How companies prey on your weaknesses: a Robert Shiller Q&A

I wish I could believe everybody over the age of 30 has already discovered this for themselves.

As I have pointed out in some of my blog posts, headlines often do not accurately portray the information in an article. They are written to draw in the reader. A problem is that some people won't read the story, they will just read the headline and get misinformed. Or if they do read the article, their understanding of it will be affected by the first impression they got from the headline.

http://www.cbsnews.com/news/how-companies-prey-on-your-weaknesses-a-robert-shiller-q-a/

Oct. 30, 2015

It's no secret we do things we know we shouldn't. We overeat, gamble away our savings and live like tomorrow will never come. One reason, two Nobel laureates argue, is that there are plenty of businesses happy to lead us astray.

Robert Shiller, an economist at Yale University, used his understanding of how human behavior can affect markets to predict the dot-com crash of the early 2000s and the housing collapse of 2007. He won the Nobel Prize for Economics in 2013 for his work showing that stock and bond prices can move out of step with economic fundamentals even over the long run.

In his new book with George Akerlof, another Nobel-prize winning economist, Shiller examines the many ways credit-card companies, financial firms and other businesses lure people into buying things that might harm them. The authors call that phishing, adopting the word for a common email scam to a broad array of cynical business practices. They call the person who takes the bait a phool. Their book is called "Phishing for Phools: The Economics of Manipulation and Deception."

Their big point: It's not that bad actors are gaming the free market, it's that hucksters and dishonest marketing are part of the free-market game.

In a recent interview with The Associated Press, Shiller talked about how phishers lure phools, the appeal of one-armed bandits and the media's misleading fascination with splashy stories.

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Q: The gist is that businesses keep casting new lures into the water until they get a bite?

A: It's the same thing with Cinnabon. They don't publicize the experimentation they do. Manufacturers of food try to get the optimal ratio to tap into your impulsivity. They don't care about your health. Cinnabon boasts about their genuine Makara cinnamon from Indonesia. They can boast about that sort of thing. They can't say, "Boy, we really cranked up the fat and sugar."

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Q: You say the news media is guilty of phishing, too. How so?

A: They often focus on things that aren't important because they know what kind of story sells. In March of last year, this Malaysia Airlines plane went down mysteriously. The logical thing is to think somebody made a mistake. However, the news media latched onto a mystery story for days and days. It's just a waste of time to think about.

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tags: influence