Dan Ariely’s Post

Transcript

Halo halo. We have water. More importantly, we have coffee. And we're ready to start the discussion about the psychology of money. And how we can use money in better ways. So first of all, hello, my name is Dan Arieli and I'm the James B Duke Professor of Psychology and Behavioral Economics at Duke University. And mostly I study the question of how do we make people act in a better way? How do we get people to act in a better way in the domain of health and the environment and also in our financial decision making. Before I dive into the topic of the lecture for today, you might have noticed that I have half a beard, beard on this side and nothing on this side. And maybe you wondered what kind of bet I lost. So I didn't lose a bet many years ago, I was badly injured. Most of my body is covered with scars, including the right side of my face. So I just don't have hair on this on this side. So it was not intentional. It looked sort of symmetrical. But I learned that unless I explain it, people stay confused and they keep on wondering what's the point of this half a beer. So there's no point. It just how the accident happened. So let's talk about. Money now. If we want to make better decisions about money. And the first thing we might want to do is to understand the nature of money. What is money? And money is actually an amazing invention. It's an amazing invention at the scale of the wheel. Think about how the world would look like if we didn't have money. I would raise chickens and you would grow broccoli and we would meet and we would argue about the value of chicken pot broccoli and how much you would get and how much I would get and it could be very tough to negotiate. And not only that, there's lots of professions that we couldn't have profession that need long time to learn or to train or specialization. I'm university professor. I don't know how that would work out if if we all had to, to barter all the time, but people, kids would come and bring an apple to the teacher. I don't know how it would work. So money created tremendous value for society. It allows us to trade and to store value and to plan and to save for retirement. Lots of wonderful things. And so once we've said good things about money and now the question is what is the essence of money that allows us to have all of these things? And it's the idea that money can be traded with everything. It's not that we trade chicken with broccoli. We trade chicken with money and broccoli with money. And money is kind of like the common good. Think of it as an umbrella good at everything in life, almost everything can be mapped into money. And because of that, we can buy chicken now and save the money and buy broccoli later. We can do all kinds of things. But the essence of the innovation of money is that money is the common good. And lots of things. Almost everything, can be mapped into money. I can sell water or buy water. Sell coffee or buy coffee I can. I can get a smartphone, all kinds of things now. That idea is called the opportunity cost of money. And the notion is that every dollar represents lots of things we could buy. You know, if if I train broccoli with chicken, the broccoli is representing an amount of chicken and the chicken is representing an amount of broccoli. But if we think about the common good, it means that a dollar represents lots of things. I could buy. Chewing gum I could buy. One thousandth of a phone I could buy. 140th thousands of a car there's all kinds of things that that I could buy so so money wonderful is an invention. Its value comes from the fact that it's the common good. We can map it to lots of things and this is called the.