Antifragile Ecommerce: How one short message template declined a discount, secured a sale and got me fantastic feedback

One of the most mentally exhausting aspects of the particular online platform my family use to sell goods is customers asking for discounts.

People who would never dream of walking into a physical shop and asking for a discount are more than happy to chance it through text messaging.

Don't get me wrong, I have no problem with people doing this. It's part of the game and appears to be seen as part of the spirit of the platform we use.

I have seen regular complaints about sellers who write no offers/discounts in their bios in Facebook discussion groups.

So we never wanted to do this, but we also don't want to give discounts. This is where the exhaustion comes from. Every time someone asks, it just seems so reasonable. 

Well, not every time. We've had customers ask for 50% off or more. 

No use to complain about this though, as many sellers have on Facebook. Such customers are obviously not doing the maths before they make these offers.

Our products are pretty low-priced compared to others on the platform. When a customer asks us to sell them a £10 product for £5, they're not thinking that's a 50% discount. 

More likely, they're thinking in terms of the absolute numbers, neither of which are very big. You might say they occupy the same mental space.

Viewing things this way is an idea I got from one of my favourite entrepeneurs, Derek Sivers. He used this idea of numbers occupying the same mental space to price his services higher than he otherwise would have, and it paid handsomely.

These customers are also not thinking in terms of costs the seller has to cover. They don't know, and they probably don't want to. So to the people sending lengthy replies about how a particular offer will leave you at a loss or a smaller profit than you would like, just stop. They don't care! 

But most of our customers are just asking for free postage or a few pounds off. And it is this very reasonableness that makes them so difficult to decline.

We have used templates for a long time now to give consistent and speedy customer service, and these have worked brilliantly in all kinds of scenarios. We had one to politely decline offers.

But every time we were asked for a small discount, a struggle began. We stopped to think about it, every time.

I've thought about what motivated us to do this. One possible reason is that declining discounts is not in keeping with the spirit of the platform. 

Although, customers who do not purchase cannot leave reviews or retaliate in any way to our saying no, so this was a very irrational worry.

The second was that if they still purchased the item, we'd get a bad review. This was a little more concerning. Reviews are a big thing on our platform. 

So that is why I resolved to develop a template, using the principles of persuasion and compliance I have recently been studying.

When the moment came to apply it the first time, I was hesitant as usual. She asked for free postage for one item. I felt kind of bad but was excited to apply what I had learned.

The result was that she purchased the item at full price, and left us a fantastic five-star review citing our excellent communication.

So what did the template say, and why?

It used our stock opening line for all new customers, thanking them for their interest in our products. After this is where it gets interesting. 

The first line told them - without apology - that we were not looking to do any discounts on individual items.

I haven't come across this in any psychological literature, but I think giving the impression that it is a store policy and that you are not specifically declining that individual's offer helps soften the answer.

More than this, the template tells them we are not looking to do discounts on individual items because we prefer to save discounts for purchases of multiple items.

In a Twitter thread I spoke about the power of because. This is backed by research. The most well-known study is that of the copying machine.

When the researcher asked to jump in front of someone in a copying machine queue, with no further explanation, a few said yes.

When they asked to jump in front because they were in a hurry, many more said yes.

But here's where it gets weird. When they asked to jump in front because they needed to make some copies, a similar number of people still said yes! 

Even though the so-called 'reason' actually provided no additional information, people still complied with the request. It appears because is something of a compliance trigger word for people. 

So I made sure to include a because reason - even though it does not add too much - in the new template. 

In keeping with the spirit of the platform, I don't think it looks good to say we are not open to offers at all, and this reason helps with this. It also subtly informs the customer that many of our customers buy more than one item, or that there is some expectation to.

So the next part asks them if they have seen anything else they like, because if they buy three items I can offer them for £45 including postage.

This single sentence incorporates a couple of classic sales techniques.

The first is asking for a big commitment, three items, which I honestly don't expect a new customer to take. If they do, then fantastic, but the real reason is to make a subsequent single purchase feel like a smaller step.

I do not ask for an unrealistacally large commitment, which would expose the technique and probably just annoy people. I could never ask them to buy ten items, for example.

The second, similar technique at play here is throwing them a big number: £45 (my items are £10-£15). By relative comparison, the price of the item they are asking about should now seem diminished.

Again, not unrealistically big. And, for the record, this is actually an offer that is advertised on the store homepage and which I will obviously honour if they accept. 

The final part of the template also makes use of two key persuasive approaches: reciprocity and trust.

