Predictably Irrational: The Hidden Forces that Shape our Decisions – by Dan Ariely

I finished listening to the audio CD of this book and really enjoyed it.  I wouldn’t say I particularly learning anything useful, but it was interesting to hear all the studies that prove just how irrational people are.

Dan cites study after study that prove:

1. We make decisions by comparing outcomes, rather than weighing factors correctly.  For example, if people are offered 2 similar items, and 1 different item, but 1 of the similar items is clearly better, people will choose the better of the 2 similar items.  Apparently it’s because they can effectively prove they’re not getting the worst of the 3.  This is why selling a new item for a much higher price can actually improve sales of other items, that now look like great deals.

2. People choose free things irrationally.  When something is offered for free, we often choose it, even when paying for something better would be a more rational choice.  He did an experiment where people were offered a Hershey Kiss for 1 cent, or a Lindt chocolate for 30 cents, people chose the Lindt.  But when the price of each was lowered by 1 cent, people chose the Kiss.  I think we can overcome this by adding $1 (or so) to the price of each item.  Would I rather use an ad-funded, naggy version of an app for $1, or buy the full version for $11?

3. People overvalue what the own.  When people are offered to sell some expensive tickets they won, they wanted really high prices for them.  Yet when they asked people who didn’t win what they’d pay, they wouldn’t pay nearly so much.  (He tells the story really well about Duke basketball tickets).

4. People like to leave options (doors) open, but that distracts us from our main goal.  He tells a story about people clicking on doors in a game to get a high score, and even though people didn’t need the door to do well, they tried to prevent it from disappearing.

5. We are happy to do socially beneficial things, but not when we are paid to do them.  Apparently there are market norms, and social norms.  It’s not good to pay someone to take you to the airport for example, because they stop thinking of the good their doing, and start thinking of if it is worth the money.  A non-monetary gift would be better in such a situation.

6. It appears that most people are willing to cheat in a scientific study, but likelihood of being caught isn’t much of a deterrent.  If the person is rewarded in non-cash, they’re much more likely to cheat.  He did an experiment where Cokes in college commons areas disappeared, but dollar bills did not.

Anyway, I liked it, and recommend it lightly, just don’t expect it to be life-changing. :)

Note, my book notes are probably more for my own benefit than yours.  A 1-page summary just can’t do any book justice.