How to independently develop an automatic online sales funnel for a business in 7 steps
Maria Grineva talks about what an online sales funnel is, how to independently create an automatic funnel in your company using 7 consecutive steps According to the research agency DATA…

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How to independently develop an automatic online sales funnel for a business in 7 steps
Maria Grineva talks about what an online sales funnel is, how to independently create an automatic funnel in your company using 7 consecutive steps According to the research agency DATA…

Continue reading →

How to calculate a single tax on imputed income
It is sometimes difficult for an entrepreneur to choose his taxation system. Among this set there is a single tax on imputed income, which differs in that the amount of…

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Manipulation and deception: how not to fall into the trap of a simpleton hunter

How to protect your budget from cunning sellers who are to blame for the 2008 economic crisis and what is the danger of political lobbying? A new book of Nobel Prize winners in economics talks about the risks of free markets

The Mann, Ivanov and Ferber Publishing House has published the book The Hunt for the Simpleton. The economics of manipulation and deception. ” The authors are two Nobel laureates in economics, identity economics researcher George Akerlof and Yale professor Robert Schiller.

The market economy has become a favorable environment for misleading consumers. There are so many “hunters” in the world who are inventive and smart that each of us throughout our lives at least once, but will fall into their bait. It is unlikely that the book will help to completely protect readers from this, but the authors gave examples to recognize seller fraud or dangerous schemes in the economy.

They offer to make sure that hunting for simpletons has a significant impact on our lives. As a result, people make decisions that are not profitable for them.

Personal financial security

If we show caution in 99% of cases, then in the remaining one percent we will behave as if money does not matter much. It is this behavior that entrepreneurs monitor, cleverly setting traps. Someone is prone to careless spending on the eve of the New Year and Christmas holidays, someone is ready to lay out a fortune for the wedding of their dreams. As a result, people do not sleep at night, thinking about how to pay their bills and pay off all debts on loans.

Car dealership owners know that every buyer has already formed the perfect image of a car, carefully imposed by advertising. And they are able to inspire the client with the need for additional equipment, various “stuff”. Car dealers use flattery, persuasion, play on the psychology of the client. Only one who recognizes such tricks can buy a car and not stay aground.

Another trick is to use credit cards to pay for purchases. The authors cite the results of research by psychologist Richard Feinberg, who found that credit card holders leave 13% more tips than those who pay exclusively in cash. Another study in the northeastern United States found that credit card holders buy more products in a single shopping trip. Of course, other factors influence customer behavior. It is even more difficult to assess how the research results are applicable to Russia and other countries of the world.

But supermarket owners in the United States have already taken this trick into service. Despite the fact that they usually pay a bank commission to Visa, Mastercard and others for operations, most often they do not include this commission in customer accounts. The buyer thinks that it is profitable for him to pay with a credit card, and does not even notice how he began to sweep the goods from the shelves.

Macroeconomic stability and sellers of “rotten avocados”

The hunt for simpletons in financial markets is the main cause of crises leading to a deep recession. A prime example is the 2008 crisis. Investment managers who purchased packages of sub-standard securities did not want to get involved in a dubious transaction. But deception and manipulation led to extremely grave consequences that affected not only the economic system of America, but the whole world.

“If I have a reputation as a seller of excellent ripe avocados, then new opportunities open up before me. I can sell you medium-quality avocados for the price of first-class fruit. But in doing so, I jeopardize my reputation, although I am fishing for a simpleton in your face, ”the authors write.

The same story, only on a larger scale, lies at the heart of the financial crisis, raging in the economy so far. The reputation of the largest rating agencies in the United States has been building for almost a century based on the rating of bonds, which was used to assess the likelihood of bankruptcy of the issuer. In the late 1990s and early 2000s, agencies set themselves an ambitious task – to determine the rating of new securities, financial derivatives. Due to the novelty and complexity of these securities, it was not easy for customers to evaluate the fairness of their rating. Derivatives were secured by mortgage loans with a high risk of bankruptcy, but customers trusted rating agencies.

Why did the sale of “rotten avocados” (that is, revalued securities) lead to a massive crisis? Large commercial and investment banks, hedge funds and other organizations are large borrowers. For example, large investment banks finance about 95% of their assets through borrowed capital. Derivatives cost almost nothing, that is, they turned out to be “rotten avocados”. When the truth became clear, the cost of such securities fell sharply.

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