Wednesday, November 19, 2008

CLUES How much is your ego costing you?

Which is more important – your ego or your cash?

What level is your credit card or frequent flyer status? Bronze? Platinum? Does it matter? I never even stopped to think about this until recently.

Some good friends were teasing me because I have a high tier frequent flyer card but I couldn’t see the joke. It meant I had a reasonable place to wait for flights, that I might not be the first to get bumped off an oversold flight and that occasionally, the staff member at the aircraft door would call me by my name instead of simply being told to take the second aisle.

So I suggested to my friends that their banter was just “card envy” But it stopped me in my tracks and made me think when David said: “well my goal is to have bronze”.

Bronze? His goal? He went on: “If I had bronze instead of platinum, it would mean that I wouldn’t be travelling as much and would be at home with my family more.”
What an insight. He’d certainly sorted out his priorities and made me think about mine.

Pre-approved – for more fees!

This issue of card status and its implications came up for me again when I got an unsolicited letter from the bank telling me I had been pre-approved for a platinum credit card.

Of course, in playing to our egos, what the banks don’t emphasise is that if we take up the higher level card it is accompanied by a higher credit limit, encouraging us to spend more. And if we don’t pay off our credit card accounts each month, the bank achieves its aim in sending out the pre-approval, i.e. to earn more interest.

So I got out all my credit cards and added up how much these cards were costing me in annual fees. The nasty thing about these fees is that unless you keep track of when they are due, the only time you are reminded of them is when they appear on your statement and that’s after they’ve been charged to your account.

Then there are the membership reward scheme fees on top.

So I started to do some analysis about what I really need my cards for. And then comparing that with the level of the card I had. I soon realised that I was paying for more expensive (higher level) cards when I didn’t need them.

What’s more, I didn’t need the extended credit limits and I would have to earn an enormous number of frequent flyer points to justify the difference between the costs of some of the cards. It would be cheaper to shop around for a discount fare!

Status and reward

So why was I hesitating in changing the cards? I began to think that my amygdala (and The Almond Effect - in this case an irrational fear of how it will look to others to have an ‘inferior’ card) was getting in the way of my downgrading from gold and platinum cards so I started to explore why.

It seems that reputation and standing (status) could be more important to our brain than cash. According to one of the authors describing an experiment in a study published in April this year in Neuron the part of the brain called: ‘the striatum became just as animated when players were given a shot at improving their social standing as it did when they won a buck...

And that wasn't the only indicator that they cared about how others perceived them... another brain region (the medial prefrontal cortex) involved in sizing up others went wild when players were shown photos of competitors who outperformed them.’

Hmmm. Maybe that’s the explanation for why, when I split the lunch bill with a friend the other day, and I put down a gold credit card and he put down platinum, I momentarily felt, well, of lower status!

And The Almond Effect® also is implicated. The researchers went on to note: ‘brain areas that process emotional pain (the amygdala and posterior cingulate) lit up when players failed to answer questions that inferior competitors had aced. The researchers speculated that this is because they were worried it would diminish their reputations as superior players.

The power of status in rational decision-making

Some of you will also remember the work of Robert Cialdini on Influence. Linking his work and the status theme, the way that status lights up parts of our brains reminds me of the mental heuristics (or shortcuts) that Cialdini talks about. In particular I’m thinking about his research on how we respond to social proof (“keeping up with the Joneses’) and to authority where Cialdini writes that people will tend to obey authority figures, even if they are asked to perform objectionable acts.

Authority and the perceived value of status seem closely connected to me. And this raises the whole question of how we make decisions and what we sub-consciously allow ourselves to be influenced by.

Managing your almonds (and your striatum!)

Coincidentally as I thought about these things, I was revisiting the writings of Viktor Frenkl. In particular the latter part of the following quote resonated with me:

"We who lived in concentration camps can remember the men who walked through the huts comforting others, giving away their last piece of bread. They may have been few in number, but they offer sufficient proof that everything can be taken from a man but one thing: the last of the human freedoms—to choose one's attitude in any given set of circumstances, to choose one's own way.

And this:

“Between stimulus and response, there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom."

Gold, Platinum and the patience to do something about it

As I write this at my desk, I now have three credit cards sitting in front of me. These are the cards that I am going to cancel or downgrade because I simply don’t need them - even though I like their colour!

As we face the fallout of the global almond effect (that’s the way I described the global financial crisis in the last CLUES) maybe, as I have done, this is a good time to ask yourself what you really need and whether your ego is costing you? Is it worth it?

And of course, the issue of status and ego goes way beyond credit cards and into the world of work where the ‘status card’ gets dealt endlessly by bosses to employees and by others who like to play with power and politics. Maybe that should be the topic for another CLUES.

