 Hello there, I'm George Franklin, and I'm going to take a look at how even the best and brightest people can make truly stupid decisions and terrible predictions, and what we can learn from them. This is Dare to be Stupid. This time on Dare to be Stupid, The Impossible Self-Appraisal, or From Hemness to Hoddle. A little while back, radio pundit and hobbyist Twitter self-owner Jesse Kelly bemoaned the softness of modern men. Can't believe there are men who don't know how to work with their hands, he tweeted. I woke up this morning and built a shed for the backyard. A firm stand for principles of traditional masculinity or whatever, at least as firm and masculine as a phone booth-sized plastic snap-together rubber-made storage bin can be. Before he quietly deleted the tweet and photo and shuffled away, multiple commenters were happy to point out that his six-square-foot, sun-cast-brand plastic tool shed was available for a cool-to-hundo at Home Depot and boasts easy assembly in minutes. But let's not chuckle too smugly at one person's performative manliness, because there, but for the grace of God, go all of us. Every human being shares the delusions of inflated self-appraisals of value and utility, though perhaps some of us more than others. When we do something with our own hands, as this paragon of testosterone did, we will almost always value the results a bit too highly. Assessing value is vital to not just trade or business, but to every kind of decision-making. Whether we're putting old furniture on Craigslist or deciding between two life-changing job opportunities, we're appraising values and weighing them against others. It won't surprise anybody to hear that the average person can't perform a flawless mental risk assessment, but it may surprise you how reliably we all sabotage our appraisals in the same ways. From our second-hand IKEA furniture to our long-game crypto wallets, the mental meter of worth and importance is tied to some universal human malfunctions. Even money, no matter how far we distill it into a pure and perfectly fungible exchange medium, sprouts human traits when it passes through human hands. You don't have to be a meticulous new mismetist to notice that old and misprinted coins become more than just their fiat value. Even when money sheds its corporeal form and ascends to the spirit world of cryptocurrency, traces of infundability still remain. A bitcoin is a bitcoin is a bitcoin, but the movements of values create differences. Even when crypto coins are unserialized and stripped of individual delineation, their destinations themselves can become more than the sum of their parts. For example, wallet addresses themselves are commoditized beyond their explicit asset values. Mintings of Cassatius coins, the physical bitcoins, featured public addresses on the forefront and private keys embedded under a tamper seal. The disclosure of all the public addresses means that anyone can track the contents of all physical coin wallets freely, but so long as the coin is untampered, it can be a hand-swappable unit of cryptocurrency, literally trading an entire wallet with the cash inside it. These physical coins have become collectibles now in two completely different contexts. The untampered coins with their crypto value and collectible markup, and then the wide secondary market of tampered coins as curios. They are literally compromised wallets. The private key is now known by previous holders. It's a hollow coin with no safe utility, but they're still numbered in limited pieces of crypto history and retain an inexplicable collectible value. Context will always be the key. That context could be the universal baggage of unmoved coins under scrutiny or the personal curiosity of the keys to an empty kingdom. The nature of crypto is to preserve the ledger, the history of every movement, and I can't think of a better way to define history than context and baggage. Let's back up and talk about that Ikea furniture. At this very moment, I am blessed with a new house and burdened with an Ikea Hemnes secretary desk with matching hutch. There's no spot for the latter within the former. It's time to put it up for sale. The thing is tall. It is heavy. Other people are asking about 200 for similar pieces, but ours is in great shape. I installed extra shelves, some coat hooks along the top, and made cutouts in the back for cables and outlets. My wife listed it for $150. Excuse me? I have to disclose the crap you attached to it and the bits you cut out, she says, taking photos of my handiwork for the listing. I want it to actually sell. And damn it, she's right. Nobody's going to care about the time I spent lugging the flatpacks in, putting it all together, realizing the hutch was sold separately and buying that, realizing it would block the outlet and require a cutout, adding an extra shelf without looking tacked on, and finding hooks that match the color and the knobs well enough to blend in. To any other person on the internet, my hemmness secretary desk with matching hutch looks like any other hemmness secretary desk with matching hutch for sale, except with some crap bolted onto it. My sense of effort is meaningless against the nearly identical effort every other one of them required at one point or another. It only seems important, improved, or impressive, to me. Mercifully, I'm not alone. The results of a truly strange set of social experiments in 2011 by combined researchers from Harvard, Yale, and Duke outlined what the authors dubbed the Ikea effect, also known to boring people as the endowment effect. This was a behavior that arose when test subjects were asked to complete various instructed projects, from Lego to origami to, yes, Ikea