Dan Ariely : Predictably Irrational

As we all, as Dan states, seem to be predictably irrational, I will sum up just a few highlights from his book - unpredictably starting from the end:

"We all make the same types of mistakes over and over, because of the basic wiring of our brains. So wouldn't it make sense to modify standard economics and move away from naive psychology, which often fails the test of reason, introspection, and - most important - empirical scrutiny?" (239) ... "Wouldn't economics make a lot more sense if it were based on how people behave, instead of how they should behave?" (239)

On Beer and free Lunches

"When people order food and drinks, they seem to have two goals: to order what they will enjoy most and to portray themselves in a positive light in the eyes of their friends. ... In essence, people, particularly those with a high need for uniqueness, may sacrifice personal utility in order to gain reputational utility." (237)

On People (and Corporations) cheating

"It is difficult to get a man to understand something when his salary depends upon his not understanding it." (227) ... "Nonmonetary currencies lead us astray. They let us bypass our conscience and freely explore the benefits of dishonesty." (227) ... "There are companies out there, in other words, that aren't stealing cash off our plates, so to speak, but are stealing things one step removed from cash." (227)

"We have learned that given a chance, people cheat. But what's really odd is that most of us don't see this coming." (222)

"The result even surprised us: the students who had been asked to recall the Ten Commandments had not cheated at all." (208)

On Placebos and Price

"Before recent times, almost all medicines were placebos. Eye of the toad, wing of the bat, dried fox lungs, mercury, mineral water, cocaine, an electric current: these were all touted as suitable cures for various ailments." (177)

"Does a pricey medicine make us feel better than a cheap medicine? Can it actually make us psychologically better than a cheaper brand?" (176) (Yes!)

On the Effect of Expectations

"The moral, as you might expect, is that if you tell people up front that something might be distasteful, the odds are good that they will end up agreeing with you - not because their expereince tells them so but because of their expectations." (159)

On Stereotypes

"A stereotype, after all, is a way of categorizing information, in the hope of predicting experiences. The brain cannot start from scratch at every new situation. It must build on what it has seen before." (168)

On Keeping Doors open

"In the context of today's world, we work as feverishly to keep all our options open." (140) ... "We might not always be aware of it, but in every case we give something up for those options." (140)

On the High Prize of Ownership

"Ownership is not limited to material things. It can also apply to points of view. Once we take ownership of an idea - whether it's about politics or sports - what do we do? We love it perhaps more than we should. We prize it more than it is worth. And most frequently, we have trouble letting go of it because, we can't stand the idea of its loss. What are we left with then? An ideology - rigid and unyielding." (137)

On the Cost and Benefit of Social Norms

"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." (86)

"Instead of focusing the attention of the teachers, parents, and kids on test scores, salaries, and competition, it might be better to instill in all of us a sense of purpose, mission, and pride in education." (85)

"If corporations started thinking in terms of social norms, they would realize that these norms build loyalty and - more important - make people to extend themselves to the degree that corporations need today: to be flexible, concerned and willing to pitch in. That's what a relationship delivers." (83)

"If companies want to benefit from the advantages of social norms, they need to do a better job in cultivating those norms." (82)

"When a social norm collides with a market norm, the social norm goes away for a long time. In other words, social relationships are not easy to reestablish." (77)

"There are many examples to show that people will work more for a cause than for cash." (71)

On the Cost of Free

It's certainly counterintuitive, in these times of budget cutbacks, to make something FREE! But when we stop to think about it, FREE! can have a great deal of power, and it makes a lot of sense." (63)

If you are in business, and understand that, you can do some marvelous things. Want to draw a crowd? Make something FREE! Want to sell more products? Make part of the purchase FREE!" (62)

"Whether it's a product or money, we just can't resist the gravitational pull of FREE!" (58)

On the Fallacy of Supply and Demand

"Behavior Herding: It happens when we assume that something is good (or bad) on the basis of other people's behavior, and our own actions follow suit." ... "Self-herding: This happens when we believe something is good (or bad) on the basis of our own previous behavior." (36)

Dan wants us to understand, that we all act irrational and counterintuitive, and we do not even see it coming. We think - and we are officially treated - like rationalists, but we are far away from that. We are irrational and we are predictable. Fellow individuals, corporations and politicians, who know that are exploiting us, some are even ripping us off!

By giving you just the above, I would like you to think about every single quote and try to find examples where you behaved like 'that', or 'this' happened to you!

Buy the book and get all the beef, the examples, the philosophy, and Dan's life-story. And - of course - have a look at his TED-Video and the video at Jörg's digitalpublic.

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