 Welcome to the fuzzy world of being human. |
| Review Date: February 19, 2008 |
| Reviewer: D. Stuart, Auckland NZ |
Dan Ariely is the guy you'd want at your dinner party. He's witty, smart and also very inclusive - sharing his passion for the way humans tick in a way that makes us feel great about the fact that, rational as we like to think we are, we make bad snap decisions, we cheat and we get ruled by our heart precisely when the facts are screaming "go the other way!" There's a lot in this writing which celebrates our human-ness. Why do we do this?
What Ariely has done here is shift a lot of the thinking developed by such pioneers as Kahneman & Tversky who worked in behavioural economics, and moved it into the everyday sphere. And he's done a great, insightful job. Where the behavioural economists are focused on financial decisions (why we buy high and sell low - and confound the assumptions of the classic economists who assume 'the rational man,) Ariely eschews the technical language and walks us through everyday examples of our often fuzzy and quite irrational decision-making.
The result is utterly engaging - and this easy 300 page read still has academic rigour and strong foundations. Ariely cites many experiments and examples, and shows that we often get things wrong because we frame things the wrong way, mis-judge probabilities, apply heuristic rules of thumb that don't always work, or we just plain let our emotions rule.
We love to think that we're educated, rational and moral. Yet who hasn't overestimated the upside on a sure-fire investment, bought some clothing that we knew was a mistake even as we bought it, or got our wires crossed between work-rules and social rules? This book is fascinating, entertaining and very, very illuminating.
- Recommended for the general public, but I'd urge marketers, market researchers and business people to read this one carefully. Dan provides excellent dinner-party insights, but they apply to our real world and explain why so many poor decisions are made - whether by customers or by the 'rational' business people who make million-dollar decisions.
- Recommended companion book: Nudge: Improving Decisions About Health, Wealth, and Happiness here one of the godfathers of behavioural economics discusses the way we can manage the "choice architecture" in our world. |
Made me think through some things I'd overlooked about market behavior
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| Review Date: June 27, 2009 |
| Reviewer: Drifty, Southwest and Southeast USA |
I have been thinking about economics seriously for nearly 30 years. Classical economics is built to no small degree on the notion that people will generally act in their own best self interest, after rationally and intelligently examining their options. This fit my world view fine in my first career as an engineer (BS and MS in Electrical Engineering).
From my 2nd Career as a Business Development person (MBA), I began to have to deal with people's tendency to not entirely think things through.
Here in this book, we have a professor who runs socioeconomic tests on his MBA students. These students are smart enough, worldly enough, experienced enough, and educated enough to approximate the standard economic assumptions and produce reasonably rational behavior.
Guess what. Even among broad experiments conducted on multiple MBA classes over time, one can predictably pre-bias the outcome of a particular run of a socioeconomic experiment by what seeds you plant in the class members' minds before the experiment. For example, in one experiment in estimating prices, the author requires his students to write the last two digits of their social security numbers on the top of the paper. Simply the act of writing a high number (e.g., 88) versus a low number (e.g., 08) produced statistically significant correlatable influences on the students' later price estimates. Those compelled to write "88" at the top of their papers would reliably estimate higher prices than those compelled to write "08" at the top of their papers, to a statistically significant degree.
Extrapolating to "real life." Watching Fox News will tend to make you more conservative without you knowing it. Watching MSNBC news will tend to make you more liberal without you knowing it.
If you want to understand "real truth," you are just going to have to do a little more than self-select your news feeds. You are going to have to seriously consider a diversity of viewpoints.
Moreover, if you have Social Darwinist beliefs as I once did, you may need to re-think the concept of the Poverty Trap. Early pre-conditioning really does make a difference.
Here is the way I think of it as an Engineer. Classical Economic Theory is analogous to Classical Newtonian Physics. There is nothing badly wrong with it, and it is a good approximation for most real world problems at the middle of the distribution.
However, General Relativity is indeed more correct that Classical Newtonian Physics, and the additional knowledge makes a real difference in certain special cases. And, those special cases are sometimes the really important ones. Likewise, Behavioral Economics is adding something very valuable to our knowledge of Classical Economics.
Read this only if you are brave enough to contemplate that the world might be a little more complex than we wish it were. |
Exploring why so much of what we do doesn't make sense
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| Review Date: February 19, 2008 |
| Reviewer: C. Bracken, New York, NY USA |
I had the privilege of taking Dan's class at Duke last fall, where all of us got the chance to read preview copies of Predictably Irrational. Of course, not everyone will get the chance to hear Dan's excellent lectures, but the book does a great job of capturing his wit while providing a wealth of information about why human behavior can be as fallible as it is.
