Signaling

Source: FS.blog, Nov 2019

Signaling is the act of conveying information about ourselves to people in a way that is costly for us and therefore believable. Without the associated cost of sending a signal, we would not be able to trust the information being sent. For instance, if it’s easy to signal that we are amazing without actually being amazing, then the signal would be comparatively worthless and no one would pay attention to it. Thus, effective signals take up a lot of time and energy, but are essential as a means of communication because the information they convey is trustworthy.

By understanding signaling, we can get better at efficiently conveying the information we want others to pick up on. We can assess if what we’re signaling is really worth the effort. We can learn to better detect what other people are indicating to us—and if it’s genuine or just a show.

Honest and Dishonest Signaling

We use signals because they are costly and therefore more believable than straightforward information. But that doesn’t mean all signals are “true”—they can be categorized as honest or dishonest. An honest signal means the signaler possesses the trait they claim. A dishonest one means they don’t. If a signal is easy to fake, it degrades the value of the trait it advertises. A picture of someone in a fancy car used to signal wealth. Now that we’ve all heard of people hiring expensive cars for a photo op, it just looks sleazy without other signals indicating they own it.

Countersignaling

“An effective use of countersignaling requires finesse. Most importantly, the countersignaller must already hold some independent air of mystique.” — Tyler Cowen, Discover Your Inner Economist

A multibillionaire casually admits to eating at McDonald’s for breakfast every day. A powerful CEO shows up at the office in jeans and a hoodie. A middle-class mother sends her child to school in a pajama shirt with unbrushed hair. A New York Times bestselling author says, “Oh, I write books,” when asked what they do at a dinner party. A supermodel posts a candid picture without makeup or filters online.

These are all examples of countersignaling; the act of signaling something by not signaling that thing.

The essence of countersignaling is that those who do it feel no need to signal. The value of countersignaling is that it frees up time, energy and resources. Signaling correctly is an endless, exhausting process where one slip-up can undo previous efforts. Countersignaling is the easier option because it doesn’t involve an active effort. We are most likely to countersignal when a given trait is obvious to any observer.

When we countersignal, we don’t feel insecure or embarrassed about it because we’re in control.

Conspicuous Consumption

“Invention is the mother of necessity.” ― Thorstein Veblen

Conspicuous consumption is the practice of choosing to purchase goods and services for their capacity to signal wealth and thereby excite respect or envy in others, rather than for their practical value.

Economist and sociologist Thorstein Veblen debuted the concept in his 1899 book The Theory of the Leisure Class. Veblen noticed that the wealthiest people in society were eager to outright waste their money on useless purchases, purely for the status this would signal. Having the capacity to squander time and money was the ultimate signal of wealth during Veblen’s time, following the Industrial Revolution.

The newly created leisure class suddenly had unprecedented wealth and opportunities for demonstrating it. Prior to the Industrial Revolution, conspicuous consumption was purely the domain of the very rich.

Afterward, it was open to almost everyone and became a key part of the way we consume—with the need to signal becoming more important than utility in most of our purchases.

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