Once there was a Mr. X who was studying in some college. In College, everyone have to appear for a Group Viva ( An examination conducted by spoken communication). Mr. Y is a friend of Mr. X. They have to appear for a viva. Teacher asked 10 questions to both of them. Mr. X gave 7 correct answers and Mr. Y gave 5 correct answers. When results came out, Mr. X got 90 marks while Mr. Y got 60 marks.
In next semester, again Mr. X has to appear for a viva. This time he was giving it with Mr. Z. Same teacher is taking their viva. She asked 10 questions to both of them. Mr. X gave 7 correct answers and Mr. Z gave 10 correct answers. When results came out, Mr. Z got 100 marks and Mr. X got 75 marks.
Mr. X got puzzled by looking at his marks. He gave same number of correct answers in both the cases but he got different results.
Why this is so?
This is because of the contrast effect. In 1st case, Mr. X appeared more smarter to teacher because his friend gave only 5 correct answers. In 2nd case, Mr. X appeared less smarter to teacher because his friend gave all the correct answers. This is the psychological bias in our thinking.
Contrast Effect means we never evaluate the stimuli like temperature, loudness, brightness, health, status, prices etc on absolute terms but with respect to some reference point.
Look at the below image and check which rectangle is more brighter?
Left or Right
Both the rectangles are of same color but seems to look different because of the Contrast Comparison.
You can do a simple experiment to test it. Take three buckets each containing ice-water, hot-water and water at room temperature respectively. Dip one hand in ice-water and another in hot-water. After few seconds dip both of your hands simultaneously in a bucket containing water at room temperature. You will feel warmness in the hand which is dipped in ice-water and coldness in the hand which is dipped in hot-water. It happens because of the contrast effect. Water at room temperature seems warmer compared to cold water and colder compared to hot water.
Stars are present in day also but they are not visible because of the brightness of the Sun. When Sun sets only then they are visible to us. Another example of Contrast Effect.
This psychological bias can be used by various people to exploit others.
Real Estate agents have to sell their bad houses along with good ones. Let's assume an agent has to sell bad house, to manipulate his customer he first show them extremely bad house in ugly neighborhood. Customer outrightly reject the offer then he show them the house which he intended to sell. Now current house appears more attractive than the previous one. Customers ended up buying them.
Retail clothiers have to sell as many products as possible to maximize their profits.
Suppose you wanted to buy Tuxedo and Sweater. Owner have two choices to show you: Tuxedo and then Sweater Or Sweater and then Tuxedo.
Which one will you choose if you are the owner?
Selling Tuxedo first and then Sweater will make the contrast effect work for their own benefit and choosing the other option will make it work against them. How? Buying $800 sweater seems too smaller after buying $5000 Tuxedo but buying $800 sweater first will develop an aversion for buying $5000 expensive Tuxedo. The basic rule of retail owners is to show you expensive items first and then lesser expensive items to maximize the profit.
After buying Computer other accessories like head-phones, printers etc. seem too smaller and you will be ended up buying them.
Automobile Industries also use the Contrast Effect for their benefit. After buying an expensive car, music system and other accessories seems smaller and you will be ended up buying them.
Charlie Munger on Contrast Effect explains:
In my generation women lived at home until they got married, I saw some perfectly terrible marriages made by highly desirable women because they lived in terrible homes. And I have seen some terrible second marriages which were made because they were slight improvements over an even worse first marriages. You think you are immune from these things and you laugh, and I want to tell you, you aren't.
To see the real life implications of Contrast Effect, an experimenter did two experiments. In 1st experiment, experimenter gave two options to experimentee:
Getting $6 or an expensive pen. Most of them choose $6. In another experiment he added one more option: Getting $6, an expensive pen or an inferior pen. Most of them choose an expensive pen. Adding an inferior option make other look more attractive. We think we are in control of our decisions but actually we aren't.
In Influence - Psychology of Persuasion, Robert Cialdini explains:
Studies done on the contrast principle at Arizona State and Montana State universities suggest that we may be less satisfied with the physical attractiveness of our own lovers because of the way the popular media bombard us with examples of unrealistically attractive models. In one study college student rated a picture of an average-looking member of the opposite sex as less attractive if they first looked through the ads in some popular magazines. In another study, male college-dormitory residents rated the photo of a potential blind date. Those who did so while watching an episode of the Charlie Angel's TV series viewed the blind date as less attractive woman than those who rated her while watching a different show. Apparently it was the uncommon beauty of the Angels female star that made the blind date seem less attractive.
Next time when you go for a date either go alone or go with your less handsome friends.
To treat something as fair or unfair can also be explained by the contrast effect. If a disaster hit in an area, prices of the hotel room rises from $1000 to $1500. People treat this as unfair because people use the previous price as a reference point and surge in $500 made them angry.
In Thinking fast and Slow, Daniel Kahneman explains:
For financial outcomes, the usual reference point is the status quo, but it can also be the outcome that you expect, or perhaps the outcome you feel entitled, for example the raise or bonus that your colleague receives. Outcomes that are better than reference points are gains. Below the reference point they are losses. A principle of diminishing sensitivity applies to evaluation of changes wealth. The subjective difference between $900 and $1000 is much smaller than the difference between $100 and $200.
Chains of habit are too light to be felt until they are too heavy to be broken. Warren Buffet
How can we use this Contrast Effect to our own benefit?
Developing a good habit is not easy. To make it easy surround yourself among those people whose normal behavior is equivalent to your desired behavior. Desired behavior looks easy due to contrast.
In Seeking Wisdom, Peter Bevelin explains:
Contrast may blind us to change until it's too late. For example, we don't notice the bad behavior of others if it goes sour gradually over time. We see reality as constant, although it gradually changes. A stimulus must reach an absolute threshold before we detect it. Before we notice a change in stimulus, a certain relative change most occur. If the change is slow enough we don't notice the change. Our ability to detect and react to change in stimulus decreases as magnitude increases. To a small stimulus only a small amount is added. To a large stimulus a large amount is added.
To lift heavy weights start with something very small and gradually increase it with time. Our body can't detect gradual changes. Reading a book seems too big. Start with one page and gradually increase your capacity. Charlie Munger gave an analogy to explain it. If you put a frog in a boiling pan it immediately jumps out of it. If you put a frog in a pan whose water is at room temperature and slowly increase its temperature. Frog will die but never jump out of it.
Warren Buffet on Contrast Effect explains:
The world is not going to come to an end because tomorrow 200 or 250 thousand more people on the planet than they were today. That's about the number it grows everyday.... it is like eating about 300 calories more each day than you burn up; it has no effect on you today. You don't get up from the table and all of sudden everybody says, " My God, you look fat compared to when you sat down!" But, if you keep doing it over time, the incremental problems are hard to attack because the one extra piece of pie doesn't really seem to make a difference. The 250,000 people tomorrow don't seem to make a difference but the cumulative effect of them will make a huge difference over time, just like overeating will make a huge difference over time. The time to attack the problem is early.
Conclusion: See the reality as it is. Evaluate objects in absolute terms rather than on the basis of some reference point. Keeping this psychological bias in mind will help you to improve the quality of your decisions.
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