hedonic-treadmill

What Is The Hedonic Treadmill? The Hedonic Treadmill In A Nutshell

The hedonic treadmill was first described in a 1971 essay entitled Hedonic Relativism and Planning the Good Society. The authors described a tendency for people to keep a stable baseline level of happiness despite positive or negative external events. The hedonic treadmill, therefore, is a theory positing that people repeatedly return to a baseline level of happiness, irrespective of what happens to them.

AspectExplanation
Hedonic TreadmillThe Hedonic Treadmill, also known as the Hedonic Adaptation, is a psychological phenomenon that refers to the tendency of humans to return to a relatively stable level of happiness or baseline emotional state after experiencing positive or negative life events. It suggests that major life changes or windfalls do not permanently impact happiness.
Concept OriginThe concept of the Hedonic Treadmill is rooted in positive psychology and was popularized by psychologists Philip Brickman and Donald T. Campbell in the 1970s through their research on the lottery winners’ paradox and paraplegics’ adaptation to disability.
Key PrincipleThe central principle of the Hedonic Treadmill is that individuals often quickly adapt to changes in circumstances, whether positive or negative, and their subjective well-being tends to revert to a baseline level over time. This suggests that external factors have a temporary impact on happiness.
ExamplesPositive Life Events: Winning a lottery, getting a promotion, or buying a new car may initially boost happiness, but individuals tend to adapt, and the initial joy fades.
Negative Life Events: Conversely, experiencing a breakup or job loss can lead to initial unhappiness, which diminishes with time.
ImplicationsThe Hedonic Treadmill concept has significant implications for the pursuit of happiness. It suggests that long-term happiness is less influenced by external circumstances and more by individual disposition, attitude, and habitual ways of thinking. People may overestimate the impact of material gains on their well-being.
Positive PsychologyThe Hedonic Treadmill concept has prompted the development of positive psychology interventions and practices aimed at helping individuals sustain happiness over the long term. These include gratitude exercises, mindfulness, and focusing on intrinsic values rather than external achievements.
CritiqueWhile the Hedonic Treadmill highlights the adaptability of human happiness, critics argue that it oversimplifies the complexity of human emotions and that individuals can make meaningful and lasting changes in their lives to improve well-being. The concept is also debated in the field of psychology.
ApplicationUnderstanding the Hedonic Treadmill can lead to more realistic expectations and decisions in life. It suggests that the pursuit of lasting happiness should involve efforts to change one’s mindset and focus on intangible and sustainable sources of well-being, such as relationships and personal growth.
ConclusionThe Hedonic Treadmill is a psychological concept that emphasizes the human tendency to adapt to both positive and negative life events, ultimately returning to a baseline level of happiness. It encourages individuals to seek happiness through internal factors and mindset changes rather than relying solely on external circumstances.

Understanding the hedonic treadmill

However, the concept itself was alluded two almost 200 years earlier by philosopher and writer Jean-Jacques Rousseau.

In his 1754 Discourse on Inequality, he wrote: “Since these conveniences by becoming habitual had almost entirely ceased to be enjoyable, and at the same time degenerated into true needs, it became much more cruel to be deprived of them than to possess them was sweet, and men were unhappy to lose them without being happy to possess them.”

No one can escape the hedonic treadmill because it impacts nearly every aspect of life.

One person may dream of buying a house or starting a new career and fantasize about the happiness these events will bring.

However, when these dreams become a reality, the happiness is neither as sustained nor as intense as they envisioned.

Note that the baseline level of happiness varies from person to person. While most people are happy most of the time, some individuals will default to a more neutral or negative baseline.

Real-world examples of the hedonic treadmill

The hedonic treadmill is most often associated with high impact positive and negative events, including:

  • Winning the lottery – winning a large sum of money is a happy experience initially, but the individual tends to revert to their previous baseline after the novelty wears off. Some lottery winners may find their happiness decrease because of the way money changes their relationships with family and friends.
  • Becoming an amputee – those who lose a limb in an accident or for some other reason experience a tremendous amount of physical and emotional pain. Though they are left with a permanent disability, most return to their previous happiness level.
  • Finding a new partner – many attribute falling in love to be one of the most enjoyable experiences in life. However, two people in a relationship quickly become habituated to each other and may experience negative emotions as a result.