The joy in this material lies in the fact that every few pages you will find yourself smiling because you too have behaved in the irrational manner being described, and now that you look back on it, it's hard to remember why.
Why are we so excited about free stuff, even if we just throw it out later? Do we convince ourselves that an expensive meal will taste better than a cheap one? And why are we motivated to act on some humanitarian disasters, but not others? We all make irrational decisions at times, but this book provides the rare opportunity to reflect on those decisions and observe the behavioral patterns underneath.
If you enjoyed Freakonomics or any of Malcolm Gladwell's writings, you will also enjoy Predictably Irrational. The pace is quick, and nearly every page contains some nugget of surprising information that you'll want to tell your friends. It is more like Freakonomics than Blink or The Tipping Point in that it is structured around experiments, with each chapter covering the results of experiments in a specific area of irrational behavior, the implications for society, and what individuals might do to mitigate it.
It's a hard book to put down, and it's both entertaining and interesting from start to finish. For those who are curious about the world, this might be the ultimate beach or airline reading! |
An excellent book which provides valuable insights
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| Review Date: May 20, 2009 |
| Reviewer: Irfan A. Alvi, Towson, MD USA |
This book and Dan Ariely have recieved a lot of media attention, so I approached the book with some skepticism, thinking that it might be overhyped. I'm pleased to report that my skepticism turned out to be unwarranted.
The book has many strengths, the main one being that it convincingly presents many ways people are wired and/or conditioned to be irrational, usually without even being aware of it. This eye-opening revelation can be a bit disheartening, but the good news is that we can fix at least some of this irrationality by being aware of how it can arise and then making a steady effort to override it or compensate for it. That's not an easy task, but it can be done. As a simple example, I've programmed a realistic exercise schedule into my PDA, and I've been very consistent with my exercise because of that. The PDA imposes a discipline on me which I couldn't otherwise impose on myself (as I know from experience).
The book is also well written, and I would even say enjoyable to read. The many experiments described in the book are presented in a lively way which elicits interest, and Ariely goes into just the right amount of detail -- enough to convey the basic experimental designs, results, and plausible interpretations, without boring the reader by getting into esoteric points which are more appropriate for journal papers.
The one criticism I have of the book, which applies to most of Western pscyhology, is that most of the described experiments used US college students as subjects. That raises a serious question regarding the extent to which the results can be generalized to people of the same age who aren't college students, people of other ages, and people outside the US. Study of cultural psychology reveals that differences due to these factors can be profound, and Ariely himself notes a Korean study where such differences were observed, but he doesn't really elaborate on the point.
Despite this one criticism, I think this is an excellent and authoritative book, and among the better ones in the "why smart people do dumb things" genre, so I highly recommend it. The insights revealed are both fascinating and practical, if you can muster the discipline to apply them. |
Almost Did Not Buy, Reviews Too Negative--This Was Worth My Time
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| Review Date: March 29, 2008 |
| Reviewer: Robert D. Steele, Oakton, VA United States |
I almost did not buy this book as I sought to explore the new literature on behavioral and cognitive science. The negative review are too negative. You get from this book what you bring to it in open mindedness, in my opinion.
My truth-teller, off-setting the reality that this is a double-spaced book that inflates 120 pages of thought into 240 pages of easy to digest presentation, is the author's unique provision in the end-notes of both direct references to seminal works that each chapter is based on, with additional references suggested, AND his recognition of 17 collaborators, each with a long paragraph of biographic information. This is in short a worthy work, it was worthy of my time, and I do not agree with those who are dismissive or cavalier about this book.
As with Nudge: Improving Decisions About Health, Wealth, and Happiness and other works of this ilk, they seem to be blessed with an immaculate conception that fails to recognize the work of the 1960's and 1970's (e.g. Herbert Simon, "satisficing," but I no longer mark this down--this is a new generation thinking new thoughts, and I have decided it is too much to expect them to go back more than 20 years.
The opening of the book is impressive. The author was burned on 70% of his body by a magnesium flare, and his probing of his own pain and how the nurse's had settled on fast painful ripping off of the bandages (with no medication.