I tell them that I will hold one of this item back so they can take a look (for anyhting else they may like).

It is hard to engage reciprocity through an online business. You can't send someone a free gift or a sample in advance. Yet it is a potent psychological driver of compliance.

In this sentence, I am trying to engage it by doing them a favour. Namely, holding an item back for them. 

I just tell them that I am doing this. There is no point to ask them if they would like me to. That would only be another opportunity to say no. 

Remember the goal here is to close a sale, with no discount, and protect myself from bad reviews. Helping them in this way potentially helps assists three goals.

Moreover, holding an item back from sale means I am unable to sell it to someone else. Therefore, I am acting in their interests and to the detriment of my own. This is an important builder of trust.

Trust, of course, is not just a powerful motivator to comply with someone's request, but necessary to persuade someone to transact with you.

Holding the item back for them immediately may even imply scarcity, like there is only few of the product and I expect they will run out fast, another strong motivator of behaviour. 

And that's it. In this very short template, I've employed a variety of well-researched persuasive techniques, but in an exceedingly polite, subtle and informal manner.   

It is definitely worth noting that imitation encourages liking too, so the message is not quite written as I have outlined above, but is written to mirror the vernacular of our target customers.

And the psychological techniques do not stop there. After studying about the power of written commitments in Robert Cialdini's book Influence, I crafted this template to encourage customers to reply with a written commitment to purchase.

According to the research, all commitments are powerful, but written commitments even more so. But how do you get a customer to send you a message basically saying "I want to buy your product"?

Well, I've made them an offer that I don't expect they will accept. But I do expect that - having been amply persuaded by the other techniques in the template - they will reply with something like "I'll just buy this one, thank you."

And this is exactly what happened.

What's more is that if they don't reply, I can follow up by asking them directly whether they still want the item (remember I am holding back the item for them), and forcing the written commitment.

So there it is, a psychologically loaded sales template with proven success so far and the rationale behind it all. I hope there is something here that other small businesses can apply with the same success.

Like A Trader part 4: A portfolio of healthy habits

I found out from Dan Ariely's Facebook fanpage that the compounding losses effect I wrote about in Like A Trader part one has been noticed by dieticians.

Apparently it is nicknamed the What-the-hell effect. The name comes from the fact that once we consume something we shouldn't, we tend to think "what-the-hell, this day's ruined so let's keep eating junk!"

As I mentioned, I suffered from this attitude quite severely and found a way to overcome it by using rituals, an approach absent from dieting literature I've seen.

In fact, it's strangely absent from lifestyle literature in general. Rituals, when mentioned, are more often than not presented by way of morning and evening routines, or ways to get into a productive mindset for working. It is rare to see them applied at other times and to solve specific problems.

This is a shame, because I have found them to be a powerful tool. However, they only represent a small part of the approach that has helped me most with diet and exercise habits.

The main feature of my approach I have decided to term a portfolio of healthy habits.

Part of the problem I've had in the past is that I have approached healthy lifestyle with the very broad goal of being healthy.

I'm not going to get into SMART goals (specific, measureable etc) here. That might work for some, but for me finding the right metrics to measure is a pain.

For health, I also think that specific goals can lead to too much focus on certain aspects of fitness and neglect of others, which does not make you fit. At worst, Goodhart's law may come into effect.

That's the idea that when a measure becomes a target, it ceases to be a valid measure. Think that can't happen on individual level?

Look at bodybuilding. When muscle size and low body fat became the primary metrics by which health is measured, people began abusing steroids to achieve better scores.

Does this mean they are healthier? The many who have died prematurely provide good evidence against that being the case.

So my approach is not to make goals more specific. It is to remove what I see as a mental limitation. That obstacle is categorisation.

Under my goal of being healthy, I lumped together diet and exercise into one category: healthy behaviours. Seeing them as a single category caused a problem.

Being healthy became an all or none activity. Diet and exercise were inextricably linked, despite there being no rational basis to be. Failure in one meant giving up on both for the day.

Why should this be so? If I missed a workout, it should be more important to eat healthily that day. Yet although I knew this through reason, it was difficult to practice.

Worse still, the effect is fractal. For example, all exercise behaviours were lumped together in the exercise category, even though they didn't need to be. 

If I missed my main workout, there was often nothing stopping me from doing some quick deadhangs, overcoming isometrics or anything else that is highly valuable but takes only a few seconds.

Yet I wouldn't bother because something completely unrelated had already been skipped. It was like a domino effect: one failure in diet or exercise took everything down with it. 

