Book Review – Priceless by William Poundstone

In my youth, nothing was fairer than the “you cut, I choose” rule. When we were lucky enough to get a candy bar to be split between siblings, one would run for the knife – point facing down and away, naturally – and the other got the ruler, meaning short of a stupid measuring error the result would be perfectly even. William Poundstone exploded this basic concept of fairness into nearly 300 pages in Priceless, his 2010 book for folks who buy and sell things (yup, that covers most people inhabiting the planet). The book may be five years old, but the topics are timeless. He cites fancy concepts like coherent arbitrariness, anchoring, heuristics, and psychophysics, all of which apparently mean we often don’t really know what many things should cost. We make assumptions, use shortcuts, and sometimes are “too boneheaded to think things through” as we should. Taking this personally? Don’t. Poundstone aims to help us sharpen our senses when it comes to determining value.

The author says it’s all about the contrasts of gains and losses. If you heard that in 2009 German billionaire Adolf Merckle, distressed over recent losses, leapt in front of a speeding train, would you guess he was financially destitute at that time? You’d think, and yet his net worth was purportedly still in the billions. Take half of an absurdly wealthy man’s fortune and he commits suicide; watch Average Josephine’s reaction to $5,000 being left her by a dead aunt and you’d think she was readying to buy a private island. We hate to lose and love to win and the more often the better. A $30,000 bonus is lovely, Poundstone writes, but it’s not three times as nice as three $10,000 rewards. The key is how often we’re afforded moments to truly celebrate. If you’re in charge of doling out such funds at your company, you may heed his advice closely, especially if you’re able to orchestrate these as unexpected events. This is of course easier said than done, as bonuses can eventually be treated as deferred income by the ungrateful, unwashed masses.

Poundstone loads gobs of go-figure, you-don’t-say material into his book. Studies show that if $10 were presented to you and a stranger, you’d be okay with a $4 take but at $3 you’d tell the other person to shove it (meaning you’d rather get nothing than feel ripped off). In an extensive 2003 South African study of payday loan junk mail, men were as likely to agree to an offer that included a nondescript, black-and-white headshot of a woman as they were to accept one sans photo that carried an interest rate of 4.5% less per month (go ahead, read it again – promise, that’s no typo). Supermarket shoppers spend on average $2 more per visit when forced in a counterclockwise direction. Procter & Gamble rolled out Luvs in the late 70’s by intentionally overpricing it to make Pampers seem like a deal, causing hardcore cloth diaper consumers to finally change. Hooters wants to draw your eye to the big, um, steak with so-called bracketed pricing on its menu. On and on. Priceless is for the reader looking to become more shrewd in spending as well as wanting to sharpen up cocktail party banter. And at $13.17 for the paperback? Kids, it’s a steal.