Predictably Irrational: The Hidden Forces that Shape Our Decisions by Dan Ariely exposes how we, with all our fallibility, make decisions. We, as rational agents, like to believe that we can (and do) make calculated decisions based on reasoning. But at the same time, we know from experience that not all of the time do we act accordingly to this principle. Through both personal stories, illuminating examples, and a new and exciting field of research, Dan Ariely gives the reader an insight into our irrational behaviour.
Irrationality is not random. There are several components that make for irrational decisions. The first is relativity. In evolution, it has been very handy to compare things relative to each other. Seeing if we should take route A or B, only calculation the differences and ignoring all things equal has reduced computing in our brain to only the necessary input. But this mechanism can also easily be hijacked. Imagine for instance route A and B have two attributes they differ on (one being better on attribute 1, the other on attribute 2). When you throw in route C, which is slightly worse on attribute 1 than route A, but equally worse on attribute 2 as route A is compared to B, you will be tempted to choose option A. Route C has acted as a decoy, accentuating route A whilst in fact it was comparable to route B.
As people, we are also disproportionately attracted to things that are free. In a clever experiment, Ariely set up a cookie shop in two malls. In the first, he priced some expensive cookies at 1.10 dollar, the cheaper cookies at 10 cents. In the other case, he decreased the price to make it 1 dollar and FREE. ‘Sales’ of the FREE cookies rose disproportionately. This is the power of free and can have a significant influence on both your buying decisions and businesses. For you, it means you will be more likely to buy that expensive TV if it has a free PS4 that goes with it. For businesses they can expect people to consume much more when you offer something for free.
There are so many topics discussed in the book that an example of each would make this review irrationally large. Some of the topics are; the influence of arousal, the high price of ownership, keeping doors open, the effect of expectations, and beer and free lunches. In a mix of groundbreaking research and real-life examples, Ariely takes the reader on a tour of his lifetime of research. Anyone with an interest in psychology, behavioural economics or our irrationality in general, should read this as soon as possible.
More on Predictably Irrational:
https://floriswolswijk.com/upside-of-irrationality/ – Review of The Upside of Irrationality
http://danariely.com/ – Blog by Dan Ariely
http://www.youtube.com/watch?v=JhjUJTw2i1M – Dan Ariely on our irrationality