Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions by Dan Ariely (PDF)

Description

Behavioral economist and New York Times bestselling author Dan Ariely offers a much-needed take on the irrational decisions that led to our current economic crisis.

User’s Reviews

Reviews from Amazon users which were colected at the time this book was published on the website:

⭐”Predictably Irrational: The Hidden Forces That Shape Our Decisions” by Ariely Ariely (PI), was an interesting read, and deserves to be looked at by economist, psychologist, marketer, or just people looking to improve their selves alike. It follows the trend, set by Freakonomics, by Steven Levitt and Stephen Dubner, in discussion of esoteric economic concepts, but without the academese that tends to keep casual readers away. I found myself personally engrossed while reading this novel due to the parallels of irrational behavior I discovered I also exhibited and will be actively correcting. The following three I believe have sentimental value to me and I feel are genuinely worth discussing.Zero cost irrationality as described by PI is the concept that reviews the large bias humans show towards “free.” I put free in quotations as I am using the term loosely in this context as often the decision chosen is not without cost, and in relative terms, it is often not the option that held the most value per unit of the exchanging intermediary item. In fact, just a few hours before writing this brief review, I purchased three Publix cloth shopping bags that I had no intention of purchasing beforehand, but because they were buy three get one free. I can say in earnest, without that free offer, I would have completely shrugged off the Publix bag, to purchase at another time. A potential solution to this problem, derived from a specific example he mentions within the chapter, is to mentally give the “free” item a price, even one as low as one penny. This, surprisingly, nullifies the zero cost irrationality for most individuals, allowing for proper cost-benefit analysis of the additional item or offer.Procrastination, or the giving up of long-term goals for immediate gratification, this desire for immediate satisfaction permeates particularly strongly throughout American culture. The effect of this national procrastination can be seen by abhorrently low national saving rate, or more implicitly or healthcare system that is more reactive than proactive. Though I personally am not a pure procrastinator, in fact many would consider me an extrovert, I believe that there quite a bit I still put off that I do so exactly because I fail to properly evaluate the opportunity cost of the long term benefit of said action. For example, I did a quick back of an envelope calculation of me putting of my savings to next year, rather than not starting when I begun work two years ago. This three wait has cost me over half a million dollars (Assumptions: Roth IRA, with locked six percent APR, maturing in fifty years). I have begun taking Ariely’s advice, and setting hard deadlines for many things, such as this particular book review which I gave myself exactly the day after completing the book to complete, no exceptions and no excuses.The final personal irrationality I’ve found plaguing my decision making has been that of `keeping doors open,’ or not being able to stand the idea of closing our alternative options. My irrational in my context, has to do with maybe not a plethora of options, as emphasized within the book, but rather when I am down to two options that have to deal with something within the social sphere. Case in point, I would fret over the decision of whether I should continue to chase after a girl or letting her go, or going to a party where I would probably feel uncomfortable or not, though these examples may seem simple to an someone else, I struggled with these decisions constantly. Often than not, I found myself unable to take the choice that errs on the side of negative (deciding to stay home, or leave the girl alone) as I felt doing so eliminates a multitude of options without producing any new ones of benefit. I am curious to whether how much confidence has to do with the exact experiment presented within the book. I speculate if participants were required to self select as confident, or perhaps anchored to think of confidence, if such decisions become easier. I wonder this, since many my such decision-making gridlocks underlie a lack of self confidence, perhaps those with more of it at the time of the test may change results. In sum, Ariely’s solution, as I interpret it, the cure for procrastination is really premised by self-confidence, where one sets long term goals and bravely commits to them.The book discussed around 14 irrationalities in total across 13 chapters, each holding a slight new scope of human cognizance to gain. The three above mentioned irrationalities after a deep introspective look, I felt held the most personal utility. I genuinely I have a new lens to the world. I genuinely believe that holds the potential to enrich the perspective of most readers as well, no matter their relative amount of academic background on the subject.

