. And as you might expect, employed men had 33 more leisure minutes than women. As for what we did, it was probably watch TV although grandma and grandpa spent the most time in front of the set. Instead, it appears that computers and playing video games occupy close to an hour each day for 15-24-year-olds but only 13 minutes if you are 35-44 years-old. Sadly, reading is attracting less time among the young.

As the age group that works the least, people over 65 had the most leisure time. Meanwhile, their 35 to 44 year-old children had more than three hours less to watch TV, relax, read, and think:

Our Bottom Line: Opportunity Cost

Time use decisions always require a sacrifice. Called opportunity cost, choosing is refusing the next best alternative. When you eat pizza for lunch, you might have refused a salad. Watching a video could mean you did not talk on the phone. And picking up a penny prevents you from using those seconds for something else.

Similarly, whether it involves the work we could have done or exercising rather than reading, leisure always has a tradeoff. And whatever we did not do would have had benefits that we decided to forego.

Thinking of those tradeoffs, you might want to compare your time use to the averages:

My sources and more: For some extra detail, do take a look at this ATUS summary. Then, if you want even more, this is the entire survey and a blog that provides some additional insight. 

Meanwhile, the WSJ report provides some history.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Creating Critical Thinkers by Andy Jobson

I always try to make my teaching relevant.  As an English teacher, I want my students to read great works of the past, but I also want to equip them to think (and write) about issues that are happening in their world today. That’s where izzit.org is such a great asset. 

My eighth graders read works like King Arthur and Macbeth.  They wrestle with notions of power and corruption, and I can draw in more modern examples like Too Big to Fail or Unintended Consequences: Eminent Domain to help them think through the nature and challenges of governmental power.  At my school, Riverside Military Academy, we emphasize character education, and my students find programs like Three Keys to Success and In the Classroom with David Robinson interesting and informative as they learn more about making good decisions.  As middle schoolers, they enjoy the title of From Poop to Profits, but I enjoy knowing that they’re being reminded of the power of the human spirit to overcome challenges when given the opportunity and flexibility to experiment.  My upper middle-class kids also gain from seeing the challenges other countries face through videos like Victoria’s Chance, Locked Out, and many others.

One of my favorite aspects of izzit.org is that they understand my needs as a classroom teacher.  I love the fact that I can use one of their videos as a small portion of a lesson.  The viewing takes only a small portion of class time, allowing me to focus on the all-important skills of asking good questions, considering various viewpoints, and articulating arguments.  While my boys would typically say they don’t like writing, they don’t mind nearly so much when the assignment deals with an izzit video.

I could go on about the ways I use izzit with my upperclassmen, but I think you get the idea.  izzit is a great friend for educators who care about helping their students see the world; my hope is that they will also ‘Bee the Change’ our world needs.  I can’t say enough in thanks to the many contributors who make this resource possible.  But, like a good izzit video, I wanted to ‘be brief, be bold, and be done!’  

econlife - What Soccer Can Teach Us About Investing by Elaine Schwartz

After France won the World Cup, the world was sadder. No, certainly not because of the French victory. The reason relates to some emotional math from two economists.

Where are we going? From a soccer win to investing and how we respond to loss.

This is the story…

Winning the World Cup

In a recent study economists monitored the happiness of thousands of fans during years of British soccer matches. Controlling for variables like the time of day and location, they observed happiness fluctuations before, after, and during the games. On the scale they used, fans were 3.9 points “happier than usual” with a win for their team and 7.8 points sadder if their team lost.

And it gets worse. Because the losers’ sadness lasts longer than others’ happiness, those down feelings are four times any upside that winning created.

Below, you can see that people felt the pain of loss more acutely than the joy of winning:

Investing

University of Chicago economist John List suggests that investors ignore stock market fluctuations because they too feel loss more intensely than winning. People who are down $1000 experience the drop more so than if they had been up by the same amount. The result? Most of us sell when stock prices plummet…precisely when we should be patient. Or, we hold on too long because we want to avoid the reality of a loss. Either way, the pain of loss makes us sell at the wrong time.

Our Bottom Line: Loss Aversion

Called loss aversion by behavioral economists like Nobel economics laureate Daniel Kahneman, our desire to avoid a loss affects how we feel and act. For many of us, the dismay over losing a $10 bill exceeds the happiness we feel when we find one.

I suspect though that this picture provides the perfect definition:

And returns us to why there was more sadness in the world after the World Cup.

My sources and more: Thanks to the Washington Post Wonkblog for alerting me to the new soccer happiness study. A perfect summary, the Post article then linked to more detail in this paper on “football” happiness. It also took me to the behavioral side of investing in this NY Times column and to this paper. Finally, this New Yorker Magazine discussion even shows us how politicians can benefit from telling voters what they have lost.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.