Sleep often went too. Not out of worry, but out of violating my no caffeine after 4pm rule or staying up late to eat as much as I could now the day had become a 'cheat' day.

This is when I came up with my approach of seeing each individual behaviour the way a trader might see shares in a portfolio. 

No good trader ever abandoned their whole portfolio because of a single bad position. They cut the individual loser and move on to the next thing while holding onto the other positions that are working.

This took some getting used to. A helpful way I have found to do this is to use one of those goal tracking apps on a smartphone.

I'm not usually one for using technology this way and certainly wouldn't want to become reliant on it, but it has been helpful to make a list of healthy habits I would like to stick to.

Each night before bed, I tick off all the habits I did that day and ignore the ones I didn't. Big red crosses are not motivating, so I just don't bother filling in the things I missed.

But the act of having to tick each individual habit has really reinforced this view of separation. Sometimes I will count them up to see my 'score', but the real aim is just to see each habit in isolation.

It probably also helps to see them as equally important, even though in reality they may not be. One habit equals one tick, regardless of its contribution to my health. Sometimes self-deception can be good.

This comes back to clipping the tail that I spoke about in part 2. The most harm is caused by writing off the day and doing nothing healthy for the remainder. So doing anything healthy is better!

As I said when I spoke about rituals, even the smallest healthy step can put you back in control and influence your decisions for the rest of the day. It's the old foot-in-the-door technique.

Something motivating I have found when using a goal tracking app is setting the app to order the habits by longest streak. Although I have about sixteen healthy behaviours to track, only five are displayed on my home screen without scrolling down. 

This means that when I casually glance at my screen while using my phone during the day, all I see is my top 5 with the most ticks. This provides good motivation to keep up all my habits.

I'm sure this can be more broadly applicable and is not limited to health. It's certainly not my original observation. 

Another favourite philosopher of mine, John Gray, speaks in his book Straw Dogs about setting aside the restrictions of category and acting as each new situation calls for. Such is the Taoist approach to life.

However, my approach to putting this into practice is not one that I have seen written about elsewhere. 

I guess there is a similarity with the advice about not eating the whole elephant. This means that rather than being intimidated into inaction by big goals and projects, one should break them into tiny pieces and focus on completing each individual part.

The metaphor is somewhat helpful, but also implies an end to the goal and some kind of chronological order to complete the tasks in. 

I've tried to find practical tricks here for when these conditions are not met. For when, like trading, people presumably want to do the best they can for as long as they can and stick it out in a field where they regularly have to deal with individual failure and mental biases. 

Like a trader part 3: Complexity as a cause of commitment

I would posit that most people with the slightest interest in trading have a knowledge of common psychological biases that affect traders, such as confirmation bias.

Confirmation bias appears to influence a further common mistake, being wedded to one's positions. In other words, not getting out when the facts that got them in change.

Such mistakes leave people exposed in other situations too. In Influence, psychologist Robert Cialdini discusses a tactic used by unscrupulous used-car dealers which he calls lowballing.

This means offering customers a car at a price substantially below market value, but without the intention to ever actually honour it. The price is to get them to commit to purchasing from that dealership. 

Then the dealers simply let time and confirmation bias do the rest of the work.

They may get the customers to do lots of paperwork, or give them the car for a test period. It doesn't matter. All they need is time for the customers to think up plenty of other reasons to support their original decision.

When the customer returns to complete the purchase, the dealers will say they (or their boss or the bank) made a mistake, and the car actually costs more. 

The customers, by this time having thought of lots of other reasons to support their decision, more often than not go through with the purchase, despite the original reason they wanted the car from that dealership (the great price) being withdrawn.

Good traders are aware that confirmation bias does not end once they've finished researching and call their broker to make a purchase. If anything, it probably warrants extra caution after they've commited to the position.

However, commitment and confirmation biases are elementary and appear in lots of trading literature, although their interplay is not-so-commonly discussed. 

Something that is less discussed still are a couple of other psychological biases which I speculate are also powerful contributors to poor traders' unwillingness to get rid of bad positions.

The first of these is a marketing point I picked up from a Rory Sutherland podcast. I have not come across it in any purely psychological literature, but it seems plausible.

It is the idea that complexity makes us trust solutions more. Rory's example is stripey toothpaste, which obviously gets mixed up in your mouth anyway and is more difficult to put into the tube.

So why do toothpaste companies go through the trouble? He thinks there is a kind of placebo effect to the added complexity. There are other reasons too but this is the only relevant one to my theory here.

The point is, our bias towards complex solutions may carry over into trading and investment. 