The hedonic treadmill in marketing

The hedonic treadmill is one of the main reasons a brand has to deliver new and different versions of its core message to maintain customer engagement over time.

For instance, American insurer Allstate launched a series of advertising campaigns where the company mascot, Mr. Mayhem, portrayed several different disasters that might require the target audience to make an insurance claim.

Each disaster comprised a single episode, with each episode designed to provide a new, unexpected, and novel way of communicating Allstate’s brand message.

The hedonic treadmill also impacts product development. After the initial success of Angry Birds began to wane, game developers had to diversify and start releasing subsequent versions to secure the attention of the target audience.

Stuffed toys and other physical merchandise were also sold to maintain some degree of novelty in the brand.

Hedonic treadmill examples

Some more hedonic treadmill examples are listed in this section.

Gadgets

Gadgets such as the iPhone are subject to the hedonic treadmill perhaps more than any other product in the twenty-first century.

According to Rob Hudson, chief digital officer at Y&R Group, the average turnover on a new smartphone is just eight months.

Hudson reasoned that smartphones never make people truly happy and most are stuck in a perpetual cycle of buying one and then, almost immediately, looking toward the next model update.

The hedonic treadmill’s impact on smartphones can be seen in the way they were first received compared to now.

Reviews of the early iPhones were mostly poor, but as Apple ironed out kinks and other usability issues, consumers were enraptured with a new piece of technology that could do anything a PC could.

Unlike a PC, however, iPhones could be carried in one’s pocket and many camped at Apple Stores overnight to be the first to get their hands on one.

Fast forward to today and the iPhone has undergone at least 13 model updates (more if you count S models and the like).

The product itself is even more feature rich and technologically advanced than its predecessors, but the sheen has very much worn off.

Now, consumers post reviews that admonish Apple for removing the home button or incorporating a 10-megapixel camera when it really should have been 12 megapixels.

Others are locked in battles that pit Apple against Samsung or Sony which are as perpetual as the hedonic treadmill itself.

Car ownership

In a study that was accepted into the Journal of Economic Psychology in 2017, researchers Johannes Emmerling and Salmai Qari found that car owners experienced “a significant and sizeable decrease in individual happiness in the years after a car purchase.

After surveying British households over an 18-year period between 1991 and 2009, the pair found that five years after the purchase of a new car, happiness decreased by around 33% due to the hedonic treadmill.

They also found there was an 80% chance of the study participants exhibiting habits that would contribute to the effect – presumably, in this case, a habit involving the purchase of a new vehicle.

In 2017, luxury automakers such as BMW, Range Rover, and Mercedes-Benz admitted that they had too many models after running out of niches to exploit or new markets to enter.

Some models were even hybridized versions of two different markets like the Range Rover Evoque SUV that was re-released as a convertible.

Despite claims the manufacturers would be culling less popular models, Mercedes-Benz was then featured in a subsequent 2020 article over criticism of its product line-up.

In the Australian market alone, the company offered ten different passenger car models, five van models, and seven SUV models which would be also supplemented with 2 additional EV markets in the near future.

While the expansion of the SUV range enabled Mercedes to cater to the growing popularity of these vehicles, other products such as the S-Class coupe and X-Class utility vehicle were retired due to low sales volume.

Might the development of new car models for the sake of it be driven by the hedonic treadmill and the ceaseless demand from consumers for a new set of wheels?

Hedonic treadmill vs. happiness set point

The concept of a hedonic treadmill or hedonic adaptation is connected to the so-called happiness set point.

In short, the happiness set point theory describes the initial level of happiness that each of us has.

The happiness setpoint, of course, will depend from individual to individual.