⭐I have not written any product reviews on Amazon, but I was forced into writing one because of my sincere admiration and new-found respect for Prof. Dan Ariely. I was introduced to the science of Behavioral Economics and the irrational decisions people make in their lives. The author, through his experiments, has an uncanny knack of explaining all the profound concepts in a simple and entertaining manner. The contents in this book will quite literally open your eyes and make you wonder how people are living in this so-called idealistic world of rational decision making. Some of the key ideas presented in this book are:-> How humans perceive value – “not in absolute terms, but one with respect to another,” and this is how companies and marketers deceive people with “seemingly attractive” offers that you cannot resist.-> Market forces of supply and demand only apply to rational people – in the real world, companies exploit people’s irrationality and influence prices and demand.-> The power of FREE – People are, in essence, losing some other resource in trying to procure FREE items.-> The wonderful distinction of market and social norms, and why and how they cannot coexist. He also explains how companies can motivate their employees using social benefits, which are cheaper and stronger than financial incentives.-> As long as money is not involved, we are caring social animals.-> Why people exhibit different behaviors when they are “normal” (cold state) and when they are “aroused” (hot state). Learning to bridge the gap between the two extreme states is very important and will help you avoid making errors or bad decisions that you will forever regret.-> The high price of ownership reveals three irrational quirks in human behavior – we are deeply attached to what we have; we often focus on what we may lose (also called Loss Aversion); we assume other people (or buyers of our goods) to also value the goods in the same manner as we do.-> People’s expectations can cloud their thinking, and they use this as a marketing strategy to influence their friends’ tastes and preferences.-> Price is so powerful that it can drive the Placebo Effect – the more the price, the more the utility you derive from the product. This phenomenon was explained with Aspirin – why a 50 cent Aspirin can do what a penny Aspirin can’t.-> Trust is an important public resource and a necessary lubricant of the economy. A few bad players in the market can completely erode it.-> Why even the most morally upright person can be susceptible to making small crimes that hardly matter. However, a contemplation of moral behavior or a religious code of law before doing any action can greatly reduce the likelihood of people committing these petty crimes.-> The idea of FREE LUNCHES in behavior economics; the science of economics should be modified to account for how people actually behave instead of how they should behave in society.These are just some of the important principles explained in the book through experiments and startling revelations. It is easy to read and highly entertaining. However, there is one minor flaw in this book – the concepts and results described are all based on experiments performed on American college students or the western society, which may not be applicable to the more conservative societies in the world.BOTTOM LINE – Predictably Irrational is a wonderful book with new insights into irrational behavior in people. But for the one criticism, I believe this can change the way people think about economics, and can result in newer norms that account for our actual and not ideal behavior.PS: For people interested in reading more about behavior and cognitive sciences, I have the following book suggestions:1. “The Power of Habit: Why We Do What We Do in Life and Business” by Charles Duhigg.2. “Thinking, Fast and Slow” by Daniel Kahnem.3. “The Upside of Irrationality” by Dan Ariely.4. “The Signal and the Noise: Why So Many Predictions Fail — but Some Don’t” by Nate Silver

⭐I enjoyed the book, I am new to the topic this was a great introduction. Amazon says I need 5 more words …

⭐Predictably Irrational – Book review.GET THIS BOOK. That’s it.A BRILLIANT read. Irrespective of what you do, you must read this textbook of human behaviour & how amazingly complex our minds are decisions are.A sample of what’s inside:Consider an experiment on 100 students based on an old subscription model of The Economist magazine, offering:Option 1 – a web subscription for $59Option 2 – a print subscription for $125Option 3 – a web & print subscription for $12516 students chose Option 10 students chose Option 2 (obvious!!)84 students chose Option 3.Revenue earned = $11,444.The author then removed Option 2 (Print sub for $125) Results:68 students chose Option 132 students went for Option 3Revenue earned = $8,012What could have possibly changed their minds? It was the mere presence of THE DECOY (2nd option) that made them buy MORE expensive options in the 1st experiment & less in the 2nd experiment.The book is replete with such experiments. Also, real-life examples of human behaviour when it comes to product pricing (including ‘anchoring’), buying houses, cheating, Starbucks Upsells, what Ford learned from Toyota about Car servicing and too many brilliant quotes.

