Book of the Week: Predictably Irrational
09 Mar 2013
Dan Ariely’s Predictably Irrational explores the behavioral psychology behind why humans make irrational decisions. Each chapter is a self contained nugget of information, so here are some summaries/thoughts I had about each chapter. Chapter 1 The Truth about Relativity(Why everything is relative, even when it shouldn’t be) People’s perceptions and decision are made by comparisons. Your new iPhone is awesome when it comes out, but when a newer iPhone comes out, it no longer is as awesome even though it is the same phone. A person can be making a lot of money, but if they are making less money than their peers, then they are not as happy. Taking a step back and appreciating what we have will make us happier. Chapter 2 The Fallacy of Supply and Demand(Why the price of pearls and everything else is up in the air) Once people have an anchor, the decisions they make will be compared to the anchor. Subsequent decisions are made with the anchor in mind. To avoid failing victim to this, you need to revaluate old decisions to see if they are still valid. One thing would be reevaluating your current job. Chapter 3 The Cost of Zero Cost(Why we often pay too much when we pay nothing) People would do things for free stuff that they wouldn’t do for things that cost 1 cent. Free is in a category of its own for pricing. We don’t take into account other opportunity costs when factoring for free things. Chapter 4 The Cost of Social Norms (Why we are happy to do things, but not when we are paid to do them) People are more willing to volunteer their time for free than at a reduced rate. Need to appeal to values to truly motivate people.
Money is the most expensive way to motivate people. - Dan Ariely, Predictably Irrational
Chapter 5 The Influence of Arousal (Why hot is much hotter than we realize) Emotions can take control our of behavior and cause use to do things that we normally wouldn’t do. Need to remember condom before getting aroused. I wonder how this section of the book compares to Fifty Shades of Grey. Chapter 6 The Problem of Procrastination and Self-Control (Why we can’t make ourselves do what we want to do) People procrastinate. Deadlines are needed to get people to do things. More specifically deadlines imposed by other people. Chapter 7 The High Price of Ownership (Why we overvalue what we have) Once people own something they don’t want to give it up. They value what they have more. This reminds me a bit of synthesizing happiness. Chapter 8 Keeping Doors Open (Why options distract us from our main objective) People hate closing doors, because they want to keep their options open. This prevents them from achieving their goals. If you want to start a company, you need to jump all in. The more similar things are, the more time we waste on the decision. If they are so similar then it really doesn’t matter which choice you make. Chapter 9 The Effect of Expectation (Why the mind gets what it expects) We perceive what we expect to see and that perception is our reality. Chapter 10 The Power of Price (Why a 50-cent aspirin can do what a penny aspirin can’t) Placebo effect. Chapter 11 The Context of Our Character, Part I (Why we are dishonest, and what we can do about it) People are dishonest until you remind them of honesty. Honor codes work. Chapter 12 The Context of Our Character, Part II (Why dealing with cash makes us honest) People are more likely to be dishonest with things that aren’t cash. Chapter 13 Beer and Free Lunches (What is behavioral economics, and where are the free lunches?) People’s choices are influence by the choices of others that may steer them into less happy situations. It is good to know about irrational behavior, so I can either take advantage of it or design around it. Purchase Predictably Irrational on Amazon.com or check it out from your local library.