Money Is a Potent Distractor

I am going to flip a coin, and if it comes up heads, I will give you the coin. Does that sound like a good deal?

Perhaps it is if I can do it in an entertaining way, but viewed strictly in financial terms, probably not. That’s because the time it takes you to watch me flip the coin may be worth more than the coin itself.

If you have the opportunity to work in a U.S. minimum-wage job, you get paid 1 cent approximately every 6 seconds. If I pick a penny to flip, and it takes me more than 3 seconds to flip it, with a 1 in 2 chance that you get the coin in the end, the expected rate of return on your time from my coin-flip offer is less than you get at work.

Despite this, almost everyone gets caught up in deals that are no better than the coin-flip offer. It is not that people lack financial sense or are not aware of the value of time. The reason it happens is that money is a potent distractor. It is not hard to contrive a situation in which the appearance of money is used to take people’s attention away from what they are doing.

When I was very young, my relatives took me into a Texas bar. There was a coin, a nickel I think, on the floor near the entrance. When I pointed it out, they invited me to take a closer look at it. As I did, I discovered that the coin was nailed to the floor. It was put there, they explained, as a sort of test for people who were new to the place. Anyone who tried to pick up the coin was a person who had never been there before.

That is how easy it is to distract people with money. You can easily think of less benign examples.

Imagine if your employer paid you in real time, with a machine that dispensed pennies at your workstation. You wouldn’t be able to get much work done, having to stop every few seconds to collect your pay. We think of money as an incentive to focus on work, yet as this thought experiment shows, money also serves to distract from work. Money is, in general, one of the most potent ways to distract people.

Gasoline Prices and Auto Sales

Some news stories have suggested that the strong sales of new automobiles in December shows that consumers are getting comfortable with the low gasoline prices of the last three years. If this is indeed the thinking of car buyers, a 20 percent increase in the price of gasoline over the next four or five months could be enough of a jolt to send sales numbers back down to their previous levels. The general availability of all-electric cars later this year will not do much initially to boost sales. Battery prices need to fall a bit farther before electric cars can break out of their niche, and that breakthrough is not likely to occur this year.

There are various scenarios by which oil gasoline prices would rise by 20 percent or more. One that I have mentioned several times is the possibility of a strong recovery in the U.S. job market. If more people are driving to work in the United States, that has a big impact on global oil consumption. Unfortunately, this is not the only way oil prices could rise. If Iran follows through on its plan to blockade the Persian Gulf, even if it is not entirely successful, that alone could send oil prices up by 20 to 30 percent.

Oil Prices Recover

An oil executive warned today that oil and gasoline prices could not plausibly go much lower than they are now. It is a thought that echoes the analysis of economists who wonder how oil has managed to stay so low for so long. It is not just the ongoing train wreck in Iran that could raise oil prices. Any expansion in U.S. employment or spending will also stretch the limits of the oil supply.

And this is the season when oil prices tend to start going up. A combination of factors could easily raise world oil prices to near-record levels by June.

Beyond the Cliches of Personal Change

My book Fear of Nothing has had its best week of sales yet as readers take on the new year’s resolution of “no clutter.” It is an objective that has extra significance this year. People are hoping to cut their ties to the past decade of economic doldrums, and nothing says pessimism and economic decline more emphatically than clutter. It is a hopeful sign for the larger economy that people are undertaking personal change. The current economic problems might be global in scope, but the solutions start on an individual level.

This also means that personal change ultimately has to look beyond the pre-packaged “change” of the same old commercial products. This year more than last, we can expect to see change of a more spontaneous nature, as people respond to external changes with ideas too new to have been vetted by the two-year book publishing process or the decades of development that have created the familiar cliches of change. It is those cliches we tend to reach for first after we realize that things could be better. This year I believe we will find that we can reach beyond them.

A Fluid Year

People have been talking about 2012 for a long time, and much of the talk has focused on the expectation of an unusual fluidity this year. It is the end of an era in a Mayan calendar and a transition point in U.S. demographics. Some of the most persistent predictions for 2012 talk about shocking changes hitting coastal cities on every continent.

In historical terms, the world has been remarkably fluid and changeable for the past 21 years or so. One thing we have learned during this period is that people and institutions that put too much stock in planning eventually get left behind. We cannot avoid planning, but in times like these, we must also remember to plan to read and react. If the 2012 prophecies are true, or even if they are not, that consideration may be more true than ever this year.