Taken alone, complex strategies could be good or bad. I think sticking to a plan that covers entry, exit and position sizing gives people a better shot at success, and if some find it easier to stick to such a plan with a complex strategy or by doing lots of research rather than adopting a simple approach, then they should do that.

The bad of course is that a complex trading approach can be time consuming and there is no clear additional benefit. Plenty of traders have been successful focusing on a single metric or reason to trade.

Moreover, an area in which leading psychologists Daniel Kahneman and Gerd Gigerenzer agree is that in the complex, real-world environment, better decisions are made using simple rules or algorithms and very limited (but highly relevant) information.

For those selling books or courses on trading or investment however, there's probably a better chance of making sales if the strategy is fairly complex, but not offputtingly so.

There is a limit to how complex a plausible solution can be: people know to take aspirin for a headache rather than see a neurosurgeon!

But this leaves retail investors exposed to more complicated strategies than they probably need. If said books are popular, the fact more people are trying to trade these strategies makes them less likely to work too, costing the investors not only money but more time.

However, my main problem with complex approaches is caused by the second psychological principle at play here. 

I have come across it both in Influence and on behavioural economist Dan Ariely's wonderful Ask Ariely column in the Wall Street Journal this week.

The principle is: personal effort effects how we subsequently see our decisions.

In Influence, Cialdini discusses the insane hazing rituals of fraternities and sororities at US universities in comparison with coming-of-age rituals undertaken by tribesfolk and basic training in the military.

Something all have in common is making their subjects work brutally hard, because the harder they have to work to join, the more committed they will be after the fact.

The example in Ask Ariely was a reader reporting that the frustration of collecting furniture from Ikea, trying to fit the oversize boxes in his car then painstakingly assembling it made him and his wife appreciate the final product more than they thought they would when they decided to buy it. 

The harder we work for something, the more likely we are to value it. Can you see the problem?

Our brains seem to try and protect our egos by preventing us from doubting our past decisions. Especially when those decisions cost us a lot of time, effort, willpower and money.

Traders giving in to the desire to adopt a complex or time-consuming approach are putting themselves at a disadvantage compared to those who opt for simplicity. 

They are making it less likely that they will be able to cut bad positions and move on.

Worse still, most people have been warned about throwing "good money after bad" at some point in their life because we tend to invest more (and not only money) in the things we've already invested the most in, even when it is the wrong thing to do. 

Of course, there are many cases where this is not the wrong thing to do. From an evolutionary perspective, it would have been bad for survival if people could just have easily walked away from their family after an argument with their spouse or some other mishap.

Like we are finding out about most of the heuristics and biases research, whether they are helpful or unhelpful really depends on the situation and environment in which they are applied.

I think there is a generally applicable framework here. In situations where commitment can be costly and your primary concern is not enjoyment, then a quick-and-dirty approach is probably best.

At least this would be the case at first. Certainly another common trading principle is adding to your winners, so you can invest more (money, time, effort) once something is clearly working for you.

If enjoyment is the main outcome state you are hoping for, then the logical conclusion to this would be to find additional steps that make a task more difficult. This has also been used in marketing.

I may have stumbled upon this by accident, albeit in a very small way. For years I used a Moka Express to brew coffee, refusing to buy an espresso machine because I enjoyed the ritual of making it.

Now I know that I probably enjoyed the end product a bit more too.

My wife and I have taken this further recently by grinding our own coffee beans with a handheld grinder too. The taste is objectively superior, but our satisfaction when we've finished making the coffee is also now greater.

I would be interested to know about the scale of this effect to bigger decisions. For example, are people who buy homes that need fixing-up happier with where they live? 

What other big decisions are available where we might deliberately make them more difficult to increase satisfaction with the outcome?

What non-trading decisions are there where fast and frugal approaches might protect us from our bias towards complex solutions and overcommitment? I'm going to spend some time thinking about this and may follow this up in a later post.

 

My heuristic for flow-state inducing music

Despite having often been too lazy to sit down and write, I think it must be something I enjoy as it is one of the only activities in which I can achieve the fabled 'flow state' of focus.

When I'm 'in-the-zone', I can feel thirsty and even have a water bottle withing reach yet not remove my fingers from the keyboard to grab it. I think this is a good sign.

I've begun learning about flow states thanks to an excellent blog and Youtube channel I have found called The Bioneer. This has actually been the most direct inspiration for me to start writing about my interests here.

In this post, I just want to share a quick heuristic I have found that solved a problem I'd had for some time: working to background music.

