I can see how people would forget to include them (2nd order thinking is hard!). But how would they underestimate the effects when there is t really a clear way to accurately quantify them?
It makes a big difference if word of mouth was 1% increased versus 20%.
(And then there are 3rd order psychological effects - people tend to increase their perception of how valuable something is when they pay more. that’s kind of the BMW strategy!)
What we’re left with is a world where we make decisions on easy measurements. That does not necessarily mean including 2nd order effects would change the calculus. And if you’re doing 2nd order, how can you make smart business decisions that aren’t just your gut?
Human psychology is really complex, situationally dependent, and cannot be generalized from our own experience. That’s why companies rely on data, even if it’s incomplete.
It makes a big difference if word of mouth was 1% increased versus 20%.
(And then there are 3rd order psychological effects - people tend to increase their perception of how valuable something is when they pay more. that’s kind of the BMW strategy!)
What we’re left with is a world where we make decisions on easy measurements. That does not necessarily mean including 2nd order effects would change the calculus. And if you’re doing 2nd order, how can you make smart business decisions that aren’t just your gut?
Human psychology is really complex, situationally dependent, and cannot be generalized from our own experience. That’s why companies rely on data, even if it’s incomplete.