The happiness setpoint can be partly due to genetics; in part, it depends on how we respond and reframe our behavior in the context we live in.

In short, while genetics does play a role, we can train ourselves to frame external things that happen in the environment as good or bad.

In other words, those who have mastered the ability to reframe things as “obstacles to overcome” instead of just “bad things” for which you can’t do anything also change how to respond to them.

Regarding happiness set level, it’s critical to set your expectations properly.

If you think that anything is due, that the real world must be good, and that you mostly got to live a comfortable life, then your expectations are too high.

And anything bad, happening to you will be framed as a catastrophe.

Instead, if you do accept the fact that the real world doesn’t necessarily owe you anything.

Bad things happen, and you can decide how to respond to them. Then, suddenly, it also changes your perspective.

Making your happiness set point higher but also more stable over time. You might want to understand the difference between what you can control and what you can’t.

You might want to adopt a piece-of-mind approach for things out of your control. Where pretty much accept that you can’t control what happens to you, but you can control how you perceive it.

And for things you can control, that is where your focus will be. You will need to work as hard as possible to shape the world around you according to your vision.

In this manner, you will be able to build a proper context where you can build the best version of yourself.

Additional Case Studies

ExampleDescriptionImplications
Salary IncreasesA person receives a substantial salary increase, leading to increased satisfaction. Over time, they adapt to the higher income, and the initial boost in happiness diminishes.– Understanding the Hedonic Treadmill can help individuals set realistic expectations about the long-term impact of financial gains and focus on other sources of well-being.
Material PossessionsSomeone buys a new car, which initially brings excitement and joy. However, as time passes, the novelty wears off, and the car becomes just another possession.– Recognizing the Hedonic Treadmill can encourage mindful consumption and a focus on experiences and relationships, which often provide more lasting happiness.
RelationshipsA couple experiences the honeymoon phase at the beginning of their relationship, marked by intense happiness. As time goes on, the initial excitement decreases, and they adapt to their partner’s presence.– Acknowledging the Hedonic Treadmill can lead to more realistic expectations in relationships and a focus on nurturing love and connection beyond the initial euphoria.
PromotionsAn employee receives a promotion at work, which initially boosts their job satisfaction. Over time, they become accustomed to the new responsibilities, and the happiness effect diminishes.– Understanding the Hedonic Treadmill can help individuals find intrinsic motivation and job satisfaction beyond external rewards.
Luxury VacationsTaking an extravagant vacation can bring immense joy during the trip. However, upon returning home, the memory of the vacation may fade, and the person returns to their baseline level of happiness.– Recognizing the Hedonic Treadmill can lead to a greater appreciation of everyday experiences and a focus on creating lasting memories.
New GadgetsPurchasing the latest smartphone or gadget can be exciting at first, but the thrill diminishes as the technology becomes commonplace.– Being aware of the Hedonic Treadmill can encourage responsible and mindful use of technology, reducing the constant desire for the latest gadgets.
Weight Loss AchievementsLosing weight and achieving a desired body shape can lead to happiness. However, as the new weight becomes the norm, the initial joy may dissipate.– Understanding the Hedonic Treadmill can help individuals maintain a healthy lifestyle and focus on well-being beyond physical appearance.
Home RenovationsRenovating a home can bring satisfaction, but people often adapt to the changes and no longer experience the same level of happiness associated with the improvements.– Recognizing the Hedonic Treadmill can lead to more considered home improvement decisions and a focus on enjoying the living space as it is.
Educational AchievementsEarning a degree or achieving an educational milestone can be a source of pride and happiness. Over time, the individual may adapt to their new level of knowledge and the associated happiness may wane.– Being aware of the Hedonic Treadmill can encourage lifelong learning and curiosity beyond formal education.
Health ImprovementsRecovering from an illness or achieving improved health can lead to happiness. However, people often adapt to their new health status and return to a stable level of well-being.– Understanding the Hedonic Treadmill can motivate individuals to maintain a healthy lifestyle and prioritize health as an ongoing goal.