furniture. Once complete, the majority of subjects appraised the value of their creations on par with those of experts and professionals. Many saw their constructed Ikea furniture and storage bins as worth significantly more than the given retail price of the unassembled merchandise. They did not see the same objects as similarly valuable, when they were put together by someone else. The fact is that while labor and effort will always be sources of value, we have overwhelming biases towards our efforts and our labors. The investment of our time and sense of control over the construction of these products provides them with emotional endowment that is tragically non-liquid and non-vungible. Stranger still, this added cost can be used against us. The Ikea effect allows us to be sold experiences at an upcharge using our required labor as a value add. The researchers were happy to point out this role reversal through the existence of Build-A-Bear Workshop, a place where kids can do all the labor of assembling and stuffing a plush animal for four times the price of a pre-assembled plush animal. I can only imagine the pain these noble economists must have felt years later when building their own lightsabers at Disney World. If it feels like these are backwards, unintuitive habits, well, I'm sorry, but it gets worse. There's signs of correlation between the endowment effect judgments and the Dunning-Kruger effect, that is the cognitive bias in which the less expertise a person has in a subject, the more they overestimate their skills with it. It's the inevitable end point of, how hard could it really be? The more inexperienced an amateur is at a new task or craft, the greater the risk of them grossly overvaluing their output. For example, a person would say, no experience building things with their own hands, might think that assembling a snap-together plastic storage shed is a momentous triumph worth sharing with the world. These are all widgets and doodads though, the sort of things with nebulous qualitative values. When you try to get into the real economics of it, the way we handle objectively measurable assets is somehow just as bad. Somehow, when given choices of quantitatively equal value, the human brain still defaults to an emotional bias. Specifically, we will tend to overvalue the assets we already own more highly than potential gains of equal value. This is particularly evident in collector's markets, where a prized asset, the $1000 rookie card, the $10,000 vintage wine, simply cannot be parted with for the known established values. The satisfaction and security of owning the asset is worth far more than the equivalent cash. This has even been experimentally demonstrated on the micro scale by the economist John List, with research volunteers assigned random $5 gifts at the beginning of events and then given the opportunity to trade out at the end. Among typical attendees, 4 out of 5 declined to even consider trading out. Yet among volunteers specifically experienced in commodities trading, that rate climbed to almost 50-50. Clearly, unless people have trained themselves to depersonalize their assets, they'll find themselves attached to them. The struggles of the everyday crypto-hodler provide some insight into this conflict. On one hand, you can explain away some of this behavior through classic rules of opportunity cost. When you sell, you're sacrificing other potential gains. But it's rarely just that. It's the fact that you're dropping out of the fight. You're quitting the game. You're tearing up your ticket for the money train. No amount of cash in hand will ever fully quantify the loss of your stake in the journey. Some people have desensitized themselves to that hidden cost, but many of us will find it hard to shake. This isn't an indictment of emotional decisions, nor is it highlighting the chumps we all deserve to laugh at. The depth and degree of these biases will vary, but we all share them. It's the cost of being human, and surprisingly, it's not necessarily a weakness. There's a connective thread behind many of these habits that hasn't always been clear. It's a tough thing to measure, but it goes something like this. Which is the stronger feeling, the satisfaction you'd get from gaining a $5,000 raise, or the frustration you'd get at taking a $5,000 pay cut? When faced with objectively equal utility value at stake, are the emotional stakes also equal? For the majority of human beings, they simply aren't. The discomfort of a loss is consistently greater than the magnitude of the pleasure of equal gains. The human brain is inherently more loss averse. Our biology is trained to be cautious, to gather resources, to value our time, and to take our losses even more personally than our gains. It's not something to be ashamed of. Take pride in your triumphs, be mindful of your failures, and enjoy the ride. Just be sure to step outside your own shoes from time to time. You'll be a better negotiator, a better person, and all around less likely to hold a play school toy shed over your head and declare yourself he-man. Thanks for listening. As always, I'd like to remind you that all of my job titles come with the word armchair. If you're an expert and I'm getting it wrong, I'd like to hear from you. Thanks so much to George and to you, the listener. If you've got any questions or comments about this segment, send an email to Adam at speakingofbitcoin.show. This episode was written, performed, and edited by George Franklin with production assistants from Adam B. Levine. Today's show featured music by Gertie Beatz and the Speaking of Bitcoin theme song is provided by Jared Rubins. We'll be back next week with full episodes end. Thanks for listening.