Way back around Thanksgiving I finished reading (aka "listening to") Predictably Irrational, a book about "behavioral economics," or, "human judgement and decision-making," written by professor of psychology Dan Ariely. For a more complete description of his experiments and conclusions from the book, check out the Wikipedia article, or the book's website, http://danariely.com/tag/predictably-irrational.
Some points that jumped out at me:
- Pulling bandages off patients slowly causes less overall suffering [for the patient] than ripping them "quick like a band-aid." (the author himself was once burned head-to-toe, so has personal experience, in addition to his scientific research, to attest to this)
- The idea of a "hot state" vs a "cold state," with regards to anger, arousal, road rage, etc. (hint: always better to make decisions in a cold state, aka, not in-the-moment; this can be applied to interpersonal relationships as well as purchasing decisions)
- Perceiving ownership: once you perceive ownership of a thing, it becomes a real loss psychologically to lose it, even if you never actually owned it. For example: bidding in an auction, you start to think of the thing as yours, emotionally disposing you to fight for it when another bidder outbids you - even though you don't own the item yet, you perceive a "loss" of the item when you're outbid. Other examples included having a 30-day free trial, or a money-back-guarantee.
- Owners attribute higher value to an item than non-owners. For example, a house owner views his/her home with a higher value than a prospective buyer, partly because of their emotional investment. Same with a car. Dan proposed a goal challenging himself to approach everything as a non-owner. This is something I'll need to bear in mind next time I'm buying something expensive, or trying something out (such as right now, as I've engaged in a 30-day free trial of Amazon Prime).
- He oft used the word Orwellian, which is a phenomenal word and I must start using it more myself.
- Regarding prescriptions and over-the-counter medications, "...you get what you pay for. Price can change the experience." (meaning psychologically, not in actual quality of the medicine)
- They saw similar results in studies conducted with pain meds, drinking wine, and eating food - the presentation (such as using the right wine glass, or charging more for a brand-name medication) changes our perception of quality, even while in their double-blind taste tests of the same, participants reported no differences.
My favorite quotes
Humans rarely choose things in absolute terms. We don't have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly. For instance, we don't know how much a 6-cylinder car is worth, but we assume it's more expensive than the 4-cylinder model. - 22:27
Most people don't know what they want unless they see it in context. We don't know what kind of racing bike we want until we see a champ in the Tour de France ratcheting the gears on a particular model. We don't know what kind of speaker system we like until we hear a set of speakers that sounds better than the previous one. We don't even know what we want to do with our lives, until we find a relative or friend who is doing just what we think we should be doing. Everything is relative, and that's the point. Like an airplane pilot landing in the dark, we want runway lights on either side of us, guiding us to the place where we can touch down our wheels. In the case of The Economist, the decision between the Internet-only and print-only [subscription] options would take a bit of thinking. Thinking is difficult, and sometimes unpleasant, so The Economist's marketers offered us a no-brainer: relative to the print-only option, the print and Internet option looks clearly superior. The geniuses at The Economist aren't the only ones who understand the importance of relativity. Take Sam, the television salesman. He plays the same general type of trick on us when he decides which televisions to put together on display. A 36" Panasonic for $690, a 42" Toshiba for $850, a 50" Phillips for $1480. Which one would you choose? In this case, Sam knows that customers find it difficult to compute the value of different options. Who really knows if the Panasonic at $690 is a better deal than the Phillips at $1480? But Sam also knows that given three choices, most people will take the middle choice, as in landing your plane between the runway lights. So guess which television Sam prices as the middle option? That's right, the one he wants to sell. - 23:43
It has been shown repeatedly that the link between amount of salary and happiness is not as strong as one would expect it to be. In fact it is rather weak. Studies even find that countries with the happiest people are not among those with the highest personal income. Yet we keep pushing toward higher salary. Much of that can be blamed on sheer envy. As H. L. Mencken, the 20th century journalist, satirist, social critic, cynic, and free-thinker noted: "a man's satisfaction with his salary depends on" - are you ready for this - "whether he makes more than his wife's sister's husband." Why the wife's sister's husband? Because - and I have a feeling that Mencken's wife kept him fully informed of her sister's husband's salary - this is a comparison that is salient and readily available. Now that you know this fact, and assuming that you are not married, take this into account when you search for a soul-mate. Look for someone who's sibling is married to a productivity-challenged individual. - 46:37
