Pavlovian Conditioning, Operant Conditioning & Coca- Cola
I recently bought Poor Charlie’s Almanack, which is a review of Charlie Munger life. The book is structure similarly as Poor Richard’s Almanack by Ben Franklin. For those interested in the understanding Charlie’s multidisciplinary approach, I highly recommend to buy a copy.
In the book, there is a speech given in July 20, 1996. The name of the speech was Practical Thought about Practical Thought? This speech is a great example of what is Charlie approach about. It gives a clear example of how to think of Coke as a great investment assuming you were in 1884. Even though he gives various examples of multidisciplinary approach I will discuss just one of them “Pavlovian Conditioning” and how it relates to Coke.
For those not familiar with Conditioned reflexes, let me briefly explain what Pavlov did.
Pavlov's experiment & Conditional Reflexes
“The most famous example of classical conditioning involved the salivary conditioning of Pavlov's dogs. Pavlov's dogs naturally salivated to food. Pavlov therefore called the one-to-one correlation between the unconditioned stimulus (food) and the unconditioned response (salivation) an unconditional reflex. If a tone (generated by a tuning fork, for example) was reliably sounded for a few seconds before food, however, the tone eventually came to elicit salivation even when the tone was presented alone. Because the one-to-one correlation between the conditioned stimulus (tone) and the conditioned response (salivation) involved learning, Pavlov referred to this relationship as a "conditional reflex". The conditional reflex (food-related behavior elicited by a stimulus that has been reliably paired with food) is said to be developed through classical conditioning.
The origins of the two reflexes are different. The food (unconditional stimulus) causing salivation (unconditional response) reflex has its origins in the evolution of the species. The tone (conditional stimulus) causing salivation (conditional response) reflex has its origins in the experience of the individual organism.” (Source: Wikipedia)
Operant Conditioning
According to Wikipedia “Operant conditioning, also called "instrumental conditioning", involves the modification of behavior due to the consequences of behavior. When a response or act is followed by a reinforcing consequence, the future probability of the response increases. When a response or act is followed by a punishing consequence, the future probability of the response decreases. Operant conditioning is generally associated with B.F. Skinner (1938, 1953, 1957). During reinforcement and punishment, the behavior of an organism is changed by the experience of the coincidence of the response and consequence (some would say the contingency between the response and consequence). The organism (or the response) is thus said to have been conditioned.
A typical example of operant conditioning in the laboratory would be a comparison of the response rates of rats under two conditions. In the first, rats are allowed to press a lever with no programmed consequence. In the second, rats are allowed to press a lever with the result that each lever press is immediately followed by giving the rat a small portion of food. Generally, the rate of lever pressing is higher in the second condition. It is then said that lever pressing was reinforced by the presentation of food, or that the response-contingent presentation of food strengthen lever pressing.”
Basically, you create stimuli and you will have a desire response.
Back to Charlie, he challenge us to describe to a Venture Capitalist how to make a $2trillion Dll business from 1884 to 2034, and we have 15 minutes to describe our plan how to achieve this out with basic knowledge of freshman courses (assuming 1996 knowledge) but back in 1884, and assuming we do not nothing about what happened in the future (Got it!).
He first asked us to start any solution to a problem by simplifying “no brainer” decision. The first one is that in order to achieve a $2 trillion business we must rely on a strong trademark. This will lead us to understanding the essence of the business in academic terms. In psychology 101, we are going into a business of creating and maintaining conditioned reflexes. “The Coca- Cola trade name and trade dress will act as the stimuli, and the purchase and ingestion of our beverage will be the desired responses.”
At first Charlie will use Operant Conditioning from which will try to accomplish two things… “…maximization of rewards of beverage ingestion and minimize possibilities that the desire reflexes (as Pavlov’s Dog) will be eliminated by operant conditioning by proprietors of competing products”.
As we know there are two types of operant conditioning a) with rewards b) with punishment…clearly we want to use rewards such as: Food value in calories, Flavor, texture & aroma, stimulus (sugar & caffeine) Cooling effects, etc.
Munger will go explaining also the effects on publicity… and how it relates to Pavlovian conditioning; he gives an example on “Men’s brain yearns on the type of beverage held by the pretty women he cant have”, this will parallel when the “Dog salivated at the bell it cant it”. Thus, beverage must be associated with in consumer minds with all things customers like or admire.
He goes further to utilize Pavlovian effect in texture, color and flavor… such as making Coca- Cola appear like wine and to have carbonated water to seem like Champagne. With all this we ensure maximization or rewards; but there is a pending question: how does Coca-Cola ensures that these reflexes will not be eliminated by operant conditioning by our competitors? Well, the answer is availability. Coca-Cola must be available everywhere. As he goes to mention: “…a competing product, if it’s never tried, can’t act as a reward creating a conflicting habit”.
