Latest / Behavioral Economics with Fexingo: Decision Making, Bias, and How People Really Spend / How Social Proof Decides What You Buy
Transcript
- Lucas: So you walk past two coffee shops. One is packed, line out the door. The other is empty, barista scrolling on their phone. Where do you go? Luna: The crowded one. Every time. And I know rationally it might not be better coffee. But my gut says twenty people can't all be wrong. Lucas: Exactly. And your gut is leaning on something behavioral economists call social proof. The idea that we look to other people's behavior to decide what's correct — especially when we're uncertain. Luna: Which is most of the time, let's be honest. Lucas: Right. So today I want to go back to where this concept was first nailed down in a lab. It's the 1950s, a psychologist named Solomon Asch. Luna: Asch's conformity experiments. I remember these from Psych 101. The one with the lines. Lucas: That's the one. He brought in a subject, put them in a room with seven other people — who were actually actors. Then he showed them a card with a single line on the left, and three lines of different lengths on the right. He asked everyone to say which line matched the target. Luna: And the actors all gave the same wrong answer on purpose. Lucas: Correct. The real subject was seated second to last. So they heard five or six people confidently say line B matches, when line A clearly does. And the question was: would the subject conform, or trust their own eyes? Luna: I remember the number was shocking. Something like a third of subjects went along with the group at least once. Lucas: Seventy-five percent of participants conformed at least once. On average, subjects conformed about one-third of the time. Even when the correct answer was obvious. Luna: And that's in a lab with strangers and literal lines on paper. In the real world, with brands and products and reviews, the pressure must be even stronger. Lucas: That's the whole point. Social proof scales. Think about Yelp. A restaurant with 4.5 stars and 2,000 reviews. You don't know the reviewers, you don't know their taste, you don't know if they were paid. But you trust the aggregate. Luna: Because it's a crowd. And crowds feel wise, even when they're not. Lucas: James Surowiecki wrote a whole book called 'The Wisdom of Crowds' — but the catch is, crowds are only wise under certain conditions. Independence of opinion, diversity of perspective. When those break down, you get herding. And herding amplifies errors. Luna: Which is exactly what happens with fake reviews. If a company posts 500 five-star reviews, the next real customer sees 4.8 stars, buys, and then maybe leaves a five-star because they don't want to seem out of step. The herd just grows. Lucas: Amazon has been fighting this for years. In 2023 they sued over 10,000 groups on Facebook that were coordinating fake reviews. But the social proof machine keeps running. Because even if you know some reviews are fake, you still use the star average as a shortcut. Luna: It's a shortcut that feels rational. I mean, what else do you have? You can't taste the soup through the screen. Lucas: And when you're uncertain, any signal is better than none. That's the behavioral principle: uncertainty amplifies social proof. The less you know, the more you look at what others are doing. Luna: That explains the Stanley cup phenomenon, right? The insulated tumbler that suddenly was everywhere in 2023, 2024. Lucas: Perfect example. Stanley, the brand, had been around since 1913. It made rugged thermoses for construction workers. Then they released a colorful, 40-ounce Quencher tumbler, and it caught on with a demographic that wasn't their core — mostly women, mostly on social media. Luna: And once a few influencers posted it, everyone needed it. There was a limited edition drop at Target in January 2024 that caused literal fights in stores. Lucas: Right. People camped out. Resale prices hit triple digits. The product itself was a cup. But the social proof that owning that specific cup conferred was the real product. Behavioral economist Dan Ariely would say we're not just buying the cup, we're buying the sense of belonging. Luna: And the scarcity amplified the proof. If it's hard to get and everyone wants it, it must be valuable. Lucas: That's a related bias — the scarcity effect. But social proof is the engine. You see 50 people on TikTok with the same cup, you think, 'I should have one too.' Not because you need it, but because the group has normalized it. Luna: Let's talk about a darker side. Social proof can also lead to really bad outcomes. Like the bystander effect, where everyone assumes someone else will help because nobody else is helping. Lucas: That's the classic case — the murder of Kitty Genovese in 1964, where 38 witnesses reportedly didn't call the police. Later research complicated that story, but the principle holds: when others are passive, we interpret inaction as the correct response. Luna: So social proof is a double-edged sword. It helps us make quick decisions, but it can lock us into bad ones. Lucas: And it can be manipulated. Marketers know this. That's why you see 'Best Seller' badges, '10,000 customers served', 'Join 5 million happy users'. They're artificially creating a crowd to trigger your conformity instinct. Luna: And it works. I bought a phone charger on Amazon last week because it said 'Amazon's Choice'. I didn't even read the reviews. Lucas: And that badge is essentially an algorithmic stamp of social proof. Amazon's Choice is based on sales velocity, returns rate, and some quality signals. But it's still a heuristic. And heuristics can be gamed. Luna: So what's the takeaway? How do we resist social proof when it's leading us astray? Lucas: One tactic is to pause and ask: do these people have better information than me? In the Asch experiment, the actors didn't. They were guessing wrong. In a restaurant review, the reviewers might have different taste. So the question is: does their choice reflect something I value? If not, their proof is irrelevant. Luna: Another tactic is to seek out dissenting voices. If every review is five stars, read the three-star ones. Those are often the most honest. Lucas: And remember that uncertainty is what makes us vulnerable. So if you're about to make a big decision — buying a house, choosing a career path — don't just look at what everyone else is doing. Spend time gathering your own information. Because the crowd might be running toward a cliff. Luna: That's a grim image, but fair. Speaking of which, we talk a lot on this show about how to make better decisions. And one thing we've never done is run ads. Lucas: We haven't. It's a deliberate choice. We want these episodes to be useful, not interrupted. And if you've found that valuable, there's a way to support it. Luna: It's buy me a coffee dot com slash fexingo. Think of it as a tip jar. Keeps the show independent, keeps us free to pick these angles without worrying about sponsors. Lucas: Exactly. No pressure, but if walking through the economy with us has made something click, that link is there. Alright — back to social proof. Luna: So let's talk about something we see every day: the 'likes' on social media. Is a post with a thousand likes actually better than one with ten? Lucas: Objectively, no. But subjectively, your brain treats those likes as a quality signal. That's why platforms display them prominently. They're creating social proof loops that keep you scrolling. Luna: And engaging. Because if you see a post with high engagement, you're more likely to engage too. Lucas: Right. That's the bandwagon effect. It's social proof in real time. And it's why viral content snowballs. The snowball isn't necessarily good content — it's content that already has momentum. Luna: So next time I'm about to buy something because 'everyone has it', I'll try to ask: do I actually want this, or do I just want to be part of the crowd? Lucas: That's a good question. And if the answer is the crowd, that's fine — as long as you know that's what you're paying for. Social proof is a tool. It's neither good nor bad. It's just how our brains are wired. Luna: And being aware of the wiring is half the battle. Thanks, Lucas. Lucas: Thanks, Luna. See you next time.