When the American kitchenware company Williams Sonoma launched a breadmaking machine it initially sold badly – until it introduced a more expensive model after which the cheaper one did well. Speed-daters are less likely to want to meet a partner again if their previous speed-date was especially attractive. Estate agents sometimes show clients a grotesquely overpriced property with the intention of making their other properties seem more attractive. And watching TV makes us unhappy by reminding us of the mundanity of our own lives.
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Behavioural Finance
Underestimating compounding
We all underestimate the power of compound growth – which leads investors astray in many ways.
Chris Dillow