Charlie speech really goes into the heart of Worldly Wisdom… drawing several concepts from other disciplines to apply them into our real world. This is the purpose of this blog, that we all share ideas on how to acquire and use Worldly Wisdom.
In the book, there is a speech given in July 20, 1996. The name of the speech was Practical Thought about Practical Thought? This speech is a great example of what is Charlie approach about. It gives a clear example of how to think of Coke as a great investment assuming you were in 1884. Even though he gives various examples of multidisciplinary approach I will discuss just one of them “Pavlovian Conditioning” and how it relates to Coke.
For those not familiar with Conditioned reflexes, let me briefly explain what Pavlov did.
Pavlov's experiment & Conditional Reflexes
“The most famous example of classical conditioning involved the salivary conditioning of Pavlov's dogs. Pavlov's dogs naturally salivated to food. Pavlov therefore called the one-to-one correlation between the unconditioned stimulus (food) and the unconditioned response (salivation) an unconditional reflex. If a tone (generated by a tuning fork, for example) was reliably sounded for a few seconds before food, however, the tone eventually came to elicit salivation even when the tone was presented alone. Because the one-to-one correlation between the conditioned stimulus (tone) and the conditioned response (salivation) involved learning, Pavlov referred to this relationship as a "conditional reflex". The conditional reflex (food-related behavior elicited by a stimulus that has been reliably paired with food) is said to be developed through classical conditioning.
The origins of the two reflexes are different. The food (unconditional stimulus) causing salivation (unconditional response) reflex has its origins in the evolution of the species. The tone (conditional stimulus) causing salivation (conditional response) reflex has its origins in the experience of the individual organism.” (Source: Wikipedia)
Operant Conditioning
According to Wikipedia “Operant conditioning, also called "instrumental conditioning", involves the modification of behavior due to the consequences of behavior. When a response or act is followed by a reinforcing consequence, the future probability of the response increases. When a response or act is followed by a punishing consequence, the future probability of the response decreases. Operant conditioning is generally associated with B.F. Skinner (1938, 1953, 1957). During reinforcement and punishment, the behavior of an organism is changed by the experience of the coincidence of the response and consequence (some would say the contingency between the response and consequence). The organism (or the response) is thus said to have been conditioned.
A typical example of operant conditioning in the laboratory would be a comparison of the response rates of rats under two conditions. In the first, rats are allowed to press a lever with no programmed consequence. In the second, rats are allowed to press a lever with the result that each lever press is immediately followed by giving the rat a small portion of food. Generally, the rate of lever pressing is higher in the second condition. It is then said that lever pressing was reinforced by the presentation of food, or that the response-contingent presentation of food strengthen lever pressing.”
Basically, you create stimuli and you will have a desire response.
Back to Charlie, he challenge us to describe to a Venture Capitalist how to make a $2trillion Dll business from 1884 to 2034, and we have 15 minutes to describe our plan how to achieve this out with basic knowledge of freshman courses (assuming 1996 knowledge) but back in 1884, and assuming we do not nothing about what happened in the future (Got it!).
He first asked us to start any solution to a problem by simplifying “no brainer” decision. The first one is that in order to achieve a $2 trillion business we must rely on a strong trademark. This will lead us to understanding the essence of the business in academic terms. In psychology 101, we are going into a business of creating and maintaining conditioned reflexes. “The Coca- Cola trade name and trade dress will act as the stimuli, and the purchase and ingestion of our beverage will be the desired responses.”
At first Charlie will use Operant Conditioning from which will try to accomplish two things… “…maximization of rewards of beverage ingestion and minimize possibilities that the desire reflexes (as Pavlov’s Dog) will be eliminated by operant conditioning by proprietors of competing products”.
As we know there are two types of operant conditioning a) with rewards b) with punishment…clearly we want to use rewards such as: Food value in calories, Flavor, texture & aroma, stimulus (sugar & caffeine) Cooling effects, etc.
Munger will go explaining also the effects on publicity… and how it relates to Pavlovian conditioning; he gives an example on “Men’s brain yearns on the type of beverage held by the pretty women he cant have”, this will parallel when the “Dog salivated at the bell it cant it”. Thus, beverage must be associated with in consumer minds with all things customers like or admire.
He goes further to utilize Pavlovian effect in texture, color and flavor… such as making Coca- Cola appear like wine and to have carbonated water to seem like Champagne. With all this we ensure maximization or rewards; but there is a pending question: how does Coca-Cola ensures that these reflexes will not be eliminated by operant conditioning by our competitors? Well, the answer is availability. Coca-Cola must be available everywhere. As he goes to mention: “…a competing product, if it’s never tried, can’t act as a reward creating a conflicting habit”.
Charlie speech really goes into the heart of Worldly Wisdom… drawing several concepts from other disciplines to apply them into our real world. This is the purpose of this blog, that we all share ideas on how to acquire and use Worldly Wisdom.
posted by Average Joe at 11:55 AM
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