Of course, I can work and write when I absolutely have to, but when trying to write for pleasure or something non-essential, I am easily distracted by background noise.

If I try to work at home, I have to deal with my other half taking phone calls and the constant bumps, bangs and clashes that come with having four cats in the house.

In the rare cafes that don't play terrible music (more on that later), the conversations of others can be distracting too. 

Even living in another country where I understand only a little of the language, any reasonably animated conversation still draws attention. 

I'm reluctant to use noise cancelling headphones, so that leaves finding some music to work with. I think music certainly can effect our psychology in all manner of ways, so I'm also just more interested in its potential compared to working in silence.

Some cafes try to provide music for me, usually in the form of a repetitive playlist of lethargic bossa-nova pop song covers or dreary heartbroken-teenager acoustic Thai pop that seems to be all the rage right now.

For most people, these styles probably do just sink into the background and go unnoticed. As a musician, my ears seek out the music in whatever environment I'm in and if it's something I dislike it can make it almost impossible to work.

Even when picking my own music, being a musician has made it a challenge. It can't be too complex, nor can it be too repetitive. It certainly can't have words and definitely should have little dynamic range.

At a previous job for a bank I excelled despite listening to music on my phone without these rules. However, I do not attribute that success to attaining a flow state. 

In that situation, I had to work, and the work was so very tedious that pairing the tasks with music I enjoyed was pretty much the only way to stay motivated to do them.

So what music fits my stringent requirements. Well, I found it in a place that in retrospect seems quite obvious. The heuristic I now use is:

Movies about geniuses have music that makes you feel like one.

The Imitation Game. The Theory of Everything. A Beautiful Mind. All of these and more have excellent soundtracks to work to.

For one, film music is written to not be too distracting. It is certainly meant to add to movies, but not distract you from the happenings on screen.

Genius-movie melodies tend to be nicely flowing, but simple and easy on the ear. There's no harmonic complexity to contend with. Just repetitive, gently rolling sequences of triads usually plaid on lush lower strings and warm woodwing. 

What's more is these are usually underpinned by some kind of ticking or chugging ostinato played by the violins or  a piano, which is terrific for setting a rhythm to work to. 

And being movies about real-life geniuses, the blaring horns of action sequences are absent. At most the music becomes a little more tense, but only so much as to create nice peaks and troughs to work to.

The formula seems pretty stable across the troubled-genius genre. My playlist currently includes: The Imitation Game, The Theory of Everything, A Beautiful Mind, The Man Who Knew Infinity, and Sherlock (the BBC series).

The latter is admittedly a little more upbeat and exciting than the rest, but not offputtingly so. 

I have found comparable music in another genre of movie and television too, and that is high drama. I've found the scores for The King's Speech, Darkest Hour, Downton Abbey, The Crown, Atonement and Brideshead Revisited to be well-suited to writing.

I now use my playlist to help me almost everyday with blocking out unwelcome background noise and getting me into the state of mind to work. 

Although it is the same playlist each day, there is over ten hours of music on it so far and I'll be looking for more to add, so as not to let it become too repetitive.

And there it is, my heuristic for flow-state inducing music. I'll be writing more about what helps my productivity as I learn.

Like A Trader part 2: Invert the tweak, clip the tail

I consider myself a recovering unconstructive optimiser.

I use this term for people like myself who naturally behave in one or both of the following two ways.

The first is spending hours (even years, in some cases) obsessing over finding the exact right way to do things down to the very last detail and achieving nothing, instead of just trying things and finding a good-enough solution.

My own experience of this has mostly consisted of a few weeks each year trying to design the perfect workout while seated at my desk, trying in vain to evaluate what one expert says about another.

Worse than this were the years spent confusing myself by reading every trading and investment book out there, convinced I could craft the perfect market-beating strategy. 

At some point, more information starts taking you further away from a solution.  

This type of behaviour has been widely written about. It has been contrasted by the psychologist Gerd Gigerenzer and others with satisficing; saving time and mental expenditure by choosing a good-enough solution from a limited range of choices.

Gigerenzer's book Risk Savvy has some excellent tricks for dealing with this behaviour. Tim Ferriss also has a list of tips in an article on his blog about living a choice minimal lifestyle.

The second behaviour that is characteristic of the unconstructive optimiser is less well covered in my experience. 

This is the discarding or postponing of important activities because the circumstances are not optimal.

For example, many sources say it's good to eat soon after a workout. It's good to. But certainly not essential unless you are a professional bodybuilder.

Somewhere along the way, this message became scrambled and I began to behave as though workouts were not worth doing at all if they couldn't be done before a meal. 

