old car that represents social influence

When George Costanza drove off the car lot in a used 1989 LeBaron, he wore a smile as wide as the Hudson River. Little did he know that he exhibited the same irrational behavior that afflicts many investors.

It was intended to be a routine trip to the dealership. George, like most prepared car shoppers, researched what he wanted before stepping foot on the lot. Everything said ’89 Volvo, a safe, reliable car that can handle the vagaries of city driving. All there was left to do was make the transaction official. 

That was until the salesman called George’s attention to an old LeBaron. “It’s got a few more miles on it, but the previous owner was John Voight,” the salesman said. George’s eyes suddenly lit up, and he couldn’t resist himself. How many people could say they own the same car as a world-famous actor. 

The interaction played out just how the salesmen imagined. He dangled a piece of social proof in front of George, and George, always one to fall in line with social norms, took the bait. 

Famed social psychologist and author Robert Cialdini calls social proof one of the most powerful tools of persuasion. In uncertain situations, we look to others for answers about how to think and behave. George found that validation just from hearing John Voight’s name. After all, why would John Voight own a lemon?

But George isn’t alone in behaving this way. Investors will often succumb to dogmatic views and groupthink exerted on social media or elsewhere. In early 2021, millions of investors banded together around the shared idea that GameStop was an undervalued stock. On the surface, the video game retailer looked like any other fundamentally challenged stock. They weren’t selling video games and couldn’t pivot fast enough to a robust ecommerce strategy. So why would anyone rally behind the retailer? Despite the company’s clear challenges, the social proof of Reddit users aping into GameStop convinced even more investors to pile into the meme stock. 

Social proof isn’t the only force at play. When George hears John Voight, he falls into two additional persuasion traps: scarcity and credibility. Scarcity, as the name implies, plays to people’s desire for owning resources in limited supply, regardless of their intrinsic value. In the book Influence, Cialdini runs multiple experiments to demonstrate the scarcity principle. 

Coincidentally, the first looked at car shoppers’ behavior. He found that shoppers wanted a car more when they knew the car had other potential buyers. The competition for a scarce resource made car buyers ignore why they wanted the car in the first place. In other words, the car itself never changed just the buyer’s perception. 

He also observed people’s preferences for cookies. He notes, “As we might expect from the scarcity principle, when the cookie was one of the only two available, it was rated more favorably when it was one of ten. The cookie in short supply was rated as more desirable to eat in the future, more attractive as a consumer item, and costlier than the identical cookie in abundant supply.”

Sound like George. He intended on buying an ’89 Volvo from the second he stepped on the car lot. It wasn’t until the salesmen made a scarce resource available in the form of John Voight’s car that George began doubting himself. However, to George’s credit, John Voight probably owned a few cars and this may have been George’s only chance to have a rare item. 

And let’s not forget the last persuasion tactic; credibility. This one is straightforward. Attaching a credible name or expert to a product increases its perceived value. Done the right way, credibility will compound the effect of scarcity. 

Wall Street is no stranger to both. Most firms parade so-called experts on CNBC to discuss why viewers should consider different investments. They don’t act overtly, but the intent is clear; buy X stock because my senior role at an omnipotent company means I know what I’m talking about.  

All this happens in about five minutes. George displays the same behavior that typically unfolds over multiple chapters in a psychology textbook. The rest of the episode will focus on George’s attempt at self-preservation. 

After driving off the lot, George dropped by Jerry’s to tell him the news. There was a chance that Jerry would see the situation as somewhat impressive. After all, his friend now owns an iconic actor’s car. But Jerry responded in his usual snide fashion, “You like the idea of telling people you’re driving Jon Voight’s car.” 

Not one to concede an argument, George starts playing mental gymnastics to explain away the situation, the same way a Bitcoin owner may rationalize the inherent flaws in the cryptocurrency. In psychology terms, this is a classic case of cognitive dissonance, the mental discomfort we feel when we hold two inconsistent beliefs and attitudes. Cult followers often exhibit this type of behavior when easily disprovable events like a doomsday rapture or UFO landing never occurs. They jump through hoops to preserve their preferred view of reality rather than concede defeat. 

George’s dissonance is on display from here on out. When he notices that John was spelled Jon on the car title, George insists the actor uses an alias to remain incognito. According to Cialdini, this commitment can be normal. “People tend to add justifications to support the commitment and are willing to commit themselves further,” he says, “Once we have made a choice or taken a stand, we will encounter personal and interpersonal pressures to behave consistently with that commitment, those pressures will cause us to respond in ways that justify our earlier decision.

It wasn’t until Kramer gets bitten by the real John Voight that the mystery comes ahead. While at Tim Watley’s Thanksgiving eve party, George petitions a dentist to compare the bite marks on Kramer’s arm to those on a pencil found in the LeBaron. 

Sure enough, George learns the true identity of the car owner—Jon Voight, the periodontist, not the actor. 

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