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Hi, When is $204 less than twenty dollars?
November 10, 2009

Hi

Volume 74

Hi there to all our loyal and our new members. 186 new members joined in the last month. Welcome to the Time Creation community.
This edition of your Time Creation Newsletter tells a story about the $204 twenty dollar note and how it costs you time and money.
The article takes about 2.7 minutes to read.
Enjoy and have a laugh too.

  1. Article: The $204 twenty dollar note!
  2. Laugh out loud: Real Beer
  3. NEW Intuitive Time Management System
  4. Links you should check out: The Irresistible Pull of Irrational Behavior.
The $204 twenty dollar note.
And how it costs you time and money.

They were bidding on a twenty dollar note and the last bid had just gone over $200. What madness could possess someone to pay over $200 for a twenty dollar note?

The same thinking that costs you many hours every week!

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Professor Max Bazerman in his negotiation skills class at Harvard Business School found that MBA students would pay up to $204 for a $20 bill. How did he get them to do this? Bazerman set up a game where the students bid on a $20 note. The difference in this game is that the 2nd last bidder has to honor their bid, even though they would not get the $20. The winner must honor their bid and they get the $20. Sounds simple enough right?

Then what happens that highly educated people pay up to 10 times the value of a $20 bill?

Here is what happens. When the bids reach around $16 to $18 dollars the two top bidders suddenly feel locked in. Now neither wants to be the sucker who comes second and has to honor their bid with no return. As the bid hits $17, the $16 bidder feels they must bid $18 or suffer a $16 loss. There is logic in that thinking. I am sure we can all relate to wanting to avoid a loss.

What happens next is the really interesting part of Bazerman's experiment. The bids race past $20 with both bidders determined to "avoid a loss". They are both determined to get the $20. Hang on a minute. If they are trying to avoid a loss why do they go past $20? Now both people lose! At this point Bazerman describes the group watching as roaring with laughter as the bids go well above $20. Yet something has taken control of the bidders.

Now the fear of loss takes over their mind.

Subconsciously the participants change their definition of loss. No longer is it connected to the $20 prize. It is now about the perceived pain of the loss. The bidders become locked into a losing strategy. The losses get bigger every time they bid (for both people) and they dig in deeper and deeper to their chosen strategy. Emotions have taken over and the bidders don't see a way out.

I see this everyday in business.

Bazerman has conducted this experiment with business people and found the same results. I am not surprised because everyday I talk to people in business who are locked into a "losing strategy". They get locked into the work harder, work longer and eventually everything will work out strategy. And it just the same as bidding $100 and $110 up to $204 for a $20 bill.

Unfortunately most of the time it takes an external "smack over the head" for people to stop the "bidding". Sickness, death of a loved one, divorce, problems with their kids, redundancy or restructures are some examples of significant events that shock people into moving away from their losing strategy. If no significant event happens you continue using your losing strategy.

Are you locked in to a strategy to avoid loss where you will end up paying $204 for a $20 bill?

Related Articles:

Time Management at Work.

Time Management Principles

Links you should visit

1) The Irresistible Pull of Irrational Behavior.

2) Time Management Central.net time management videos to inspire you to use your time wisely.

Laugh out Loud
Real Beer

Real Beer

Foure leaders of the big beer companies meet for a drink.
The president of Budweiser orders a Bud.
Miller's president orders a Millers and the president of Coors orders a Coors.
When it is Guinness' turn to order he orders a soda.
Why didn't you order a Guinness everyone asks? Nah Guinness replies.
If you guys aren't having a beer neither will I.

Make Time for some fun today :-)

More great Time Management Information
Lots more time management tools, tips and resources to help you save time


Time Management Videos -- Free video presentations on time management.

Time Management Forms -- Download and use our time management forms to get control of your time

Time Management Articles -- A comprehensive library of time management articles with information that really saves you time.

Time Management Planners -- A summarized review of leading time management planners.




Thanks for spending your valuable time with us.

Michael, Graham and the Time Creation Team


www.timecreationcoaching.com.au
www.time-management-central.net

2008 Time Creation Coaching. All rights reserved. Please pass the above in its entirety to anyone you wish.

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