Key takeaways:

  • The hedonic treadmill is a theory positing that people repeatedly return to a baseline level of happiness, irrespective of what happens to them.
  • The hedonic treadmill is most associated with high impact positive and negative events such as winning the lottery, becoming an amputee, or entering into a new relationship.
  • In business, the hedonic treadmill encourages businesses to develop new and different versions of their core brand message to keep customers engaged.

Key Highlights

  • Introduction to the Hedonic Treadmill:
    • The hedonic treadmill theory posits that individuals tend to maintain a stable baseline level of happiness regardless of external events.
    • Coined in a 1971 essay, the concept was alluded to by philosopher Jean-Jacques Rousseau in the 18th century.
  • Real-World Examples of the Hedonic Treadmill:
    • Winning the Lottery: Initially elated, lottery winners tend to return to their baseline happiness level after the novelty wears off, and some may even experience decreased happiness due to changes in relationships.
    • Becoming an Amputee: Despite the initial emotional and physical pain, most amputees eventually return to their previous level of happiness.
    • Finding a New Partner: Falling in love is a joyful experience, but over time, the happiness levels tend to stabilize as the relationship becomes a habitual part of life.
  • The Hedonic Treadmill’s Impact in Everyday Life:
    • Individual Variation: While most people maintain a stable baseline level of happiness, some individuals default to a more neutral or negative baseline.
    • Marketing: Businesses must continuously develop new and different brand messages and product versions to maintain customer engagement over time.
  • Examples of the Hedonic Treadmill in Marketing:
    • Allstate’s Advertising Campaigns: The insurance company employs various unexpected scenarios featuring “Mr. Mayhem” to communicate its brand message in novel ways.
    • Smartphone Industry: Constantly releasing new models with additional features to keep consumers engaged and prevent them from reverting to their previous level of excitement.
  • Car Ownership and the Hedonic Treadmill:
    • Decreased Happiness Post-Purchase: A study found that individuals experience a significant decrease in happiness five years after buying a new car due to habituation.
    • Luxury Automakers’ Dilemma: Car manufacturers create new models or hybrids to cater to consumer demands for novelty, leading to an array of car options in the market.
  • The Hedonic Treadmill vs. Happiness Set Point:
    • The Happiness Set Point: Individuals have an initial level of happiness influenced by genetics and environmental factors.
    • Setting Proper Expectations: Accepting that the world doesn’t necessarily owe anything and reframing responses to external events can elevate the happiness set point.
Related FrameworkDescriptionWhen to Apply
Hedonic TreadmillThe Hedonic Treadmill, also known as hedonic adaptation, refers to the tendency of humans to return to a relatively stable level of happiness or subjective well-being despite experiencing major positive or negative life events or changes. According to this concept, individuals may temporarily experience a boost or decline in happiness due to life events such as winning the lottery or facing adversity, but they often adapt to these changes over time and revert to their baseline level of happiness. The Hedonic Treadmill suggests that people have a natural resilience to both positive and negative changes in their circumstances, which can influence their overall life satisfaction and subjective well-being.When studying human behavior, psychology, or well-being, applying the Hedonic Treadmill concept to understand how individuals adapt to changes in their circumstances and maintain a relatively stable level of happiness over time, thus highlighting the importance of factors such as resilience, adaptation, and subjective perception in shaping overall life satisfaction and well-being.
Adaptation Level TheoryAdaptation Level Theory proposes that individuals evaluate their current circumstances and experiences based on a reference point determined by their past experiences and expectations. According to this theory, people adapt to new situations and experiences over time, which can influence their perceptions and judgments. Positive events may initially increase happiness, but individuals may adapt to these changes and return to their baseline level of happiness. Conversely, negative events may initially decrease happiness, but individuals may adapt and recover over time. Adaptation Level Theory suggests that people continuously adjust their expectations and perceptions based on their past experiences, which can impact their overall well-being and satisfaction with life.When examining human perception, judgment, and decision-making, applying Adaptation Level Theory to understand how individuals adapt to new experiences and circumstances, thus influencing their perceptions, judgments, and overall well-being.