In the meantime, I’m struggling with other parts of my brain including the amygdala. The parts that deal with garnering the patience and tolerance I’m going to need when I speak with the banks about changing or cancelling my credit cards.

Maybe that’s the real challenge here, not the potentially high cost of status but the emotional cost that has to be endured when trying to do something about it!

Thursday, November 06, 2008

CLUES A Global Almond Effect

CLUES Put your money under the bed

A few weeks ago I was in Brussels. Walking to a restaurant to have dinner about 7.30pm one evening, I noticed an unusually large number of people at a Dexia Bank cashpoint (ATM) queuing to withdraw money.

I remembered that it had been reported, earlier in the day, that Dexia was in trouble. It was a striking example that the global financial crisis had hit. I was instantly reminded of events I had read about where people had made a run on the banks to withdraw their funds to protect them but I never honestly though I would see that in October 2008 in the city of the European Union headquarters.

Panic spreads quickly

In a matter of months, or was it weeks, major economies of the world crashed. Banks collapsed, companies folded, stock markets took the concept of roller coasters to a new dimension, and people became scared – for their jobs, for their homes, for their lifestyle, for their futures.
Potential retirees have watched the value of their superannuation funds plummet and are now revisiting their retirement plans. Those who have retired are watching the value of their assets declining and wished they had more in cash.
Many businesses started to experience bad debts, decreased orders and supplies. Some are starting to contemplate closures and foreclosures.

A Global Almond Effect(R)

Never have so many banks got into so much trouble taking the rest of the world with them. Their excesses and recklessness have caused havoc.

Fear, uncertainty and anxiety are rampant. Humiliated CEOs and many senior executives have been and will be sacked as taxpayers have to bail out financial institutions, providing guarantees to save businesses and to stop people putting their money under their beds!

If we ever imagined a global example of The Almond Effect® – this is it. As the full extent of this crisis is revealed and when history reflects on it and its aftermath, we will see decisions and actions driven by recklessness, fear, anxiety and uncertainty.

Amygdalas – unable to perceive the difference between real and psychological threat – will cause, and have caused people to act rashly, unmediated by their pre-frontal cortexes; i.e. without thinking.

Stay in control

This is one of those times when we have to be really clear about what is going on in our own heads and stay in control. While Governments try to sort out this mess, the most important thing that we can do is remain calm.
Yes it will be tough. Our brains hate uncertainty. We pass most of our days, weeks and years in routine and predictability – responding to patterns that our brains have been laid down over time to enable us to get on with our lives without needing to continuously create new pathways.

Too much change – even welcome change – can place significant demands on our working memories resulting in tiredness, anxiety and an inability to think straight. Add the stress caused as the adrenaline flows when our amygdalas respond to the media bombardment of gloom and doom and heartbreak – no wonder there are reported increases in calls for help to corporate employee assistance programs.

Nothing to fear but fear itself

Roosevelt said: we have nothing to fear but fear itself. So put the STAR model into action immediately.

Stop. Try to notice when you are getting caught up and impacted by the headlines, the TV and radio reports and the worrying talk of others. When you catch yourself, take a deep breath and notice what is happening to you.

Think: how much of it is directly impacting on you. How much is your life going to change? The magnitude of this crisis is in the order of (though of course, different from) September 11 - and just like then, the world will change.
But at the time of 9/11 when lives were lost and the laws of 'war' were rewritten, people worried that it would be impossible for the world to ever be 'normal' again. Yet normalcy did return. Think about that. Take the time to consider and plan for the future to the extent that you need to make changes.

Act: Then act according to your plan and stay the course. Constantly monitor what is happening to you and to the people you care about.

Don’t get caught up in the emotional contagion of others. If you see friends, family and colleagues getting upset, explain to them what is happening in their brains and The Almond Effect® and share the STAR model.

Rewire: If you’ve been through other demanding events, review how you got through them and see what you can apply to this situation.

Cliché time: the sun will rise tomorrow and Australia will win the Rugby world Cup again one day

OK – I’m ever the optimist! But do keep things in perspective. It was only a few weeks ago that climate change was the most important item on the global agenda. I have a feeling it’s slipped!

Remember some of the other occasions in your lives when you thought it couldn’t get any tougher. You came through. We’ll all come through this one. Interestingly it might just be easier for those of us who have lived through these sorts of events before. It will be tougher for the younger people who have never experienced depressions, recessions and horrendous interest rates – their neurons will have to make some new pathways!

It’s not going to be easy as we see jobs slashed and home values fall. But, as longtime readers of CLUES, you have the skills to manage your emotional responses at this time. It won’t fix the situation but at least you’ll be making some calm, rational decisions about the way forward.