Prof Drazen Prelec, PhD from Digital Equipment Corporation LFM speaks in HT Leadership Summit, New Delhi…
You might have come across somebody who hated spending money and lived as though he or she were poor. Stories are common in rural India where some odd person dies just for not undergoing an operation worth 10,000 bucks in spite of having a million rupee bank balance.
On the other hand just opposite to that there are some people who are characterized by excessive or wasteful spending. You might have watched in some Hindi movies where a working-class hero surprises an entire gathering in a restaurant by offering to pay their bills for drinks and food just to impress his fiancé. The hero does that in spite of the fact that he had to spend his entire salary for that mindless act. Such people are not only featured as characters in films; you might find them in their real life also.
Prof Drazen Prelec
My friend booked tickets for a movie for six adults online, paying about Rs 2500/- knowing well that those tickets were nonrefundable. He wanted to give a treat to our gang of six on his birthday. When he came to know that half of the friends of our gang would not be available for that particular show; he booked another batch of tickets for a different show at the same cost. Eventually he spent 5000 bucks just for a worthless reason out of his careless spending habits.
Here I must mention that my friend had an outstanding balance of Rs 55,000/- to pay against his credit card bills in addition to 7500/- rent for his accommodation. This happened when he was still a trainee drawing a stipend of Rs 25,000/- a month.
I have described two absolutely opposite and extremely careless spending habits of some individuals who behave in abnormal ways while spending the most important and scarce resource called ‘money’ that we earn out of sheer hard work. Prof Drazen Prelec, from Digital Equipment Corporation LFM discussed about this crazy habit, at length, in Hindustan Times Leadership Summit, New Delhi.
In an answer to a pointblank question he declared unambiguously, that these acts of crazy spendings and miserly activities are nothing but neurological disorders or ailments. He told that the exact reasons for developing such type of reflexes are not yet known and the remedies for the same have also not been discovered. Nevertheless, neurologists in association with psychologists and economists have done primary research in this field and they hope that they might reach to some fruitful conclusions in helping to control these crazy reflexes while spending money.
For reading more on this subject please visit the site on Neuro-Economics under the Massachusetts Institute of Technology