Wanting Black Coffee in a World of Expanding Options

Even though cartoons and skits over the last decade have made fun of exotic coffee drinks by suggesting it’s hard to just get a regular coffee these days, this has never happened. No one is being turned away from Starbucks for asking to buy a black coffee. So why is this scenario repeated as if regular coffee drinkers are being excluded? Jason Pargin explains:

This exaggeration is of a world that doesn’t exist. No one took his black coffee from him. All that happened is that the range of options for other people were expanded. He perceived that as persecution as if his choice was taken away. Most people are not satisfied to simply have the option to live the life the way they want. They also want to feel normal. They want to walk around and see that most other people have made the same choice that they have made. If they see that, over time, their preference has become less popular, and even worse, is seen as being base or unsophisticated, they will perceive the mere existence of those other options as a criticism of them, even if they’ve never heard anyone voice that criticism. There is basic psychological comfort in knowing that you are conforming to what the world wants and in the reassurance that that world is not going to change.

It’s not about the coffee. It’s the fear that if everybody else stops drinking coffee the way I drink it then I will become an outcast. That is scary to someone who is suddenly remembering how they have always treated outcasts.  

Normal had Shifted

Regression to the mean is most slavishly followed on the stock market. Wall Street folklore is full of such catch phrases as “Buy low and sell high,” “You never get poor taking a profit.” All are variations on a simple theme: if you bet that today’s normality will extend indefinitely into the future, you will get rich sooner and face a smaller risk of going broke than if you run with the crowd. Yet many investors violate this advice or selling high. Impelled by greed and fear, they run with the crowd instead of thinking of themselves.

Since we never know exactly what is going to happen tomorrow, it is easier to assume that the future will resemble the present than to admit that it may bring some unknown change. A stock that has been going up for a while somehow seems a better buy than a stock that has been heading for the cellar. We assume that a rising price signifies that the company is flourishing and that a falling price signifies that the company is in trouble. Why stick your neck out?

Consider those investors who had the temerity to buy stocks in early 1930, right after the Great Crash, when prices had fallen about 50% from their previous highs. Prices proceeded to fall another 80% before they finally hit bottom in the fall of 1932. Of consider the cautious investors who sold out in early 1955, when the Down Jones Industries had finally regained their old 1929 highs and had tripled over the preceding six years. Just nine years later, prices were double both their 1929 and their 1955 highs. In both cases, the anticipated return to “normal” failed to take place: normal had shifted to a new location.

Peter Bernstein, Against the Gods