The Contrast Effect: A Finance and Productivity Weapon

The contrast effect can play havoc with our personal finances, productivity, relationships and health. But it can also be a force for good.

“Did you see how fast that guy next to you was going?” my partner asks.

I’ve just finished a new treadmill routine and I can hardly breathe, let alone answer.

Instead of running at a sustained speed with no incline – as I have for many years – I’ve started running on a steep incline, starting slow and gradually reaching my top speed around 15 minutes in.

It may not sound a lot, but trust me, it’s a killer. With every minute that passes, the speed increases by a notch or two. The legs suffer first, not used to the brutal ascent to nowhere. Then as the speed increases, the lungs start to get a gradual, gruelling examination.

Suffice it to say that by the time I’ve reached 15 minutes, I’m gone. The incline is rapidly reduced to zero, just like the good old days.

Which brings me to my answer.

Yes, I did see how fast he was going. And yes, intrigued by what he was doing, I was that weirdo who, at least early into my own routine while I could still breathe, cast a glance across to the dashboard on his treadmill.

He seemed to be doing some kind of fartlek routine, combining bursts of higher speed with spells of slower running. Sparing you the statistical detail, here’s the highlight: all of this was done with zero incline.

“Yes,” I say, now partaking in some fit of bizarre post-gym competition, of which I am the only knowing participator. “However…” I take another breath to ensure I don’t die by treadmill. “He was running with zero incline.” – stops again for breath – “Try running uphill, faster and faster for 15 minutes. Then let’s see how he does!”

For my final retort – before I sensibly decide to focus on breathing full-time – I make my thoughts abundantly clear on this zero-incline business. “I did my warm down on zero incline and it felt like running downhill!”

The Power of Contrast

As I recovered my breath, and later some of my dignity, I had two reflections. The first of these unfortunately wasn’t a new one: perhaps I should choose my moments of competitiveness more effectively. Given my track record, I didn’t expect this reflection to translate into any meaningful change.

My second reflection, however, got me thinking about something far more interesting. I’d fallen into a psychological trap – one that has both the potential to be useful and thoroughly unhelpful.

On zero incline, it felt like I was running downhill. I wasn’t, of course, but it felt this way because I’d been running uphill for the last 15 minutes. This was the power of contrast in action.

If I’d followed the workout of the professional athlete next to me (disclaimer: I have no idea what his occupation is), then I’m sure it would have felt brutal because there would be no initial incline to contrast it with. I’m sure, in fact, that I would have reduced my speed before him (after all, he is a professional athlete).

What’s more, had my warm down lasted for a few more minutes, at a few higher notches of speed, clearly my legs and lungs would be less appreciative of this contrast. The illusion of ease brought about by contrast can therefore breed misplaced confidence.

What Is the Contrast Effect?

Psychologists call this the contrast effect. In summary, the contrast effect is a cognitive bias we exhibit in our judgement of things as a result of seeing similar things immediately before.

Contrast effects can be positive or negative:

  • Positive contrast effect: Where something is perceived as better than it is because we’ve experienced or observed something worse immediately before.
  • Negative contrast effect: Where something is perceived as worse than it is because we’ve experienced or observed something better immediately before.

A few examples to put this into context:

  • Running: You run uphill for 15 minutes and then run with zero incline. Zero incline now feels like running downhill because of the difficulty experienced running uphill. This is an example of a positive contrast effect.
  • Speed dating: You go speed dating and meet an especially attractive person (probably a professional athlete) and then a slightly less attractive person. You judge the second person as less attractive than reality because of the attractiveness of the first person. This is an example of a negative contrast effect.
  • Sales: An estate agent takes you to see a couple of terrible properties before taking you to see the one he intends to sell. You’re more likely to buy the last one because of the damp, mould and structural faults in the first two properties. This is an example of a positive contrast effect.
  • Temperatures: In a classic experiment, you put one hand in cold water and one hand in hot water, and then you transfer both hands to a bowl of lukewarm water. The hand that came from cold water now feels like it’s in hot water. This could be construed as a negative or positive contrast effect, depending on your preference.

Using the Contrast Effect to Your Advantage

“Never! I wouldn’t fall into these traps!” I hear you say. But don’t take my word for it. Most of these examples are backed by scientific research.

That doesn’t mean they are inevitable, of course, but it does mean we should pay the idea due respect. Why? Because when we embrace the contrast effect, we can flip the potential negative impact on its head.

I boil this approach down to three simple principles.

#1: Buy the cheap stuff first

I’m not a salesman, but the pattern is pretty straightforward: Make the customer think they’ve got a great deal, and then hit them with the add-ons. This is why many people secure a “great deal” for a new car and then proceed to add alloy wheels, leather interior upgrades, and advanced stereo systems. It’s why department stores and supermarkets stick the expensive stuff at the front of the store and then hit us with cheaper add-ons as we approach the till.

Things seem cheaper when they follow the more expensive. The best thing for our wallets, therefore, is to flip this psychology from positive contrast effect to negative contrast effect. We can do this by recognising that the reverse is also true: things seem more expensive when they follow the cheaper.

Putting this switch into action means shopping the cheap stuff first. In effect, this takes an innate financial vulnerability and turns it into a long-term advantage for your savings. It’s not a silver bullet, but instead of overpaying, it provides an additional force to challenge, negotiate and even question the need.

#2: Do the hard stuff first

In 2001, Brian Tracy released a book called Eat That Frog (UK, US). Its premise was clear: we should get the important – and often the most difficult – tasks out of the way first thing in the morning. This then gives us motivation and momentum to go on and tackle other important tasks, lifting overall productivity.

What’s interesting about this get-it-done principle is it’s highly effective at any time of day and in any place. Not because, well, we’re getting it done, but because its food for the contrast effect. It’s why after the most difficult part of my running routine, zero-incline running felt like a breeze.

Granted, this may sound obvious, but the contrast effect provides weight to a simple productivity hack: tackle your day in order of difficulty. Do the hard stuff first, and the less hard will feel easier. It’s a positive contrast effect that can have overwhelming positive effects on output.

#3: Beware of big-ticket tricks

While going cheap and difficult first might be effective for our personal finances and productivity on a day-to-day level, we should take caution with the big-ticket items. As I already suggested, an estate agent might first take us to the cheap and difficult options, exploiting a positive contrast effect when he eventually takes us to the “real deal”. This is something Robert Cialdini observed when working undercover with estate agents for his book Influence (UK, US).

Similarly, investors can fall into the contrast trap. Research published in 2018 found that “investors mistakenly perceive earnings news today as more impressive if yesterday’s earnings surprise was bad, and less impressive if yesterday’s surprise was good.”

When it comes to big-ticket items, we need to be acutely aware of the risk that the contrast effect can present to our finances and wider lives. Awareness of the signs of the contrast effect in action could be the force that stops it from wielding its axe over these things.

Running Uphill

The next time I’m on the treadmill, I warm up and get straight to the hard stuff. An uphill, relentless climb eventually comes to an end once more. The positive contrast effect of zero incline kicks in. It’s getting easier. I’m getting healthier. And contrast is playing its part.

Confronting the difficult head on never feels easy, but what follows almost always feels easier. This is where we can take most advantage of contrast. It’s where contrast can make us healthier, happier and richer. In short, it’s why uphill battles are sometimes a good place to begin.

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