Even if I had the entire evening free after dinner, I would skip the workout thinking it just wouldn't be worth doing.

However, I recently ended up working out late at night after a massive meal with friends a few hours earlier (this exercise was actually part of the ritual I discuss in my earlier Like A Trader article).

I not only felt better for having done it, but it was obviously a more rational decision for my health to do so. 

In trader/probabilist lingo, it clips the left tail. This means avoiding or minimizing the worst outcome. In this case, doing nothing would cause the most harm. So any exercise clips that tail.

This might seem obvious, and others might not make this mistake with exercise, but I bet many people make it in other ways.

The psychologist Kevin Dutton is one of precious few I've found who have written about this. Apparently it is one of the afflictions regular folk suffer from, but psychopaths do not.

Author, ex-soldier and psychopath Andy McNab, who co-wrote a book with Dutton, said he has no problem whipping out his laptop and writing during a spare ten minutes at a busy train station. But most others would probably not consider it worth working under such conditions.

For me, the problem often starts when I hear about a good habit that I would like to do. It's almost always delivered with a tweak; an optimal-but-optional condition under which to perform the behaviour. 

Take another example I have struggled with: meditation. This is almost universally recommended to be performed in the morning.

The exposure to both behaviour and tweak together seems to cause the tweak to become a necessary condition. The alliteration of morning meditation may even enhance this more. 

But this does not mean it is not worth doing if you didn't get a chance in the morning. In fact, I've never seen any evidence given in support of this suggestion. It just seems that many people who meditate do so in the morning.

However, simply knowing and believing something is rarely enough to alter behaviour. Small actions are needed.

My trick for dealing with this form of unconstructive optimisation is to invert the tweak. 

When I hear about a habit or behaviour I would like to try, I will deliberately do it under the opposite conditions than those people advise, even just one time, to demonstrate how it is still beneficial.

This practice makes the habit more resilient to circumstances outside my control. I lose the unconscious belief that the suggested condition is necessary using the irrefutable evidence of actually having done it under imperfect circumstances.

The trick is far from new. Confidence is built in soldiers by running them ragged and making them sleep deprived then forcing them to shoot, showing them they can still operate under terrible conditions.

Nightime exercise is now a pretty regular occurrence for me, especially when friends have dropped by unannounced or invited us to dinner so I can't work out earlier.

Another way inverting the tweak has helped me with exercise was by breaking up my exercise throughout the day.

I built a daily exercise habit by taking the total number of reps I wanted to do of each exercise and inverting the standard practice of doing them all in a single workout.

I did the same number of reps, but in small sets spaced throughout the day. They weren't even taxing at first (I was starting from basically no exercise and looking to build a habit).

Gradually, because this still led to improvements, I was able to increase the number of reps in each set and reduce the amount of time between each. Now I do one intense workout, as per the standard advice.

But if I'm ever unable to fit in a single extended workout, I know I can make do with breaking it up and it's still better than doing nothing. 

This resilience helped me another time when, staying away from home, there was no room to perform one of the exercises I usually do. In the past I would've scrapped the workout entirely, but this time I just did the exercises that I could. 

This leads to something I'm hoping to address in a future Like A Trader article. A concept I have given the working title of a portfolio of healthy habits. More on that soon.

 

Like a trader part 1: The power of rituals

If asked to diet like a trader, one might think of scoffing a Red Bull, sandwich and some *ahem* sherbert *ahem* at your desk. This is not my approach.

What I think about is applying a fundamental trading concept — not compounding losses — to dieting efforts.

I have developed some tricks for this which have been working well for me lately. But this concept is something I have found strangely absent in dieting advice.

Let's define a loss here as eating something you know you shouldn't: the sugary, processed, nutritionally void junk that is just oh so satisfying for the two minutes before it hits your stomach.

I see three traditional approaches to dealing with such situations. The first is obviously to go cold turkey - don't eat such things. 

There are practical tricks to help with this, like keeping treats out of the house, shopping around the outside aisles of the supermarket etc.

Those tricks are certainly worth using, but I would posit that for most people (including myself), complete abstinence from such treats is neither desirable nor enjoyable.

So, the aim is to be able to have treats but to minimize harm by keeping them occasional and resisting their addictive allure.

One approach is the treat day. I did this for a while. Once a week, I'd chow down on as many pancakes and as much ice cream and pizza as possible.

There are tricks that are meant to minimize harm here too, like working out at the start of the day and making the first meal something healthy and nutritious. 