Set Point TheorySet Point Theory posits that individuals have a genetically determined baseline level of happiness or subjective well-being, which serves as a reference point for their overall life satisfaction. According to this theory, people may experience temporary fluctuations in happiness due to life events or circumstances, but they generally return to their set point over time. Set Point Theory suggests that while external factors such as winning the lottery or experiencing adversity may impact short-term happiness, they have limited long-term effects on an individual’s overall well-being. The concept of a set point implies that each person has a predetermined level of happiness that is relatively stable and difficult to permanently change.When exploring the determinants of happiness and subjective well-being, applying Set Point Theory to understand how genetic factors and individual differences influence baseline levels of happiness, thus highlighting the relative stability of subjective well-being over time.
Positive PsychologyPositive Psychology is a branch of psychology that focuses on the study of human strengths, virtues, and optimal functioning to promote well-being and fulfillment. Unlike traditional psychology, which often emphasizes pathology and dysfunction, Positive Psychology seeks to understand and cultivate positive emotions, character strengths, and meaningful experiences. It explores factors such as happiness, resilience, gratitude, and purpose in life to enhance individual and collective flourishing. Positive Psychology interventions aim to foster positive emotions, enhance psychological resilience, and promote overall well-being through practices such as gratitude journaling, mindfulness meditation, and strengths-based coaching.When promoting psychological well-being and resilience, applying Positive Psychology principles and interventions to cultivate positive emotions, foster strengths, and enhance overall life satisfaction and fulfillment.
Self-Determination TheorySelf-Determination Theory (SDT) is a motivational theory that focuses on the inherent psychological needs for autonomy, competence, and relatedness as key drivers of human behavior and well-being. According to SDT, individuals are motivated to pursue activities that satisfy these fundamental needs, leading to greater intrinsic motivation, engagement, and well-being. Autonomy refers to the need for self-direction and choice, competence involves feeling effective and capable in one’s actions, and relatedness pertains to the desire for meaningful connections and relationships with others. SDT emphasizes the importance of supporting individuals’ autonomy, competence, and relatedness to promote motivation, well-being, and optimal functioning in various domains of life.When understanding motivation, engagement, and well-being, applying Self-Determination Theory to recognize the importance of autonomy, competence, and relatedness as fundamental psychological needs that drive human behavior and satisfaction.
Subjective Well-BeingSubjective Well-Being (SWB) refers to individuals’ self-reported evaluations of their overall life satisfaction and happiness. It encompasses cognitive evaluations of life domains such as work, relationships, and health, as well as affective experiences of positive emotions and negative emotions. SWB is influenced by various factors, including genetic predispositions, personality traits, social relationships, and life circumstances. Research on SWB examines how individuals’ subjective evaluations of their lives relate to objective indicators of well-being and explores factors that contribute to overall life satisfaction and happiness. Understanding subjective well-being provides insights into what makes life meaningful and fulfilling for individuals and informs efforts to enhance quality of life and well-being at personal, societal, and policy levels.When assessing individuals’ overall life satisfaction and happiness, applying the concept of Subjective Well-Being to understand the factors that contribute to subjective evaluations of life satisfaction and happiness, thus informing interventions and policies aimed at promoting well-being and improving quality of life.
