Latest / Behavioral Economics with Fexingo: Decision Making, Bias, and How People Really Spend / Why You Keep Paying for Things You Never Use
Transcript
- Lucas: So I was going through my bank statements last week, and I found a charge for a meditation app I downloaded exactly once—back in January of 2024. That's seventeen months of paying for something I've maybe opened three times. Luna: Oh, I have one of those. For me it's a language-learning app. I think I've paid for it for two years and I can maybe order a coffee in Spanish. Lucas: Right. And we're not alone. A 2025 survey from WalletHub found that the average American spends two hundred and nineteen dollars per month on subscription services they barely use. That's over twenty-six hundred dollars a year. Luna: That's a flight to Europe. Or a really nice piece of furniture. Why do we do this? It's not like we're getting value. Lucas: That's the behavioral economics question. Companies design these systems to exploit what's called the 'subscription trap'—a combination of inertia, the default effect, and something called payment decoupling. Luna: Payment decoupling. That's the idea that when you pay a small amount repeatedly, you don't feel the pain of each payment as much as a single large charge, right? Lucas: Exactly. Economists call it the 'pain of paying.' When you swipe a card for a one-time purchase, your brain registers that loss viscerally. But a recurring twelve-dollar charge just blurs into background noise. You don't evaluate it each month. Lucas: And here's the kicker: the companies know this. They deliberately make cancellation hard. Peloton, for example, requires you to call a phone number to cancel your digital subscription. There's no online button. Luna: I've heard that. You have to wait on hold, and then a retention specialist tries to talk you out of it. It's a friction wall. Lucas: Yes. And that friction exploits our inertia. Behavioral economist Richard Thaler calls it the 'status quo bias'—we tend to stick with the current state of affairs because changing takes effort. So even when we know we should cancel, we don't. Luna: So the default is 'keep paying,' and the company sets up the alternative to be annoying enough that most people never bother. That's a deliberate design choice. Lucas: It's a playbook straight out of behavioral economics. And it's incredibly profitable. Peloton's digital subscription revenue was over six hundred million dollars last year. A big chunk of that comes from people who aren't riding. Luna: Let's talk about the streaming wars specifically. Everyone I know has at least one streaming service they're not watching. I have three: Paramount Plus, Apple TV Plus, and a niche documentary service I signed up for during lockdown. Lucas: The streaming companies actually track 'unused subscribers' as a metric. They call it 'sleeping revenue.' And they've realized that once someone signs up, they're very unlikely to cancel unless the price jumps dramatically. Lucas: Netflix tested this. They ran a study where they offered a group of inactive users a one-click cancellation option. Only about twelve percent took it. The other eighty-eight just kept paying. That's the inertia at work. Luna: So even when you make it easy, most people still don't cancel. That suggests there's something deeper than friction—maybe we just forget, or we think we'll use it eventually. Lucas: That's a bias called the 'optimism bias.' We overestimate the likelihood that we'll use the service in the future. So we keep paying for a gym membership we haven't visited since 2023, because we genuinely believe next week we'll go. Luna: But we never do. And the company counts on that. So what can we do about it? Is there a behavioral hack to break the trap? Lucas: There are a few. One is called the 'precommitment strategy.' You set a rule: 'I will cancel any subscription I haven't used in the past 30 days.' You make that decision in advance, when you're rational, not when you're on hold. Lucas: Another is to use a tool that surfaces all your recurring charges. Some banking apps now show a monthly subscriptions dashboard. Just seeing the total can trigger the pain of paying all at once. Luna: Yeah, I did that last month. I saw I was paying for three streaming services I never open—totaled about forty-five dollars. I cancelled two on the spot. Lucas: That's the power of making the cost salient. But there's also a policy angle. The Federal Trade Commission has been pushing a 'click to cancel' rule that would require companies to make cancellation as easy as signup. Luna: That seems like a no-brainer. But I imagine the subscription industry is lobbying hard against it. Lucas: They are. Because a significant portion of their revenue depends on inertia. Some analysts estimate that fifteen to twenty percent of subscription revenue is 'sleeping'—people paying for something they don't use. Luna: That's billions of dollars. And it's essentially a tax on our cognitive biases. Lucas: If today was actually useful to you, the way these stay ad-free is listener support. You can find us at buy me a coffee dot com slash fexingo. Luna: It really does make a difference. We don't run ads, so the show depends on people who find value in it and want to keep it going. Lucas: All right. So back to the subscription trap. There's one more bias I want to mention: the 'sunk cost fallacy' applied to subscriptions. Luna: Right, because you've already paid for this month, so you feel like you need to use it. But that money is gone—it shouldn't affect your future decisions. Lucas: Exactly. And yet it does. You keep a subscription because you've already paid, even though not using it is actually a double loss—you lost the money and you're losing more money by continuing to pay. Luna: So the rational move is to ignore the past payment and ask: 'Do I expect to get value from this in the future?' If not, cancel immediately. Lucas: That's the behavioral fix. But it takes practice, because our gut says 'I paid for this, I should use it.' That's the sunk cost emotion talking. Lucas: One more thing: companies use the 'free trial' as a hook. They know that once you're in, you're unlikely to cancel. So they deliberately make signup easy and cancellation hard. Luna: I fell for that recently. A two-week free trial for a productivity app. I forgot to cancel, and now I'm paying ten bucks a month for an app I don't use. But I keep telling myself I'll organize my task list this weekend. Lucas: That's the optimism bias again. And the longer you wait, the more likely you are to keep paying. So the best time to cancel is the day you sign up for the trial. Set a calendar reminder for the day before it ends. Luna: That's a good rule. I'm going to do that. So to wrap up: the subscription trap is a combination of inertia, default effect, payment decoupling, optimism bias, and sunk cost. Companies design for it, but we can hack our own behavior. Lucas: Yeah. And the first step is just awareness. Next time you see a recurring charge, pause and ask: 'Would I sign up for this today if I hadn't already?' If the answer is no, cancel it. Luna: It sounds simple, but it's hard in practice. Maybe we should do a follow-up episode on how companies design cancellation flows. Lucas: I like that. We'll look at the dark patterns—the specific UI tricks that make it hard to leave. For now, go check your bank statements. You might be surprised.