The relativity of values causes us to use money irrationally. I go to the supermarket to buy a $15 pen, and the clerk smiles and says, “You can buy this pen for $7 if you walk 5 minutes from here.” Then, most people walk five minutes and buy a $15 pen for $7. But if you want to buy a $1,000 jacket and the clerk smiles and says, “You can get a $992 jacket in five minutes from here,” most people simply buy the $1,000 jacket. Reasonably, walking for 5 minutes equals the effort, and the profit of $8 is the same. However, people might go to a store that sells pens cheaper, but not for the jacket, because the discount rate is too low. In other words, the relativity of comparing values makes us act irrationally. The pen’s discount rate is 55%, and the jacket’s is only 0.8%. Yet, the total amount is the same for all $8, and the effort to gain that profit is identical. Attitudes and misconceptions about consumption influence how we build wealth. - Joseph’s “just my thoughts”
One of the misconceptions people have is that they believe they ‘buy (get)’ things with money. However, in reality, it is an exchange of money for goods. You might question whether these two concepts are similar, but there is a significant difference between them. In other words, it leads people to forget that money is also a ‘good’ whose value fluctuates based on the amount available in the market. This creates an overconfidence in money . In terms of value, money is only as valuable as its role and mission in exchange. If the role of food is to ‘eat,’ then the role and mission of money is that it is endowed with ‘the power to exchange anything.’ If money can’t be exchanged for food, can you eat money instead of food? The standard that allows goods to exchange roles and missions with each other is called ‘ price .’ - Joseph’s “just my thoughts”