If you've listened to any gangsta rapper for long enough, you know that he will eventually tell you that he could have you killed. Generally, the person who would do the killing would be one of the rapper's former associates, and the price of the deed will be relatively small.
Knowing that there are people who would never kill and that there are others who would kill for cheap, or even free, poses an interesting problem. It is the problem of absolute vs relative value. This is a problem that I have found particularly troublesome in my rise through American society. It cuts several ways.
I characterize this problem as 'the logarithmic shadow', for my lack of the generally accepted term. I observe that people abstract in such a way that small differences are seen as large and large differences are seen as small. The truth of the differences are obscured in shadow, as exemplified by logarithmic scales.
Andrew Hacker, the famous social scientist, took a survey in his book 'Money'. He found that when he asked people of various income levels what their ideal raise would be - a raise they would say could take care of all of their financial needs, the answer was more or less universal. It was 20%. People's expectations are relatively finite. For the man with $10 shoes, those costing 2 dollars more would be all he desired, but for the man with $200 shoes, he required 40 dollars.
Look at it the other way. For the man driving a Ford, he would need to get a BMW in order to be complimented. But for the man already driving a BMW, he'd probably need to buy an Aston-Martin to get a similar compliment from his peers.
The Cocktail Party
A welder is invited to a cocktail party celebrating the opening of the new building he helped construct. He happens to overhear a conversation between an architect and an attorney, both who make a great deal more money. The architect makes an aesthetic statement about the beauty of a particular archway in the lobby of the building. The welder knows that there were many difficult welds used in the steel of that arch. In fact, one of his subordinates injured himself. The attorney takes the architect's statement and elaborates on the beauty. The welder pipes up, smiling with pride, yeah it cost Joe his finger. The conversation halts, abruptly with embarrassment. The subject is changed.
The Cookie vs The Credit Card
A new technology called e-Commerce becomes available so that ordinary people can shop online. In order to accomplish this, a technology called a 'cookie' is stored on the buyer's computer. It just so happens that a very sophisticated thief can get personal information from you by hacking your computer and accessing this cookie. People are horrified by the possibility. Yet every day these same people speak to travel agents to book their business travel. These travel agents know their favorite airlines, hotels, car rental, and meal preferences. Whenever people go to restaurants, they willingly hand their credit cards over to waitstaff who make much less money.
Flies on the Belly
Marta is a starving sick illiterate child in a poverty stricken country with a population of 2 million. A healthy altruist comes on television to tell us that for a mere $20 a month, Marta can get food, clothing, shelter and education. Tens of thousands of people respond netting $20 million in contributions. Two years later the same commercial comes on television. Nobody wants to contribute any longer.
These are all paradoxes of perception. I could probably structure them more properly were I to spend more time, but they all illustrate to me the difference between effort expended and results achieved, between things of equal import that can generate asymmetric reactions. I am coming to understand very specific kinds of flaws in human perception owing to the fact that I have had a career in translating such perceptions into computer aided systems of representation. A precise translation still often yields misinterpretations. People cheat in over- or underemphasis in order to communication something of value.
What is particularly fascinating in all of this to me are the border conditions of perceptual change and the manner in which shifts are communicated.
Facebook vs Arpanet
The first time I sent an email, I was still in college. It was through a system called DECnet. I was part of a small project, assisted by a guy named Richard Z. White who was working at Raytheon. We established what was then called NSBENET. It worked for a short period of time, then went unused. Even among college engineering students, it was considered geeky and complicated. A few years later, in 1985 or 86, I began sending email messages in the current way we do, client server store and forward GUI based email. In fact, I wrote back in 1986 how cool it would be if we could have our computers store and forward digitized music. At the time, CDs were first being sold, and I can remember a time when it was almost impossible to get reggae music on Compact Disk. The social context of spending many hours in a week in front of a computer screen was decidedly declasse. Today, a generation of parents who have probably experienced email for the first time in the late 90s are fretful of how many hours their children spend on Facebook.
This is the cross-fertilized field of cognition, economics and philosophy. It is fascinating to me. One last example.
The Ignored Prospectus
Ever since 2007 behavioral economics has become a dominant theme in discussions of what's going wrong in the market. People who have relied on the 'efficient market hypothesis' have now been faced with evidence that the invisible hand is a lot more clumsy and slow than they ever thought. That's because people, whose behavior ultimately determines the price of things in the market, often misperceive risk. These aggregate misperceptions establish themselves as market prices which are not efficient and they generate bubbles which certain conditions can conspire to sustain. There is probably no better example than Greenspan's indictment of 'irrational exuberance'. If there is, it's probably 'too big to fail'. Both are examples of unsustainable prices for which 'the efficient' market did not correct precisely because the aggregate perception expressed a desire that was contrary to rationality. In other words, if enough people suspend disbelief, you can sustain castles made of sand longer than rationality dictates and 'efficient' markets are not exempt.
So one of the many studies coming out to explain where we went wrong had very definite conclusions about how people perceive risk. You could draw very specific warnings out in the language of any security for sale, and people will generally ignore those expert warnings in favor of their feelings on the matter. It's rather like a reverse transferrance. No matter how big the warning label, once people have decided to buy, they go with their gut.
I expect upcoming books by Taleb and Ariely to aid my consideration at length of how people's cognitive errors manifest themselves with regard to how they take up information. I'm particularly interested in this from the perspective of abstracts of big data. There are many phenomena that we have heretofore been physically unable to probe, owing to the massive amounts of data. As our technical ability increases, and more computer mediated interpretations become the norm, what kinds of cognitive errors will we make?