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September 15, 2012

Business and Superstitions

Superstitions like these are widely prevalent in all spheres of life. Cricketers are especially known to be a very superstitious lot.  Sachin Tendulkar always wears his left pad first. Steve Waugh used to carry a red handkerchief given to him by his grandfather in his left pocket.
 Businessmen are also extremely superstitious. And among businessmen, Hindi film producers take the cake. Rakesh Roshan has always had the names of his movies starting with the letter K. Be it Kaho Na Pyar Hai which released in 2000 and made his son Hrithik Roshan a superstar or his latest production Kites, which turned out to be a massive flop.

Like Roshan, Karan Johar of Dharma Productions, also developed a 'K' fixation, after his first film Kuch Kuch Hota Hai became a huge hit. He has since given up on that and his last directorial venture was called My Name is Khan.

 Apart from Hindi films, stock market investors are also an extremely superstitious lot.  Stock market investors in various parts of the world do not like eclipses. Copenhagen Business School's Gabriele Lepori examined 362 eclipses visible anywhere in the world between 1928 and 2008 — seen by the superstitious as bad omens — and matched them against four American stock indices and  discovered a small but persistent set of effects: eclipses correlate with lower-than-average stock returns.

Businessmen also have personal superstitions. Indian businessmen are known to make visits to Tirupati (or other big temples) before they do a big deal. Then there is also the aversion of 'big business' to have anything connected with number 13. 'Some 80 percent of high-rise buildings around the world lack a 13th floor, airports a 13th gate, and planes a 13th aisle...Larry Ellison tweeted to his entourage that there may not be an Oracle version 13'.

Superstition also impacts company revenues. Take the case of the Shradh period in India, during which it is considered inauspicious to make new purchases. So the sales of consumer durables like televisions, refrigerators, washing machines etc, as well as car sales, go down. Companies have to woo buyers by offering discounts. Similarly, in the United States, 'paraskevidekatriaphobia' or the fear of Friday the 13th pulls down sales by a billion dollars because people don't like to buy new stuff on that day.

Experts are of the opinion that marriage insurance in India hasn't taken off due to superstition. The logic being, if I insure the wedding, something bad is going to happen.

While superstition does impact revenues, companies can use superstition to create new business opportunities as well. Take the case of diamond engagement rings. Over the years, a superstition has developed that these rings need to be worth at least 'two months' salary'.

As Gary Belsky and Thomas Gilovich write in Why Smart People Make Big Money Mistakes and How to Correct, 'It's a completely ridiculous figure — a ring should cost no more than you can afford...Diamond merchants, you see, understand that by leading people to start with a dollar figure equal to two months' salary, they almost certainly guarantee more money for their industry. Why's that? Because people who might have spent less for a ring will have been programmed to think that two months' pay is the point below which they are cheapskates (and what man wants his fiancee to think that?)'.

The other superstition (some would say tradition) about an engagement ring is that it has to be worn on the left hand. 'De Beers has recently begun advertising diamond rings for single professional women, by trying to introduce a new social convention: whereas traditional engagement rings are for the left hand, these single-woman rings are 'right-hand rings', there are many wealthy women who are not engaged, and who might nonetheless like a diamond ring', says Geoffrey Miller, a professor of evolutionary psychology as well as the author of Spent - Sex, Evolution, And Consumer Behaviour.

Jennifer Wang in the article titled Turn Superstition into Marketing Gold, written for, quotes Lauren Block, a professor of marketing. 'Block referred to a study in which Taiwanese consumers often paid more for a package of three tennis balls than four, because the number four is considered ill-omened. In Mandarin Chinese, the pronunciation of 'four' is similar to that of 'dead'.'

But why are businesses and businessmen so superstitious? Wang quotes Stuart Vyse, a professor of psychology, to explain: 'In the business world, there is a tremendous amount of randomness in the market and people seek ways to gain control over these events, even though they can't...What you wear that day, the coffee that you drink —these things can't affect the outcome of the day's business, but people engage in this (behaviour) to feel like they've done every possible thing to manage the outcome'.
Source: Businessmen and superstition written by

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