Predictably Irrational: The Hidden Forces That Shape Our Decisions | Dan Ariely

Predictably Irrational: The Hidden Forces That Shape Our Decisions | Dan Ariely | Delightful

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Predictably Irrati...

	Predictably Irrational: The Hidden Forces That Shape Our Decisions Dan Ariely HarperCollins, 2008 - 304 pages average customer review:based on 85 reviews view larger image
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highly recommended

Almost Did Not Buy, Reviews Too Negative--This Was Worth My Time

I almost did not buy this book as I sought to explore the new literature on behavioral and cognitive science. The negative review are too negative. You get from this book what you bring to it in open mindedness, in my opinion.

My truth-teller, off-setting the reality that this is a double-spaced book that inflates 120 pages of thought into 240 pages of easy to digest presentation, is the author's unique provision in the end-notes of both direct references to seminal works that each chapter is based on, with additional references suggested, AND his recognition of 17 collaborators, each with a long paragraph of biographic information. This is in short a worthy work, it was worthy of my time, and I do not agree with those who are dismissive or cavalier about this book.

As with Nudge: Improving Decisions About Health, Wealth, and Happiness and other works of this ilk, they seem to be blessed with an immaculate conception that fails to recognize the work of the 1960's and 1970's (e.g. Herbert Simon, "satisficing," but I no longer mark this down--this is a new generation thinking new thoughts, and I have decided it is too much to expect them to go back more than 20 years.

The opening of the book is impressive. The author was burned on 70% of his body by a magnesium flare, and his probing of his own pain and how the nurse's had settled on fast painful ripping off of the bandages (with no medication.

Key point early in the book: most people don't know what they want until they see it in context. This is one reason I am planning an edited work in 2009 on Cultural Intelligence. As Howard Bloom teaches us in Global Brain: The Evolution of Mass Mind from the Big Bang to the 21st Century, we (and our policy makers) know nothing of "the other," and I have concluded that peace starts in kindergarten and we have to separate the Israelis and the Palestians, and literally baby sit two new generations from birth to the age of 35.

The rest of the book is easy to read, has excellent real-world examples, and each chapter generally ends with a short appendix with real results. This is not a fluff book, it is a serious book that the light reader will mistake for fluff.

+ Relatively and "bracketing" matter (sell what you want by bracketing it with a more expensive option above and a trashy cheap thing below)

+ Decoys matter (e.g. a middle option that makes the "combined option" a "no brainer")

+ Publishing salaries actually sets off ego wars at the top and churn at the bottom that leads to more turnover and more wasteful employees costs.

+ Imprinting is used by the author to explain "anchoring" (e.g. black pearls anchored in setting of most expensive diamonds, this is an example of how the SELLER is setting the price, not the buyer).

+ "Free" is never really free. It can blind rational choice and it can "cost" time, choice, and a higher value that is obscured (e.g. my cotton socks disintegrate within months, whereas the cotton socks I inherited from an earlier era are still lasting forever).

+ HOWEVER, I especially liked the way the author explored "free" as a device for policy furtherance, e.g. make vehicle registration "free" if you own a hybrid car.

+ Social versus market norms are discussed. The author does not discuss Open Money (see my comment for a link to my keytone at Gnomedex) or Yochai Benckler's [[ASIN:0300125771 The Wealth of Networks: How Social Production Transforms Markets and Freedom].

+ I especially like the way the author discussed how the poorly-paid border patrol and coast guard employees have made their own peace with the drug dealers--they have the same understanding the CIA clandestine service has with the KGB and local counter-intelligence services: we do not kill, kidnap, or even embarrass each other, we all just present to bedoing our job and the only people fooled are Congress and the taxpayers. Similar, the drug dealers understand that if they do not shoot to kill, neither will we....

+ One chapter offers a fascinating study on the impact of sexual arousal (a marker for passion). This quote from page 97 is priceless:

"Prevention, protection, conservatism, and morality disappeared completely from the radar screen. They were simply unable to predict the degree to which passion would change them."

