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_{Exploring the frame, inaction, and justification}

Happy Thursday! Thanks for reading Intentional Dollar — where we look at old money ideas through a new perspective.

What’s inside?

• One tool to experiment with

• Two quotes from others

• Three questions to dig deeper

• Four lines of poetry for the point

Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.

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_{One tool to experiment with:}

The Frame

Daily, we encounter engineered information, structured in a way to motivate us into action, often by means of handing some smiling stranger our dog eared dollars and plastic pennies. You would be right to call this a form or persuasion or manipulation. But you would be wrong to assume this persuasion never happens to you.

Companies with tact will use this tool as a hook to sell their goods. But its use is not limited to sellers of psychical goods. The elite communicators, speech writers, story tellers, podcasters, and marketers all use this tool to sell their stories and capture your attention.

This is a tool about positioning information to compel action, and it’s known as framing. In the early 1980s, Amos Tversky and Daniel Kahneman discovered that people like you and me make different decisions purely based off how information is presented to us.

They performed a study with two ways of sharing a gloomy scenario. Paraphrased below:

Frame 1: 

A disease has infected 600 people. There are two courses of action to combat the disease, and study participants are asked to pick one. Program A: 200 people will be saved. Program B: there’s a 1/3 chance that all 600 people are saved, otherwise no one will be saved. Most participants in this study selected program A.

Frame 2: 

Same exact case facts, with two updated programs. Program A: 400 people will die. Program B: there’s a 1/3 chance that no one dies, otherwise all 600 people die. Participants overwhelmingly selected program B here. What’s interesting is that these two produce identical results. But the manner in which we are “framed” controls how we make decisions.

This study has become famous, but it is not an anomaly. Think about it with respect to your dollars.

Take a look at these three areas this happens with our money:

1. This $100 purse is 15% off vs This purse costs $85.  

15% off a $100 purse is an incredible deal, but you’re still spending $85. Money that likely wouldn’t have been spent if there was no presented sale.

2. Q2 earnings were $10 while Q1 earnings were $9 vs Q2 earnings were $10 while consensus earnings for Q2 were $10.50.

The things we contrast information with are what we use to understand and evaluate the presented facts. Relative to last quarter, this seems great. But to consensus? Doesn’t look as good. The numbers didn’t change at all, but our perception did.

3. This fund costs 3 basis points vs This fund costs 3 basis points or $3/year per $10,000 invested.

Fund companies know that basis points equate to hieroglyphics to us. We don’t know how to evaluate the cost, so maybe 3 basis points is enough to scare us away. But when you say it’s only $3 per $10,000 invested, that sounds incredibly cheap to me.

Be wary when you’re parting ways with your money, as the deals that appear good might be cunningly engineered to appear that way.

_{Two quotes on inaction:}

The only good time for inaction is with your investments — buy and hold. Otherwise, move forward toward the things you want.

_{Three questions on justification:}

1. What bad habits am I justifying?

2. What’s the headache or financial cost of this?

3. How might I hold a truth conference with myself and see the impact of these actions?

Which question stuck with you? Questions like these are spotlights for the mind. Reply to this email and let me know which one shined light on a previously dark cave.

_{Four lines of poetry for the point:}

Contact Me:

Content ideas, questions? Reply to this email or reach out to me at [email protected]

Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.

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