Predictably Irrational by Dan Ariely

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predictably-irrational-dan-arielyAfter listening to Dan Ariely’s TED talk on our buggy moral code, I become interested in his research on behavioral economics. During a transit flight in Frankfurt airport back to Singapore after my trip to Monte Carlo, I managed to bought myself a copy of his book “Predictably Irrational” (and you can hear the story what prompted him to write the book in another TED talk entitled “Are we in control of our own decisions?“). Upon reading the book, I found that he was basically reiterating the examples from the book during the TED talk. It’s a fascinating book providing a different perspective on how we make decisions using the combined discipline of psychology and economics. In fact, you will be convinced by his reasoning why there is hidden rationale behind people performing the acts of cheating and dishonest behaviour. So, I thought I might just summarize two interesting concepts that popped up in this book:

  • The strange truth about Relativity in decision making: In the book, Ariely explained that we tend to focus on compare things with one another but also tend to compare things that are easily comparable while avoiding comparing things that cannot be compared easily. In his model, he explained by giving a person two options A and B. By placing an additional option or decoy (-A), which is similar to A and looks slightly better than B, the individual will tend to choose A as a result. In the book, he used the following example from the subscription options available for “The Economist” magazine: (Option A) Print and Web Subscription priced at US$125, (Option -A) Print Subscription priced at US$125 and (Option B) Web Subscripton priced at US$59. Since the decision is originally between (A) and (B), with the introduction of (-A), the individual will end up picking (A) given that it looks like a viable choice.
  • The cost of social and market norms: I appreciate the distinction made by Ariely on the two worlds characterized by social and market exchanges respectively. There are different norms that attributes to different relationships. Once if you make a mistake in the social norm by introducing market norms into social exchanges. I thought the example on “the most expensive sex is free sex” in the book. The unfortunate fact is when a social norm collides with a market norm, the social norm goes away for a long time, i.e. social relationships are not easy to re-invigorated. The cases on how corporation introduced social norms to make workers more dedicated to the business and open source movements gave us some intrinsic insights on how these two different norms operate. It did prompt me to realize the distinction between bloggers and journalists. Bloggers gain trust and credibility through the quality of their content (social norm), while journalists writes articles to earn a living (market norm). Once a blogger overstepped and become more commericalized by writing too much advertorials, that social norm may be violated.

Dan Ariely’s “Predictably Irrational” is definitely worth a read and if you are not convinced by my recommendation, you can always watch the TED videos (and his talk on the buggy code is one of my all time favourite TED talks which presents actually all you need to know in the last two chapters of the book) here to make an informed decision.

Dan Ariely’s TED Talk: Our Buggy Moral Code

Dan Ariely’s TED Talk: Are we in control of our own decisions?

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Bernard Leong

A Pragmatic Idealist