...we can actively improve on our irrational behaviours. We can start by becoming aware of our vulnerabilities. Suppose you're planning to buy a cutting edge cell phone... or even a daily $4 cup of gourmet coffee. You might begin by questioning that habit. How did it begin? Second, ask yourself what amount of pleasure you'll be getting out of it? Is the pleasure as much as you thought you would get? Could you cut back a little and spend the remaining money better on something else? With everything you do, in fact, you should train yourself to question your repeated behaviors. In the case of the cell phone, could you take a step back from the cutting edge, reduce your outlay, and use some of the money for something else? And as for the coffee, rather than asking which blend of coffee you will have today, ask yourself whether you should even be having that habitual cup of expensive coffee at all. I am not claiming that spending money on a wonderful cup of coffee every day, or even a few times a day, is necessarily a bad decision. I am saying only that we should question our decisions. We should also pay particular attention to the first decision we make in what is going to be a long stream of decisions, about clothing, food, etc. When we face such a decision, it might seem to us that this is just one decision, without large consequences. But in fact, the power of the first decision can have such a long-lasting effect, that it will percolate into our future decisions for years to come. Given this effect, the first decision is crucial, and we should give it an appropriate amount of attention. - 1:31:36
...you can maintain the status quo with a 20 cent fee, as in the case of Amazon's shipping in France, or you can start a stampede by offering something free. Think how powerful that idea is. Zero is not just another discount. Zero is a different place. The difference between 2 cents and 1 cent is small, but the difference between 1 cent and zero is huge. - 2:05:51
Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective, as well. - 2:45:30
...understanding arousal's impact on behaviour might help society grapple with some of its most difficult problems, such as teen pregnancy, and the spread of HIV/AIDS. There are sexual motivations everywhere we look, and yet we understand very little about how these influence our decision-making. - 2:50:43
A recent study found that a teenager driving alone was 40% more likely to get into an accident than an adult. But with one other teenager in the car, the percentage was twice that. And with a third teenager along for the ride, the percentage doubled again. - 3:12:38
It may be that our models of human behaviour need to be rethought. There is no such thing as a fully integrated human being. We may, in fact, be an agglomeration of multiple selves. Although there is nothing much we can do to get our Dr Jekyll to fully appreciate the strength of our Mr Hyde, perhaps just being aware that we are prone to making the wrong decisions when gripped by intense emotion, may help us in some way to apply our knowledge of our Hyde-selves to our daily activities. How can we force our Hyde self to behave better? - 3:16:54
Interestingly, these results suggest that although almost everyone has problems with procrastination, those who recognize and admit their weakness are in a better position to utilize available tools for pre-commitment, and by doing so help themselves overcome it. - 3:29:48
Resisting temptation and instilling self-control are general human goals, and repeatedly failing to achieve them is a source of much of our misery. When I look around, I see people trying their best to do the right thing, whether they are dieters vowing to avoid a tempting dessert tray, or families vowing to spend less and save more. The struggle for control is all around us. We see it in books and magazine; radio and television airwaves are chocked with messages of self-improvement and help. And yet, for all this electronic chatter and focus in print, we find ourselves again and again in the same predicament as my students: failing over and over to reach our long term goals. Why? Because without pre-commitments we keep on falling for temptation. - 3:30:16
When it comes to medicines, then, we learned that you get what you pay for. Price can change the experience. - 5:30:46
If I were to distill one main lesson from the research described in this book, it is that we are pawns in a game whose forces we largely fail to comprehend. We usually think of ourselves as sitting in the driver's seat, with ultimate control over the decisions we make and the direction our life takes. But alas, this perception has more to do with our desires, with how we want to view ourselves, than with reality. - 7:17:22
A second main lesson is that although irrationality is commonplace, it does not necessarily mean that we are helpless. Once we understand when and where we may make erroneous decisions, we can try to be more vigilant, force ourselves to think differently about these decisions, or use technology to overcome our inherent shortcomings. - 7:19:22