They Inspire Me

It hasn’t been a great week because my iPod Nano 6th generation went dead and when I took it to an Apple Authorised Service Center, they refused to replace it. Reason was there is this Liquid Contact Indicator (LCI) thingie inside every iPod’s headphone jack and mine turned red, which means liquid came into contact with it and it doesn’t matter if I have Apple Care, Orange Care or Guava Care because my warranty will be automatically voided. This came to be a really bad news but I managed to contact some US Apple Care guy who transferred me to a customer rep. in Singapore who said they will try to review the case and see if any exceptions can be made. (In the end, an exception was made and I got to exchange my iPod for a new one free of charge because I am a loyal Apple fan and own quite an amount of Apple devices.)

 Image credits to dawnaenriquez

Nevertheless, this is quite a big hassle for me and made me wonder why Apple has such a strict policy on device replacement when Amazon is ludicrously generous? I had some personal experiences with Amazon and they replaced my cracked Kindle twice no question asked. All I did was to call Amazon and speak to a customer rep. who quickly apologize for the inconvinience caused when it was actually my fault and said that a replacement device will be on its way to my place almost immediately.

The main reason that Apple has a stricter replacement policy than Amazon is because of its business plan. Amazon, as we know is currently the #1 online retailing website but it’s trying to tap into the consumer devices market, hence the sales of Kindles at a loss and amazing customer service (not saying that Apple’s service is bad). On the other hand, Apple is already the giant and there aren’t many incentives to be overly generous and welcome even more people (more customer service problems) onboard.

Well, I could be wrong and there might be some other explanations but this was the thought the came into my mind. Of course, I do welcome some other explanations and please don’t hesitate telling me about it.

Recently I participated in a essay competition organized by the Royal Economic Society and the prizes are pretty attractive with a thousand pounds for the winner. There are six questions altogether for me to choose from and I chose the one on behavioral economics because I am always interested in psychology + economics and coincidentally I’ve just read a few books by Dan Ariely and Daniel Kahneman – the father of behavioral economics.

The question that I chose was “To what extent can we use ideas drawn from behavioral economics to help address specific social and economic problems?” Some of my friends who have little exposure to economics will start asking me what exactly is behavioral economics when I ask them to read my essay. Hence I hope I can clarify what behavioral economics is and what this new field can offer us as a society.

Image credits to laverrue

Classical economics always assume that people are self-interested, calculating and will act rationally to his/her benefits. However, the subprime mortgage crisis, dot-com bust, 2008 recession proved that humans are in no way rational and often acts emotionally and is prone to heuristics or biases.

This is where behavioral economics come to the rescue, a whole new field of economics and psychology, which emphasizes that humans are not completely rational, because the existence of two systems in our brain, normally called System One and System Two.

System One is a totally intuitive system, heuristic-based and crazily fast as it depends on mental shortcuts or heuristics, such as availability heuristics (decisions based on rule of thumb), affect heuristics (judgements guided by feelings of liking or dislike) and intuitive heuristics (answering to a simplified question when given a difficult question) , which allows you to swerve an incoming mental driver in less than a fraction of a second.

Nevertheless, it is prone to biases and here’s where System Two comes in, the slow system of forming judgments by allocating attention to the effortful mental activities that demand it, including complex computations.

“It’s not that I’m so smart. It’s that I stay with problems longer”

- Albert Einstein