DollarSense
Finance Literacy Workshop

Learn the essentials of budgeting, saving, and investing by applying behavioral economics to understand the psychology behind your financial choices.

What You’ll Learn and Join Us!

✓ Understanding credit & your credit score
✓ Saving, interest, and smart spending habits
✓ The basics of investing (stocks, bonds, risk)
✓ The Psychology of Money: Why we make the financial choices we do
✓ Building a budget that actually works for you
✓ Financial tips for immigrant and first-gen studentsRegister via email (free); Zoom links sent 72 hours before the session

Resources and Contact

Email: [email protected]

• DollarSense Slide Deck: Link

• Quiz: Link

Please read the blogs before answering the quiz

The Meme Stock Mania and the Mind: What GameStop and AMC Taught Us About Herd Mentality

The period between late 2020 and early 2021 was a defining moment in the history of finance, and it wasn’t driven by Wall Street titans. It was driven by retail investors on social media platforms like Reddit. The meteoric rise of stocks like GameStop (GME) and AMC Entertainment (AMC) wasn't just a market anomaly; it was a real-time, global case study in behavioral economics. At the heart of this phenomenon was herd mentality, a bias that saw millions of individuals acting collectively, often against traditional financial logic, to create a market force that no one saw coming.Herd behavior is an ancient survival instinct, but in the digital age, it was amplified to an unprecedented degree. The internet provided a space for a decentralized "herd" to form and coordinate. On forums like r/wallstreetbets, a collective identity was forged. Members weren't just investors; they were part of a movement. This sense of shared purpose and identity made them more susceptible to social influences. The fear of missing out (FOMO) became a primary motivator. As more people posted about their gains, others felt an intense psychological pressure to join in, lest they be left behind. This created a powerful feedback loop. A rising stock price attracted more buyers, which pushed the price even higher, attracting an even larger group of investors. This positive reinforcement, or social proof, drowned out any rational analysis of the underlying companies' fundamentals. GameStop, for example, was a struggling brick-and-mortar retailer, but that didn't matter. The value of the stock became disconnected from the value of the business, driven instead by collective belief and emotion.Beyond simple herd mentality, this period also showcased collective cognitive dissonance. The hedge funds who were shorting these stocks were operating on a rational, data-driven model. They believed these companies were overvalued and destined for failure. The retail investors, on the other hand, were driven by a completely different set of motivations, including a desire for revenge against what they saw as predatory institutional investors. They held two conflicting beliefs: that the company’s fundamentals were poor, but that the collective power of their group would force the stock up. To resolve this conflict, they latched onto the idea that they were participating in a historic market revolution, and that their actions were a form of righteous rebellion. This allowed them to hold their positions, even as volatility made their investments incredibly risky. For regulators, this was a wake-up call. The meme stock saga proved that in the age of instant communication, market dynamics could be shaped not just by economic data, but by human psychology and a collective sense of purpose.

The Gamification of Investing: How Apps Are Turning Trading into a Game

Over the last five years, a new wave of fintech platforms has transformed how people interact with the stock market. Apps like Robinhood made investing accessible by eliminating commissions, but they also introduced a more subtle and powerful change: the gamification of investing. This wasn't an accident. It was a deliberate strategy rooted in behavioral science to make a serious, long-term activity feel more like a video game, with significant consequences for how people make financial decisions.The design of these apps is a series of behavioral nudges. The celebratory confetti that rains down after a trade, the colorful, simple interface, and the ease of execution all work together to create an environment that encourages frequent trading. This taps directly into our brains' reward systems. Each successful trade, no matter how small, provides a dopamine hit, reinforcing the behavior. The app's design is a form of operant conditioning, where the action of trading is paired with a positive reward, making us more likely to repeat it. This contrasts sharply with traditional investing, which emphasizes a long-term, buy-and-hold strategy, a concept that is far less emotionally satisfying.This gamified approach also makes investors more susceptible to classic psychological traps. The instant feedback and ease of trading can lead to overtrading, where investors make too many transactions. Overtrading is often a net negative, as frequent buying and selling can eat into returns. The design also encourages a dangerous form of anchoring bias. Instead of focusing on a company's long-term value, investors can become fixated on the price at which they bought a stock. When the price falls, they may feel compelled to hold a losing position because they're "anchored" to the original purchase price. This is a classic symptom of the sunk cost fallacy, where past losses influence future decisions. We saw this play out during market downturns from 2022 to 2023. Many investors, fueled by the feeling of a game they couldn't lose, were left with significant losses because the very app features that made investing fun also encouraged them to make irrational choices. The gamification model, while making investing more accessible, also made it more vulnerable to human psychology.

The Allure of NFTs: The Sunk Cost Fallacy and the Art of the Digital Bubble

The period from late 2020 through 2022 was defined by the spectacular rise of Non-Fungible Tokens, or NFTs. What began as a niche technological curiosity evolved into a multi-billion dollar speculative frenzy, with digital images of cartoon apes and pixelated characters selling for millions. The NFT market was not just a financial phenomenon; it was a real-world, high-stakes case study in human psychology. At its core, the rise and fall of the NFT market was a masterclass in how behavioral biases like the sunk cost fallacy and scarcity bias can create a speculative bubble of immense proportions.The sunk cost fallacy was arguably the most destructive force at play for many investors. A prime example of this was the Bored Ape Yacht Club (BAYC). In 2021 and early 2022, the floor price of a single Bored Ape NFT surged to hundreds of thousands of dollars. People, including celebrities like Jimmy Fallon and Paris Hilton, spent a fortune to acquire these digital assets. However, as the broader crypto market entered a downturn in mid-2022, the value of these NFTs plummeted. Many collectors who had paid hundreds of thousands for a single JPEG watched its value drop by over 80%. A rational investor would assess the asset's current value and its future prospects, and if those prospects were poor, they would cut their losses and sell. But human psychology is rarely rational.Many NFT holders, especially those who had spent a significant portion of their net worth on a digital image, couldn't bring themselves to sell. The pain of realizing a loss of that magnitude was psychologically unbearable. To avoid that pain, they would fall back on classic justifications. They’d post on social media about "HODLing" (Hold On for Dear Life) and having "diamond hands," a way of signaling to themselves and others that they were committed, even in the face of immense loss. They were fixated on the initial, high price they had paid (the sunk cost), not the asset's current market value. The psychological pain of admitting that they had been wrong, or had been fooled, was greater than the financial pain of watching their investment dwindle to almost nothing. This is the sunk cost fallacy in its purest form, and it left a generation of investors holding onto assets that were, in many cases, virtually worthless.Furthermore, the NFT market was expertly engineered to exploit our desire for exclusivity and belonging. The concept of scarcity bias was a central pillar of the NFT boom. Projects like CryptoPunks and Bored Apes sold themselves on the idea that they were a limited series, a scarce resource in an otherwise infinite digital world. The promise of belonging to an exclusive community, often accompanied by real-world benefits like exclusive parties or merchandise, was incredibly powerful. The high price tag itself became a filter, creating a sense of elite status for those who could afford to "mint" or purchase one. When the market was hot, seeing a celebrity with a Bored Ape as their profile picture on Twitter served as a form of powerful social proof, a signal that this was a legitimate and valuable trend. People weren't just buying an image; they were buying an identity, a community, and a piece of perceived digital status. When the bubble burst, not only did the financial value disappear, but so did the perceived exclusivity and community, leaving many with nothing but a digital image and a lot of regret. The NFT saga serves as a perfect example of how our emotional desires for status and belonging can be leveraged to create a speculative bubble that operates entirely outside the boundaries of rational financial decision-making.