Key point early in the book: most people don't know what they want until they see it in context. This is one reason I am planning an edited work in 2009 on Cultural Intelligence. As Howard Bloom teaches us in Global Brain: The Evolution of Mass Mind from the Big Bang to the 21st Century, we (and our policy makers) know nothing of "the other," and I have concluded that peace starts in kindergarten and we have to separate the Israelis and the Palestians, and literally baby sit two new generations from birth to the age of 35.
The rest of the book is easy to read, has excellent real-world examples, and each chapter generally ends with a short appendix with real results. This is not a fluff book, it is a serious book that the light reader will mistake for fluff.
+ Relatively and "bracketing" matter (sell what you want by bracketing it with a more expensive option above and a trashy cheap thing below)
+ Decoys matter (e.g. a middle option that makes the "combined option" a "no brainer")
+ Publishing salaries actually sets off ego wars at the top and churn at the bottom that leads to more turnover and more wasteful employees costs.
+ Imprinting is used by the author to explain "anchoring" (e.g. black pearls anchored in setting of most expensive diamonds, this is an example of how the SELLER is setting the price, not the buyer).
+ "Free" is never really free. It can blind rational choice and it can "cost" time, choice, and a higher value that is obscured (e.g. my cotton socks disintegrate within months, whereas the cotton socks I inherited from an earlier era are still lasting forever).
+ HOWEVER, I especially liked the way the author explored "free" as a device for policy furtherance, e.g. make vehicle registration "free" if you own a hybrid car.
+ Social versus market norms are discussed. The author does not discuss Open Money (see my comment for a link to my keytone at Gnomedex) or Yochai Benckler's [[ASIN:0300125771 The Wealth of Networks: How Social Production Transforms Markets and Freedom].
+ I especially like the way the author discussed how the poorly-paid border patrol and coast guard employees have made their own peace with the drug dealers--they have the same understanding the CIA clandestine service has with the KGB and local counter-intelligence services: we do not kill, kidnap, or even embarrass each other, we all just present to bedoing our job and the only people fooled are Congress and the taxpayers. Similar, the drug dealers understand that if they do not shoot to kill, neither will we....
+ One chapter offers a fascinating study on the impact of sexual arousal (a marker for passion). This quote from page 97 is priceless:
"Prevention, protection, conservatism, and morality disappeared completely from the radar screen. They were simply unable to predict the degree to which passion would change them."
+ The author discusses Smart Cards and their ability to impose a restraining influence with emails, I urge one and all to dump their existing ursurous cards and turn to Interra and other similar community-based cards with high social value.
+ We over-value what we own or possess. (I would add, we also over-value credentialing and under-estimate how painfol our rote school system is, which kills creativity by the seventh grade in some of our brightest kids.)
+ Stereotypes influence behavior on both sides of the viewpoint.
+ Placebo effect is real, something the American Medical Association absolutely does not want you to know (see also Alternative Cures: The Most Effective Natural Home Remedies for 160 Health Problems among many excellent works in this area.
+ Options can confuse and divert.
+ There is a pricing effect (very high priced menu item drives folks toward the second most expensive, which they would not have chosen absent the "higher" bracket item)
+ Character costs. USA loses $525 million a year to robberies, and $600 BILLION a year to employee theft (this does not count procrastination and government issues, such as every second IRS employee a complete loser while the others do twice the work).
+ Harvard MBA students participated in a series of tests that conclusively demonstrated that people will cheat if given an opportunity to do so; they will cheat twice as much with "in kind" versus cash opportunities, but they will not cheat "wildly" even if assured of not being caught. See also The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead
+ Religion DOES have a good moral effect, as do honor codes and reminding people of the Ten Commandments from time to time. See Founding Faith: Providence, Politics, and the Birth of Religious Freedom in America for the Founding Father's deliberate mix of securlar tolerant government with a desire for a strong religious aspect to community for precisely this reason.
I can see how some might feel this book is less than they were expecting, but I do not agree. This book may be well-marketed and not the deep social science research that some buyers might have been hoping for, but I for one find it completely satisfactory and well worth my time. The author's crediting of 17 collaborators, and the unique goodness of the end-notes carry the day with me.
See also
The World Cafe: Shaping Our Futures Through Conversations That Matter
Society's Breakthrough!: Releasing Essential Wisdom and Virtue in All the People
Building a Knowledge-Driven Organization
Collective Intelligence: Creating a Prosperous World at Peace
My earlier lists (the first ten or so out of 70) focus on strategy, intelligence, information, and offer many other pointers to useful books somewhat related to the larger universe of cognitive science and decision support.
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