Sunday, March 15, 2009

Predictably Irrational

Better researched than Gladwell's Blink, filled with surprises the way Hartfod's The Undercover Economist couldn't be, thoroughly down-to-earth (and less cyber-esoterical) than Weinberger's Everything Is Miscellaneous and more easily applicable in a way that even Gilbert's amazing Stumbling On Happiness can't match, Dan Ariely's Predictably Irrational refreshingly raises the bar on pop-(social)-science writing.

Ariely surprises us even as he exposes the myriad of strange/wonderful programming which impacts our decisions. Whilst some of these were 'common sense' (e.g. feeling more attached to that which we owned as compared to that which we didn't possess), Ariely's numerous experiments drive home the realisation deeper than previously perceived.

Here's a quick part-summary of what the book reveals about us:

1. We are more likely to cheat when dealing with non-monetary items (e.g. we would almost unhesitatingly smooch a $2 pen from office, but when it comes to stealing $1 from the petty cash it's often a no-no)

2. We tend to enjoy our food if we can order 'in private' i.e. by, say, ticking on a menu-form which is eventually passed to the waiter, as oppposed to 'declaring' out loud what we'd like

3. We are predisposed to selecting an option with an obviously poorer close parallel i.e. if given Luxury Watch A which costs $50, Normal Watch B at $10 and Marginally Above-Average Watch C at $48, on average we'd go for Cup A. Why? Because in comparison with Watch C it's a better choice.

4. We determine what prices are acceptable based on initial purchases. Jack's cost of Chinese food for $20 and Jill's (for the same dishes) at $40 will decide their future valuations of said cuisine i.e. we 'anchor' ourselves to our initial price-experiences of goods, and these anchors can be completely arbitrary.

5. We are inexplicably attracted to "FREE!", often making purchases we wouldn't have on this basis. Somehow $0 creates purchase-waves where even $0.20 (a 'virtually free' price) fail.

6. We're obsessed with options and keeping them open, at the price of losing much needed focus and attention.

7. We 'believe in' goods that are priced higher, even when the substance of these goods do not differ much from lower-priced items (e.g. aspirin, bottled water, professionals, etc.).

8. We're suckers for presentation and form, and would generally feel a moderately prepared roast beef served on attractive china tasted better than excellently cooked beef on a plastic plate. Hence, our easy succumbing to branding which creates expectations which improves perception about the products we're getting.

9. When horny or angry, our propensity to do things we'd normally deny ever being capable of doing rises by a significant factor. In a word, we have a Mr. Hyde lying semi-dormant inside us.

The next step is to apply these to our work, our communities and our families. This is the exciting part as I feel there's so much that behavioural economics can contribute (another sign that this is great book, when the reader is inspired towards further exploration).

What I also like about the book is how Ariely reflects a deep passion towards the betterment of our society, e.g. when he proposed to banks to have a credit card which would stop a spender from charging above a predetermined limit.

Part self-help, part life-commentary, part research-report, all social-innovation(!), Dan Ariely's first book is one of those I'd tip for the "if you're only going to read one book this year" awards. Then again, I'd recommend you buy it - you're more likely to believe you've had a good read thus.

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