The way we approach situations and more specifically the way we phrase questions has a profound effect on how we act on those situations. In psychology this is known as the framing effect. In one of their most papers work, world renowned psychologists Amos Tversky and Daniel Kahneman stated that:
“The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways.”
More specifically the way people react to a situation depends on whether the situation is framed as a loss or a gain. Now that we’re over the short explanation here’s how this awesome idea helped save 💸💸💸.
It is the summer of 2018 and I just graduated college a couple of months ago. I am moving to San Francisco to pursue some wild dreams but before I do that I need a place to live! Before I read the book Paradox of Choice I would have created a huge spreadsheet with every building on a 5 mile radius from Dolores Park and cross-referenced with the top 20 things I was looking for in a place. However, I now know that the best thing is to not try to over-optimize and limit the choices in consideration. Thus, I forced myself to only consider 5 apartments that are walking distance from everywhere that I would possible want to go. So far so good.
However, choices kept popping up left and right. Should I go for a master bed, a private one or a converted one? How many roommates? Should I pay more for a better view? What about better amenities? The issue with all these choices is that after a while all the options start looking very similar especially when it comes to price. For example, an option that is $1750 vs $2000 only seems like a $250 difference per month.
This is when framing comes into place. That $250 might not seem like a lot but annually that adds up to $3000 😱 I kinda knew this and I automatically did the mental math in my head when I initially considered both options. However, at one point I flipped the equation and instead of thinking how much it would cost me (a loss) I thought about how much I could save (a gain). $3000 dollars was not only a lot but it was also represented almost 2 months of FREE RENT! Yes! What’s a better price than free?! Nothing. If I went with the option that cost me $1750 I would get two months of “free rent” that I wouldn’t get with the other option. Same exact price but completely different way of approaching a decision. This time it was a pretty clear choice. Two months of “free” rent it is 🙂