I’m a great fan of Apple, and not just because I use their products. For years, Apple has distinguished itself as a company that knows how to build an emotional connection with its customers. Because of that connection, Apple claims legions of loyal fans.
But with its recent missteps in its handling of iPhone battery issues, one has to wonder: has Apple lost touch with its customer base?
The Consumer Financial Protection Bureau (CFPB) meted out a $185 million fine that included a $100 million penalty to Wells Fargo in 2016 for their violation and abuse of consumer trust. The San Francisco-based bank, whose employees opened many fraudulent and unauthorized accounts in their customers’ name, now enjoys the dubious honor of shouldering the most substantial penalty the agency has issued since its formation in 2011. Now the question becomes what should Wells Fargo do next?
The new cashierless Amazon Go store is open for business in Seattle, and it could revolutionize the way we shop. At least that’s what some people think. Personally, I’m not so sure.
Amazon Go is an 1800 square foot market, with a mix of prepared foods, typical convenience store merchandise and the kinds of grocery items you’d normally find at Whole Foods, which Amazon also owns. At the front of the store, where you’d usually find checkout lines, there is a bank of electronic turnstiles. You can only pass through the turnstiles and into the store if your smartphone is loaded with Amazon Go’s app.
Imagine that you bought a ticket to see a play for $20. But when it’s time to go to the theatre you have lost the ticket. Would you buy another ticket for the show for $20? The reason I ask is that it is a significant economic decision and not everyone places the same value on their $20.
This leads me to the concept of fungibility. Unless you are an economist, you have probably never heard the word fungibility. Fungibility is a $3 economic word, and it means that money is money is money. In other words, $2 here is like $2 there and we can use these funds in any way that we choose. Fungibility is essential to economics because if money isn’t fungible, most economic theory breaks down.
Prospect Theory is the name of the concept developed by Nobel-prize winning professor Daniel Kahneman and Amos Tversky, who were the “Godfathers of modern decision science.” It describes the hidden influences that exist that drive our behavior—and they aren’t what you think.
Before Kahneman and Tversky’s paper on Prospect Theory, most economists felt like what drove decision-making was wealth, as in, the more wealth you had, the more options were available to you.