⭐Classical economic theory is predicated on self-interested rational actors. But people aren’t rational. So much the worse for classical economics.Although people aren’t rational, they aren’t randomly irrational, either. Instead, they are predictably irrational, in a way that can be studied and measured, and be built into a more realistic economic theory: behavioural economics.Dan Ariely, psychologist and behavioural economist, engagingly describes a range of experiments he and his colleagues has performed (mostly on undergraduate students, in the time-honoured experimental psychology manner) to unpick a wide range patterns of irrationality. He looks at the over-strong lure of free items, how we overvalue our possessions, how keeping options open can be a mistake, why shops will often display an expensive option they don’t expect to sell, why we are happy to do things for free we wouldn’t do if paid for, how more expensive items are more effective than identical cheaper ones, how dishonesty varies when cash is involved, how some people choose second best, and more.I found the chapter on free work versus paid work interesting, the difference being between social norms and market norms. The world is moving us towards the latter, seemingly to the detriment of enjoyment. Similarly the chapter on honesty highlights how people are more honest when cash is involved: while taking a pencil from work is barely noticed, taking the equivalent value in cash would be beyond the pale. Yet we are moving towards a cashless world, maybe to the detriment of honesty?This is a good read, with the experiments clearly described, and the context and consequences well explained. I am not entirely convinced that the experimental situations, with their small values and low consequences, can be safely extrapolated to larger scale cases, but they are very illuminating. Several of the examples will be useful to help avoid faulty reasoning in certain cases. (Although I already order what I want from the menu, whether or not someone else in the party has previously ordered the same.)

⭐Woah, man! Just check out that picture on the cover. That’s what the inside of your head will look like after reading this book! Well, pinker, and with more drippy bits, but you get the idea.NOTE: Please do not remove your head and look inside for comparative purposes.In all seriousness, this book blew me away, by demonstrating aspects of human behaviour which is hard-wired into us. You will be shocked – I was – by just how easy we can be manipulated, and you’ll be nodding along as you recognise all the times when you’ve fallen foul of these precise conditions. Even wondered why it takes you an hour to decide between brands of painkillers, when one is cheaper but the other is on special…? If you have, then man up and stick a plaster on it. But also, read this book, because it will tell you exactly why you find it so damn difficult to make that choice. It won’t help you the next time you’ve got a pounding headache and Nurofen is half-off but still twice the price of ADSA’s own bran paracetamol, but at least then you’ll understand. And if your head explodes, and covers passers-by in pinky, drippy bits, try and have a look before you expire – I reckon it’ll look just like this cover.

⭐MIT Professor Dan Ariely needs no introduction; he is one of the biggest names in the field of Behavioural Economics. Ariely studies the way we think, decide and operate – and in chapter after chapter he shows that we are far from being the rational creatures we think we are!In one of the amazing studies in the book he shows for instance that the way we ‘frame’ something (p. 41) often determines how others are going to take it (remember Tom Sawyer and how he got his friends to paint that wall? For classroom management purposes, this is crucial; if we introduce activities saying ‘Now, this may hurt a little…’ chances are students are going to feel the pain!)This leads to the hugely important subject – expectations: quick Q: would you like a beer with a drop of balsamic vinegar in it? (p. 159) A: It depends on whether you know it in advance or not! If you do, chances are you are going to dislike it. Expectations colour perceptions. How many times has this prejudiced us against certain students?Ariely’s interests range from beverages to education. Here is another Q for you: which students have better results: those who are free to choose their own deadlines, or those where the professor ‘democratically’ decides for everyone? Incredibly, it is the latter! (p. 115) This finding may go against our cherished beliefs, but in fact it ties in very smoothly with notions of ‘ego depletion’ (Baumeister). The very process of deciding exhausts us, with the result that we are both more stressed and produce poorer-quality work.Ariely writes in the simple, effortless and straightforward style that you find among people with a real command of their subject. Rather than bombarding the reader with studies and facts, he goes through each experiment in detail, ensuring that the reader manages to grasp the key concept in all its fine details. He then goes on to consider the possible applications of the findings in various fields of life – not just work. Yet what I like best about this book is that he also uses examples from his own life – sometimes funny, sometimes poignant.OK – now here is one last idea from the book: a little ‘conjuring trick’ for shamelessly manipulating students (pp 9 – 10): You give them a choice for homework: they can read a long article or they can write a short essay. But you really want them to write that essay. Piece of cake – you give them a third option; writing an even longer text! Now, nobody is going to choose that, right? Yes, but because the short essay is better than the long one, students also assume it’s preferable to the article too! Brilliant!! 🙂

⭐This is an engagingly written introduction to behavioural economics. It is based largely on the author’s own research, and so is laced with anecdotes about the behaviour of American students. If you are unfamiliar with the discipline, this is not a bad place to start. But it lacks the grand sweep and authoritativeness of Thinking Fast and Slow. It also assumes the reader is American, which can be annoying. And in my view, some of the policy proposals go beyond what is justified by the evidence presented in the chapters.

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