Psychological ResiliencePsychological Resilience refers to the ability to adapt and bounce back from adversity, trauma, or significant stressors. It involves coping effectively with challenges, maintaining a sense of purpose and optimism, and recovering from setbacks or traumatic experiences. Resilience is influenced by various factors, including individual traits such as optimism, self-efficacy, and social support networks, as well as external resources and coping strategies. Research on resilience explores how individuals develop resilience, the protective factors that enhance resilience, and interventions to promote resilience in the face of adversity. Building psychological resilience is essential for maintaining well-being and navigating life’s challenges effectively.When addressing adversity, trauma, or significant stressors, applying the concept of Psychological Resilience to understand how individuals cope with challenges, maintain well-being, and bounce back from setbacks, thus informing interventions and support strategies aimed at promoting resilience and enhancing individuals’ ability to thrive in the face of adversity.
Flow StateFlow State, also known as being “in the zone,” refers to a state of optimal experience characterized by intense focus, deep engagement, and a sense of effortless concentration. It occurs when individuals are fully immersed in an activity, experiencing a perfect balance between their skills and the challenges of the task at hand. Flow State is associated with feelings of enjoyment, timelessness, and complete absorption in the present moment. Research on flow explores the conditions and factors that facilitate this state of optimal experience and its benefits for performance, creativity, and well-being. Cultivating flow experiences can enhance productivity, creativity, and overall enjoyment of activities in various domains of life.When seeking peak performance, creativity, and well-being, applying the concept of Flow State to understand the conditions that foster intense focus, deep engagement, and optimal experience, thus facilitating productivity, creativity, and enjoyment in various activities and endeavors.
Cognitive Appraisal TheoryCognitive Appraisal Theory proposes that individuals’ emotional responses to situations are influenced by their cognitive evaluations or appraisals of those situations. According to this theory, people engage in primary appraisal, where they evaluate the significance of a situation for their well-being, and secondary appraisal, where they assess their ability to cope with or manage the situation. These cognitive appraisals shape emotional responses such as fear, anger, or joy. Cognitive Appraisal Theory suggests that individuals’ interpretations and evaluations of events play a crucial role in determining their emotional reactions and coping strategies. Understanding cognitive appraisals provides insights into how people regulate their emotions and adapt to various situations.When examining emotional responses and coping strategies, applying Cognitive Appraisal Theory to understand how individuals’ cognitive evaluations of situations influence their emotional reactions and coping strategies, thus informing interventions and support strategies aimed at promoting adaptive coping and emotional well-being.
Transactional Model of Stress and CopingThe Transactional Model of Stress and Coping proposes that stress is a dynamic process involving interactions between individuals and their environments. According to this model, stress arises from appraisals of environmental demands (stressors) and individuals’ perceptions of their resources and abilities to cope with those demands. Coping strategies, such as problem-focused coping or emotion-focused coping, mediate the relationship between stressors and outcomes such as psychological well-being. The Transactional Model emphasizes the importance of cognitive appraisals, coping strategies, and social support in shaping individuals’ responses to stressors and their ability to adapt and cope effectively. Understanding the transactional nature of stress and coping provides insights into how people navigate stressful situations and maintain well-being in the face of adversity.When addressing stress and coping, applying the Transactional Model of Stress and Coping to understand the dynamic interactions between individuals and their environments, thus informing interventions and support strategies aimed at promoting effective coping, resilience, and psychological well-being in response to stressors and challenges.

