Economic Wisdom to Apply in Your Twenties

Chapter 23

Chapter 3 Section 4 Consume like everyone else

Have you ever had such an experience: It's dinner time, and you and your friends are not sure which restaurant to go to.At this point you pass a restaurant and see two people waiting in line.

"This restaurant must be good," you say to your friend.

"Yeah, people are queuing." So you and your friend decide to join the line at the back, too.

Another guy comes over and he sees the four of you in line and thinks, "This must be a great restaurant." So he joins the queue.Others came, and so did they.

As a result, this ordinary restaurant, which may not be much different from other restaurants, was full tonight.

Economists are not at all surprised by this.Because this is a typical manifestation of the "herd effect" in economics.Inferring whether something is good or bad based on other people's behavior in order to decide whether we follow suit is "herding".

Herding effect is actually what psychology calls "herd psychology".Just as sheep like to go in groups, people in a group tend to follow the crowd blindly, and lose their independent judgment in collective sports.Herd mentality can easily lead to blind obedience, and this blind obedience is manifested as the phenomenon of following trends in consumption in our consumption behavior.

For example, the "breakup meal" that must be had when graduating from college is a typical manifestation of consumption following suit.

The so-called "separate meal" is "parting meal".Three or four years of life as classmates and close friends in the dormitory will go their separate ways in a blink of an eye. At this time, it is natural to get together, drink, and chat. Therefore, "separate meals" have become a way for college students to express their affection for each other.Eating "separate meals" when college students graduate has obviously become a law, which is passed down from generation to generation.

Seeing the former seniors eating "sanhuo meal" and seeing the students around them eating "sanhuo meal", how could I not eat it?This is actually a follow-up.If you eat lunch in the school cafeteria, then I will eat it too; if you eat it outside, then I also want to find a restaurant with a higher grade than yours.As a result, the "breakup meal" that was originally the last memory in college gradually changed its taste. "Sanhuofan" not only eats more and more, but also eats more and more high-end, more and more upscale, and the price is getting higher and higher, becoming a "luxury meal".This behavior of blindly following the trend and only trying to vent emotions for a while has brought financial burdens to many students' families.As far as the family is concerned, it has cost a lot of money to train a college student, and the luxurious dinner has increased the family's expenses.Those with rich families may not care about anything, but what about those with poorer families?For the students, most of them are dependent on their parents. They spend money when they have money, and want it after spending it. The big meal is just to follow suit, compare, and satisfy each other's vanity, which is not conducive to cultivating students' correct concept of financial management and consumption. , Contributed to the society's extravagance and waste of "drinking glasses of wine, full of ostentation".Not only that, the wrong consumption concept will also affect the employment of college students in the future. The wages they earn may even be lower than the consumption level when they were in school, which correspondingly increases the pressure on their employment.

The herd effect tells us that in many cases, it is not what the proverb says-the eyes of the masses are discerning.Ordinary people in the market often tend to lose their basic judgment, and like to join in the fun and follow what others say.Sometimes, the eyes of the masses still turn to the information media, hoping to get a basis for judgment from them.However, media people are also ordinary people, not your eyes, and if you don't know how to distinguish spam, you will lose your way.Therefore, collecting information and judging it sharply is the best way to make people less blind and more rational.

Wisdom Pieces: Herding

The herd effect comes from a simple phenomenon: put a wooden stick horizontally in front of a group of sheep, the first sheep jumps over, the second and third will follow suit; at this time, remove the stick , The sheep behind, when they come here, still jump up like the sheep in front, this is the so-called "herd effect", also known as "herd mentality".

A flock of sheep is a very disorganized organization. They usually rush left and right blindly when they are together, but once a head sheep moves, the other sheep will rush forward without thinking, completely ignoring that there may be wolves in front of them or that they are not far away. There are better grasses everywhere.

(End of this chapter)