In my experience, however, these tricks were quickly forgotten in the excitement of the oncoming sugar rush. 

Another criticism I have is that treat days are highly dependent on social life. I used to schedule them for Saturdays, which worked well when everyone I knew had Monday to Friday 9-5 jobs so that was the day we'd usually meet.

Now, I have friends who are self-employed and who live away on weekends. It's rare that I can see everyone on a single day. I'm often meeting friends a few times a week.

While writing this, I have begun to wonder why we don't meet up for healthier meals. But unhealthy feasts with friends seem to have existed through much of human history.

I don't like to disturb widely established practices that have existed for far longer than I have. Plus, it's much more fun meeting under these circumstances. 

If I had to take a wild guess, I'd say there may be some skin-in-the-game aspect to incurring harm for the sake of the friendship. The same could be said of drinking with friends too, which also makes you vulnerable.

Another issue I have with treat days is I don't think making your blood sugar absolutely skyrocket is a great idea at any time. Well, I'm mixed on this. 

It probably is better than chronically elevated levels from a consistently poor diet. Since the body is highly complex, we can assume Jensen's inequality applies and that the average gives us little information compared to the variation around it.

I've also seen some documentaries on hunter-gatherer tribes who seem to be obsessed with honey. One said it was the most important thing in life next to meat, with others saying when they found some they'd eat it until they felt sick.

At the same time, I consider the adage that the dose makes the poison. This is basically the reverse interpretation of Jensen's inequality from above: all the sugar coming in one go may be more harmful than the same amount divided up into small pieces consumed over a longer time. 

So the final approach is most suitable for me right now. That is the "It's fine to have occassionally" approach of many dieticians. 

And this is finally where the trading aspect is helpful. 

You see, I think this approach ignores a flaw in human psychology, the same one that makes us throw good money after bad and makes traders compound their losses.

It's not so easy to just have these things occassionally. They are designed to be addictive.

Many times have I been eating consistently healthy, only to be presented with an opportunity for a treat that I accept. 

Let's ignore the fact that I accept it in the first place. Like I said, I don't want to completely avoid them. The problem comes after that.

I had a mental habit of writing-off that day after a single treat and promising myself I'd start being healthy again tomorrow, simultaneously commiting myself to a damaging day of overindulgence.

A small, probably harmless treat ballooned into something much more costly, all because I couldn't think like a trader and cut my loss, walk away and see it for the isolated event that it was.

Every subsequent decision I made on those days was made with reference to that initial decision to eat something bad. Yet there is no rational basis to do this. 

From reading Robert Cialdini's book Influence, I am now aware of just how strong a driver of human behaviour consistency really is. This is the principle that underlies the famed foot-in-the-door sales technique.

I also think this is responsible for compounding my dieting errors. 

A big part of what makes great traders like George Soros great, and thinkers like the philosopher Bertrand Russell, is that their future decisions are completely unaffected by those they have made in the past.

Yet knowing this is all well and good. But I knew all this already and still made the mistake time and time again. I think there are few humans who can alter their behaviour based on reason alone, and I'm certainly not one of them.

 This is where my wider reading of trading literature came in handy.

Somewhere along the way I have come across traders who use rituals, even something as simple as getting away from the desk and taking a walk in the park, to isolate losses and mentally prepare to move on.

So, one night, I applied this idea to my dieting problem and wrote a checklist of actions that put the treat behind me and put my mind back into "healthy mode", for want of a better term.

My consistency in keeping up exercise on days when I've had a treat and eating healthily for subsequent meals has improved hugely because of this. 

So what's on the list? Nothing spectacular. Sometimes I do the whole list, sometimes I am out and can only do one or two. But even that is still effective. I have found the following helpful:

• Brushing my teeth

Yes, simply getting rid of the taste and replacing it with that minty fresh feeling makes a big psychological difference. I also think it connects with the fact that brushing is associated with the morning, or a fresh start. 

I have also found taking a shower helpful, possibly for similar reasons.

• Eating fruit
  

I know some fruit is high in sugar. But this is only very little, usually a single apple does the trick. It feels healthy, even if it is not perfectly so, and this feeling can be an important small first step in moving on.

Interestingly, Mark Baker (AKA guruanaerobic on Twitter) advises donating some money if you suffer trading losses. Although it means you lose more money in absolute terms, he argues it gives you back a feeling of control. I see this as analogous to the above.

• Drinking lots of water

Not sure why this one works, but it does. I guess it kind of feels like washing away or diluting the bad stuff. It does have to be quite a lot of water for me, at least one pint.

