IMAGINE that you are buying a phone cover worth ₹200 and you learn that another branch of the same store is offering the same cover for ₹150. That branch is 10 minutes away. Will you go to the next store and save ₹50? Most people will.
Now imagine that you are buying a phone for ₹15,000 and you learn that the other branch of the store is offering the same model for ₹14,950. Research shows that people are more likely to make the trip for the ₹200 phone cover than for the ₹15,000 phone. Isn’t that irrational? We make an effort to save the same ₹50 while buying the phone cover but not while buying the phone. You may say that a saving of ₹50 is a 25% saving in the first case and means less than 1% in the second. And hence not worth the trouble.
Maybe it is because you think of money saved in percentage terms and not in absolute terms. That is because you are affluent.
The wealthy think differently about money
Depending on whether you think of yourself as affluent or rich, your response to saving, spending and money in general could change. People will surf for hours for a few rupees off a T-shirt than making the same effort while buying a house. Getting a T-shirt for 30% cheaper may save far less than a 0.5% difference in a housing loan that you will pay over 20 years.
Rich people think of money and savings in percentages while the poor think of it in absolute terms. Can the same insight be used to encourage people to contribute to charity?
If you were raising money for a charitable purpose and you are appealing to a CEO of a company to contribute (from his own wallet, not the company’s), maybe it is worth putting the request in percentage terms. While appealing to the newly employed, it may be wiser to frame the contribution in absolute terms.
The rich often don’t notice the poor
Money changes how we look at the world. It changes how we look at other people – especially those who have less money. Affluence also seems to dull one’s ability to read other’s emotions. Research shows that individuals of a lower social class can judge the emotions of other people more accurately. The rich person may look at a poor person but may not empathise with the person’s plight.
When a princess learned that the peasants had no bread, she suggested, “let them have cake”. This phrase has often been used to depict extreme insensitivity and callousness. Behavioural science research tells us that we may be judging the princess too harshly. She may have suffered from exactly the same challenge that you and I have. We may never be able to empathise with the misery of the less fortunate.
How then do we explain the philanthropy of Bill Gates or Azim Premji – and they are not the only billionaires who support charities. Many average individuals with limited means also reach out and support social causes. It may have something to do with how we view our relationships with the less fortunate.
The poor need to depend on neighbours, friends and family for support. The rich can afford to pay people to do the same.
They can hire domestic help, babysitters and even companions for old-age. They do not really need to depend on others. The poor will often listen to music on a radio that is heard by everyone at home. The affluent can afford to buy earphones and listen to music without disturbing anyone.
We don’t have to look far. When college alumni reunions are planned (usually by those who are more successful and vocal), there is often no thought given to the classmates who may find the contribution too steep. While everyone may be equally keen to meet a classmate, skipping the get-together may be the only way out for someone to balance reality and dreams.
We do not need to wait to be billionaires before we reach out. We could start small and start now. Maybe we could start here.
First published in the SmallChange.ngo blog in April 2017.