Connected Thinking Frameworks

Convergent vs. Divergent Thinking

convergent-vs-divergent-thinking
Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Critical Thinking

critical-thinking
Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.

Biases

biases
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Second-Order Thinking

second-order-thinking
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

lateral-thinking
Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Bounded Rationality

bounded-rationality
Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

dunning-kruger-effect
The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Occam’s Razor

occams-razor
Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Lindy Effect

lindy-effect
The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.

Antifragility

antifragility
Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).

Ergodicity

ergodicity
Ergodicity is one of the most important concepts in statistics. Ergodicity is a mathematical concept suggesting that a point of a moving system will eventually visit all parts of the space the system moves in. On the opposite side, non-ergodic means that a system doesn’t visit all the possible parts, as there are absorbing barriers

Systems Thinking

systems-thinking
Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

vertical-thinking
Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

Metaphorical Thinking

metaphorical-thinking
Metaphorical thinking describes a mental process in which comparisons are made between qualities of objects usually considered to be separate classifications.  Metaphorical thinking is a mental process connecting two different universes of meaning and is the result of the mind looking for similarities.

Maslow’s Hammer

einstellung-effect
Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).

Peter Principle

peter-principle
The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Straw Man Fallacy

straw-man-fallacy
The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.

Google Effect

google-effect
The Google effect is a tendency for individuals to forget information that is readily available through search engines. During the Google effect – sometimes called digital amnesia – individuals have an excessive reliance on digital information as a form of memory recall.

Streisand Effect

streisand-effect
The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.

Compromise Effect

compromise-effect
Single-attribute choices – such as choosing the apartment with the lowest rent – are relatively simple. However, most of the decisions consumers make are based on multiple attributes which complicate the decision-making process. The compromise effect states that a consumer is more likely to choose the middle option of a set of products over more extreme options.

Butterfly Effect

butterfly-effect
In business, the butterfly effect describes the phenomenon where the simplest actions yield the largest rewards. The butterfly effect was coined by meteorologist Edward Lorenz in 1960 and as a result, it is most often associated with weather in pop culture. Lorenz noted that the small action of a butterfly fluttering its wings had the potential to cause progressively larger actions resulting in a typhoon.

IKEA Effect

ikea-effect
The IKEA effect is a cognitive bias that describes consumers’ tendency to value something more if they have made it themselves. That is why brands often use the IKEA effect to have customizations for final products, as they help the consumer relate to it more and therefore appending to it more value.

Ringelmann Effect 

Ringelmann Effect
The Ringelmann effect describes the tendency for individuals within a group to become less productive as the group size increases.

The Overview Effect

overview-effect
The overview effect is a cognitive shift reported by some astronauts when they look back at the Earth from space. The shift occurs because of the impressive visual spectacle of the Earth and tends to be characterized by a state of awe and increased self-transcendence.

House Money Effect

house-money-effect
The house money effect was first described by researchers Richard Thaler and Eric Johnson in a 1990 study entitled Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. The house money effect is a cognitive bias where investors take higher risks on reinvested capital than they would on an initial investment.

Heuristic

heuristic
As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Recognition Heuristic

recognition-heuristic
The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.

Representativeness Heuristic

representativeness-heuristic
The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.

Take-The-Best Heuristic

take-the-best-heuristic
The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.

Bundling Bias

bundling-bias
The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.

Barnum Effect

barnum-effect
The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Anchoring Effect

anchoring-effect
The anchoring effect describes the human tendency to rely on an initial piece of information (the “anchor”) to make subsequent judgments or decisions. Price anchoring, then, is the process of establishing a price point that customers can reference when making a buying decision.

Decoy Effect

decoy-effect
The decoy effect is a psychological phenomenon where inferior – or decoy – options influence consumer preferences. Businesses use the decoy effect to nudge potential customers toward the desired target product. The decoy effect is staged by placing a competitor product and a decoy product, which is primarily used to nudge the customer toward the target product.

Commitment Bias

commitment-bias
Commitment bias describes the tendency of an individual to remain committed to past behaviors – even if they result in undesirable outcomes. The bias is particularly pronounced when such behaviors are performed publicly. Commitment bias is also known as escalation of commitment.

First-Principles Thinking

first-principles-thinking
First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

ladder-of-inference
The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Goodhart’s Law

goodharts-law
Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.

Six Thinking Hats Model

six-thinking-hats-model
The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Mandela Effect

mandela-effect
The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

crowding-out-effect
The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

bandwagon-effect
The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Moore’s Law

moores-law
Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.

Disruptive Innovation

disruptive-innovation
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Value Migration

value-migration
Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.

Bye-Now Effect

bye-now-effect
The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.

Groupthink

groupthink
Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.

Stereotyping

stereotyping
A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.

Murphy’s Law

murphys-law
Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”

Law of Unintended Consequences

law-of-unintended-consequences
The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

Fundamental Attribution Error

fundamental-attribution-error
Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.

Outcome Bias

outcome-bias
Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

Hindsight Bias

hindsight-bias
Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.

Read Next: BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

Main Guides:

Scroll to Top

Discover more from FourWeekMBA

Subscribe now to keep reading and get access to the full archive.

Continue reading

FourWeekMBA