The Reluctant Zero-Sum Consumer

What distinguishes humans from the rest of the animal kingdom?

Among many possible answers to this question, there is one characteristic that pervades human societies, and that is almost entirely absent among even the most evolved and complex animals. It has been instrumental to human evolution, to prosperity and innovation, to technology and arts. This prominent feature is none other than the positive-sum transaction.

Among our distant hunter-gatherer ancestors, some will have been better at fishing, others better at setting traps to catch rabbits. One day, they would have realized that having one’s diet entirely determined by what one is good at providing does get a little boring, and one of them suggested exchanging a fish for a rabbit. Someone with plenty of rabbits would have put more value on a fish than on a rabbit; mutatis mutandis, the opposite would have been true for a person with more fish than they could eat. A positive-sum swap would leave both of them better off.

And the rest, as they say, is history. Hundreds of millions of positive-sum transactions take place every day – from the purchase of gas and electricity or a cup of coffee, to a Netflix subscription or a haircut. Yet, something seems to be amiss.

In a recent paper, Samuel Johnson, a psychologist at Warwick University in the UK and colleagues document and investigate a remarkable, and somewhat worrying phenomenon. Instead of being ecstatic with how much better off we are every time we buy something, many people see purchases as a zero-sum transaction: the seller wins, and they, the buyer, lose out. On the basis of a range of experiments in which participants imagine buying items like shirts, cars and olive oil, and the services of plumbers and hairdressers, the researchers conclude this is mainly because we consumers are, deep inside, mercantilists. We treat money as the principal seat of wealth. If we buy something, we end up with less of it, and the seller with more, so they win, and we lose.

While this obviously does not entirely stop people from buying goods and services, it certainly fuels consumers’ perception that they are being exploited. For financial institutions, this win-win denial attitude poses a challenge that looks even more complex than for retailers. Most account holders don’t pay directly for the services banks provide, but they were of course not born yesterday, and they do realize that banks get their income from the difference in interest between what they charge borrowers and what they pay depositors.

So, whenever a bank seeks to encourage its customers to do anything – say, open a new type of savings account, or move some low-interest savings into an investment product – they will be suspicious. They will need little convincing that it will be to the bank’s advantage, but their mercantilist intuition tells them that it will be to their detriment.

Does that mean it is inevitable that huge amounts of money will forever more sit languishing in current accounts, returning next to nothing to the account holder? Thankfully there are some ways banks can engage more effectively with banking customers, based on understanding the reasons why they might think they are coming off worse.

For a start, in contrast with retailers who by definition take their customers’ money, banks actually give their depositors money. Framing the options that a customer has in terms of the money they might gain (compared with the status quo) – especially when it concerns longer-term investments, but also in the short term – should play to the perception that money equates to wealth.


Consumers may also feel they are worse off because they no longer value their purchase at the price they paid for it: their preferences at the time of purchase were different from what they are now.


That lilac shirt may have looked good back then, but it’s way too brash now – yet the money’s still gone and it’s too late to take it back. Changing preferences can play a role in financial decisions, too. Risk profiles, the purpose for saving, the need for liquidity and so on, they all evolve over time. In comparison with retailers, however, banks are able to more easily explore customers’ preferences, and understand the aims and motives that underlie them. That makes it possible to offer products that are optimally suited to their requirements. Better still: unlike the shirt shop, a financial institution can very well offer flexibility in savings and investments. Even if preferences evolve more quickly than anticipated, there are always options to satisfy a changed mind.

Another source of suspicion for a consumer is information asymmetry: the seller knows much more about the nature and the quality of the product than they do, and can sell them a pig in a poke. That suspicion may well arise in finance, too. Many customers are unsophisticated and have, at best, a superficial understanding of different categories of savings and investment – much in the same way as they know little about the thread and the stitching in a shirt. But for a bank it is a lot easier to provide a clear, transparent explanation of the costs involved in a particular account or investment, and the benefits to the account holder. This can restore the perception of a fair division of benefits, and of the notion of a win-win, positive sum relationship.

These approaches – emphasizing the financial benefits of the possible choices (including “do nothing”), ensuring that the chosen option meets the customer’s complex requirements, being responsive to changing customer preferences, and providing transparent costs and benefits information – are perhaps not really new in themselves. But, when they are seen in the light of the profound and widespread win-win denial attitude, they come to life and go beyond standard marketing speak. They become instruments that directly address the concerns of the reluctant consumer, and restore their faith in positive-sum economics.

And in doing so, financial institutions have one unfair advantage compared to retailers: their relationship with their customers is all about money.