+ The author discusses Smart Cards and their ability to impose a restraining influence with emails, I urge one and all to dump their existing ursurous cards and turn to Interra and other similar community-based cards with high social value.

+ We over-value what we own or possess. (I would add, we also over-value credentialing and under-estimate how painfol our rote school system is, which kills creativity by the seventh grade in some of our brightest kids.)

+ Stereotypes influence behavior on both sides of the viewpoint.

+ Placebo effect is real, something the American Medical Association absolutely does not want you to know (see also Alternative Cures: The Most Effective Natural Home Remedies for 160 Health Problems among many excellent works in this area.

+ Options can confuse and divert.

+ There is a pricing effect (very high priced menu item drives folks toward the second most expensive, which they would not have chosen absent the "higher" bracket item)

+ Character costs. USA loses $525 million a year to robberies, and $600 BILLION a year to employee theft (this does not count procrastination and government issues, such as every second IRS employee a complete loser while the others do twice the work).

+ Harvard MBA students participated in a series of tests that conclusively demonstrated that people will cheat if given an opportunity to do so; they will cheat twice as much with "in kind" versus cash opportunities, but they will not cheat "wildly" even if assured of not being caught. See also The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead

+ Religion DOES have a good moral effect, as do honor codes and reminding people of the Ten Commandments from time to time. See Founding Faith: Providence, Politics, and the Birth of Religious Freedom in America for the Founding Father's deliberate mix of securlar tolerant government with a desire for a strong religious aspect to community for precisely this reason.

I can see how some might feel this book is less than they were expecting, but I do not agree. This book may be well-marketed and not the deep social science research that some buyers might have been hoping for, but I for one find it completely satisfactory and well worth my time. The author's crediting of 17 collaborators, and the unique goodness of the end-notes carry the day with me.

See also
The World Cafe: Shaping Our Futures Through Conversations That Matter
Society's Breakthrough!: Releasing Essential Wisdom and Virtue in All the People
Building a Knowledge-Driven Organization
Collective Intelligence: Creating a Prosperous World at Peace

My earlier lists (the first ten or so out of 70) focus on strategy, intelligence, information, and offer many other pointers to useful books somewhat related to the larger universe of cognitive science and decision support.

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Delightful

In this delightful exercise into the human mind, Professor Ariely seeks to answer the question which has bedevilled philosophers and social scientists forever: why do we act irrationally?

Using experiments, frequently utilizing MIT and Harvard students as guinea pigs, Professor Ariely shows the human mind at work. The process of coming up with a hypothesis, testing it, and then the followup experienments reads like a fun mini novel each time: complete with climax, and a few after thoughts.

Experiments showing how merely thinking of the Ten Commandments increases honesty, or mulling the word "elderly" slows one down are fascinating, both as cocktail party conversation starters, as as self-help nuggets.

Highly recommended.

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watch out

Though I have yet to finish the book I'm a believer. This is a brilliant work, in terms of the underlying technology as well as the writing style itself. A must read.

The imperfections of the human mind laid bare

As a student in university, Dan Ariely had a professor who would encourage him to propose theories and then to devise experiments that would be able to identify the veracity of his theories. As such, he has approached psychology with the rigor of an experimental scientist, and the resume of his experiences is this enjoyable book that documents several of the fallacies of the human brain. Dan Ariely's main thesis is that people don't always act the way they do for rational reasons, and then goes to show how in a dozen series of experiements.

The experiments range from analytic mistakes (why do people overvalue free goods as opposed to 1-penny goods?) to the power of suggestion (does thinking about the Ten Commandments reduce the incidence of cheating?), and most of us will recognize mistakes we ourselves make on a daily basis. He also exposes fundamental truths that go against traditional economics, such as why we will do things for free in social contexts that we would charge exorbitant amounts for under market situations.