• Doing some exercise

This does not have to be a full workout. It hardly even has to last over a minute. I have found a single set of ten pressups or squats to work just fine, as well as deadhangs, overcoming isometrics and walking.

As you can see, these small actions are like a foot-in-the-door working the opposite way to the treat. After taking these small steps, I will try to be consistent with these healthy actions for the rest of the day, instead of what came before.

If, like me, you have a tendency to scrap healthy eating for a day on the basis of a small snack, then it could definitely be worth spending a few minutes to design some rituals to try that can let you just put it behind you and move on. 

If you found this article helpful, please feel free to share what worked for you in the comments.

Antifragile Ecommerce: The antifragility of unwanted inventory

I have begun reading Robert Cialdini's 'Influence'. Yes, it's been around for years, but it takes less than a chapter to see why it is considered a (if not the) definitive text on persuasion/compliance.

Every page is a succinct hit of practical advice, and the examples are brilliant. Whoever knew toy companies could be so evil?!

While reading, I have been making notes of things I can apply to the small e-commerce operation my family run.

Lots of the advice is easy to spot being practiced by big retailers, but something that I theorise is an unexploited opportunity is what I am calling the antrifagility of unwanted inventory.

We've run our store for a while now and have a good grasp of what moves quickly and in volume. This is where we allocate the bulk of our budget. A minority will be spent on testing new things.

We follow a loose interpretation of the barbell portfolio strategy of Nassim Nicholas Taleb. Keeping allocation to risky new products small means we never lose much when something we try is unpopular.

This inevitably happens, as does the falling out of favour of things that were once popular. To protect against this we purchase smaller amounts of a large, diverse selection of popular products.

We never bet too much on any individual product, no matter how well it has sold for us in the past.

But my point is, we do end up stuck with items no one wants to buy. Traditional retail in my experience deals with this by using discounts, offers or shifting the stock to an outlet. 

Despite meaning to for a while, establishing a liquidation strategy for overstock is something I have neglected. All businesses should have one to protect against inventory forecast errors.

However, Cialdini has some principles I believe may allow unwanted products to be used to sell more of what is popular. 

The strategy is antifragile because rather than taking a reduced profit or a loss just to clear the stock, it may even help to sell more fully-priced items.

The main principle here is what Cialdini calls perceptual-contrast. Like everything else in Influence, it is a psychological shortcut people take when making decisions to avoid mental expenditure.

People do not evaluate choices on their own merits, but with reference to alternatives they have already seen. This can exaggerate the attractiveness of something they like if they see it after something they do not. And vice versa.

They would evaluate it to be more attractive or unnatractive than if it were seen on its own. The same applies to prices. Seeing something expensive first causes a second, cheaper-but-not-that-cheap item to seem more attractively priced.

The practical application of this is summed up nicely in a quote by Taleb: Sequence matters!

In practice, I am now experimenting with the counterintuitive move of adding a couple of unpopular items to the top of our shop and pricing them higher. These are followed by our top seller.

I am taking care not to go overboard with this. Only six products appear when a customer first clicks on our store. We do not want them thinking we only sell ugly, overpriced stuff and not scrolling further.

One further caveat to this technique is that pricing the initial item unrealistically high will just expose the strategy and cheese people off.

Another place I will be applying this principle is to our social media. Timelines are read downwards, so a top-seller posted first, followed by a dud or two might achieve the same effect.

 Facebook used to have a photo carousel feature when you create a post for a page, giving you control over the order in which a visitor sees the photos.

I can't find that feature now that they've moved publishing tools over to the god-awful Facebook Business Suite, but another approach could be to use collages.

It is said that people see images from left-to-right as though they were reading. So a collage with some less attractive or more expensive products followed by something popular might also work. 

I'll mostly be sticking with the first strategy I think, since looking back we've had the most engagement from posts with just a single product photo.  I also think creating more posts increases visibility.

Additional antifragile benefits of this strategy are that by moving unpopular products from the depths to the top of our shop, we can find out whether they were genuinely unpopular or whether customers just didn't scroll far enough to see them. 

Also, the worst case is that they don't sell, which they weren't doing anyway. But now that their prices are higher, if they do sell we'll make even more.  

This is just a theory I am currently testing, but the psychological principles are well supported. I am concerned that something so simple may have already been tested by big players and found not to work.

This may explain why I haven't seen anyone doing this. Or maybe they just do it subtly enough to be imperceptible. I'm trying it either way because I find this area of psychology fascinating, and I wrote this post because I hope some other people do too.

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