The book is well-written and, at under 250 pages, it's a breeze to read. If Ariely has one weakness, it's when he recommends solutions to the behaviors he seems, which mostly seem to involve government. One of his biggest whoppers: "If you accept the premise that market forces and free markets will not always regulate the market for the best, then you may find yourself among those who believe that the government (we hope a reasonable and thoughtful government) must play a larger role in regulating some market activities, even if this limits free enterprise." Ariely himself finds the flaw in his prescription, yet still recommends it!

Predictably Irrational can be enjoyed by almost anyone; it's not so much economics as sociology and psychology, and requires no real background in any of these fields. Ariely is a thoughtful analyst of the human condition, and rarely will a book be able to discuss masturbating college students, the healing power of European kings and British negotiations with the IRA with a common thread.

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partial review

I am just starting the book. Chapter one is ok. Good approach to what the author names relativity. Some irrationality is hidden in this decision mechanism and can be exploited by a clever guy.
In chapter two, the author presents the concept of anchor and an example to demonstrate how an initial and sometimes irrational information can influence future decisions. I think the concept of anchor, as presented by the author, is limited, its use is rational and the experiment is apparently misinterpreted.
Some products are very difficult to valuate. Gems are a classical example. It is not possible for a median consumer to estimate the value of a gem. The black pearl dealer was very smart in associating it to expensive products. For such products, suggested prices work very well. The sounds used by the author in his experiment are a fantastic example of a difficult-to-valuate product. The author used two groups of participants. All participants heard the same annoying sound. The first group was asked whether they accepted to hear again the sound for 10 cents (first anchor for this group). The second group had 90 cents as the anchor. Each participant had to say yes or no. The author did not report the result. It is easy to accept that the participants would adopt the suggested values as the prices of such exotic products. Then both groups were asked to bid how much they would accept for hearing again the sound. The first group (10cents anchor) offered in average 33 cents. The second group (90 cents anchor) offered 73 cents. It demonstrates that both groups accepted the anchors. Those of each group who bid the lowest values won the auction. With this, they learned that they had to offer low bids. But what is a low bid? This depends on the reference value they have for the product.
A second round of the experiment was run. The author played a second annoying sound to both groups and asked whether they accepted to hear it again for 50 cents (second anchor - the same for all). The participants had to say yes or no. The author did not mention the result. I guess that the first group accepted better than the second one because this was a better offer than the first one. The second group had a worse offer. This would be a rational decision. Then both groups were asked to bid how much they would accept for hearing again the second sound. The result was that the first group bade less than the second one, but the values were not mentioned. The author concluded that the first anchor had surpassed the second one. This would be a proof that initial information could influence future decisions even if they are not rational.
I think this conclusion is too much simple. In my opinion, the groups could have behaved very rationally. This depends on the hidden information. That is why I said that this experiment was apparently misinterpreted. I think the participants can hold or change the anchors as many times as they see an advantage in it. I think that the first group accepted much better the 50 cents anchor than the second group, because this was an advantage for this group and a disadvantage for the second group. But the first group held the old 10 cents anchor when they bid for the second auction because they learned that to win they had to bid low, and this group had a very low reference value, while the second group had not. I guess that the second group bade less than the 73 cents of the first auction. This would indicate that part of this group accepted the second anchor and used it to make the second bid because it was the lowest reference they had. The experiment had a third round that is just a repetition of the second one. The results confirmed those ones of the second round.
In conclusion, I think that anchors are accepted irrationally only if it is difficult for the person to valuate the product. The anchors can held or change for future decisions only if this brings advantage. This is a very rational behavior.
The authors did not mention an interesting result. Although the price of sounds is very difficult to estimate, the participants developed a mechanism for doing so. In the first auction, the first group bade in average 33 cents, higher than the first anchor. The second group bade 75 cents, lower than the first anchor. Thus, the groups developed a way to estimate value, even though based on initial anchors.

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