Predictably Irrational (updated) - The hidden forces that shape our decisions by Dan Ariely - #book write up @danariely


Great book on behavioural economics (if your into it) and I have to confess to making some of the 'astonishingly simple mistakes' that Dan presents so well.  I do take comfort that my misguided behaviours are neither random nor senseless and that I appear to quite human, fallible, systematic and predictable - however ask any of the three girls in my home and I am sure that they would have a different view :)

[youtube]  - TED talk video

Best bits for me are:





Let me start with a fundamental observation: most people don't know what they want unless they see it in context.  We don't know what kind of racing bike we want - until we see a champ in the Your de France racketing the gears on a particular model. we don't know what kind of speaker system we like - until we hear a set of speakers that sounds better than the pervious one. We don't even know what we want to do with our lives - until we find a relative or friend who is doing just what we think we should be doing.  Everything is relative, and that's the point.

Price is used to guide you to what someone wants you to buy - you are being used. Which black circle is bigger?



That's a lesson we all learn: the more we have, the more we want.  And the only cure is to break the cycle of relativity

Goes for time as well as material. 


The Fallacy of supply and demand

Favourite topic of mine and one that I have worked on and continue to work on


Lorenz called this natural phenomenon 'imprinting'

Is the human brain, the, wired like that of a gosling? Do our first impressions and decision become imprinted? And if so, how does this imprinting play out in our lives?  When we first encounter a new product, for instance, do we accept the first price that comes before our eyes? And more importantly, does that price (which in academic lingo we call an anchor) have a long-term effect on our willingness to pay for the product from then on?

Heard some great work by Robin Wright (founder Engine) who was exploring why the human brain demands so much more energy to change its mind - the implication is that loyalty is actually laziness.

The video is at


This must be a "fantastic restaurant." and joins the line. Others join. We call this type of behavioural herding. It happens when we assume that something is good or bad on the basis of other people's behavioural, and out own actions follow.

But there's also another kind of herding, one we call self-herding.  This happens when we believe something is good (or bad) on the basis of our own previous behaviour

Get some to recommend you - pay them,  it must be good.


Descartes said, Cagito ergo sum "I think, therefore I am"  but suppose we are nothing more than the sum of our first, naive, random behaviours - what then?

...then education is more critical...


The cost of social norms - why we are happy to do things, but not when we are paid to do them.


We need to explore the two sides of ourselves; we need to understand the cold state and the hot state; we need to see how the gap between the hot and the cold states benefits our lives, and where it leads us astray.

What did (our) experiments suggest? It may be that our models of human behaviour need to be rethought. Perhaps there is no such thing as a fully integrated human being. We may, in fact, be agglomeration of multiple selves.  Although there is nothing much we can do to get our Dr Jekyll to fully appreciate the strength of Mt Hyde, perhaps just being aware that we are prone to making the wrong decision when gripped by intense emotion may help us, in some way, to apply or knowledge of our "Hyde" selves to our daily activities.

Why are we prepared to give up liberty and privacy at a point of need.  I have thought about the point of inspiration (create), the point of consumption and the point of need as the prime reasons for doing something in digital - I now need to think about how the behaviour will change depending on what is driving the person at that time.


Ownership pervades our lives and, in a strange way, shapes many of the things we do.   Adam Smith wrote " Every man ... lives by exchanging, or becomes in some measure a merchant, and the society itself grows to what is properly a commercial society"

Since so much of our lives is dedicated to ownership, wouldn't it be nice to make the best decisions about this?  ... unfortunately , this is rarely the case.  We are mostly fumbling around in the dark. Why?  Because of three irrational quirks in our human behaviour.

1. we fall in love with what we already have

2. we focus on what we may loose rather than what we will gain

3. we assume that other people will see the transaction from the same perspective as we do.

So to collect someone data, they need to do it as they want to - Facebook.......


Ownership also has what (i'd) call "peculiarities"

1. the more work you put in, the more ownership you being to feel for it.

2. ownership is inversely proportional to the ease with one assembles something - Ikea effect

3. we feel it before we own it (ebay effect) We become partial owners before we own it and then become irrational  (offer a trial)

A for any product or service who is the sales person trying to get you to take ownership. 


Ownership is not limited to material things - points of view.

Worth thinking through ownership.  Features are all capex based (ownership), services are all opex, pay as you borrow/ rent)

Given people like to own, will the service market have some significant issues?


There is no know cure for the ills of ownership. As Adam Smith said, it is woven into our lives. but being aware of it might help.  Everywhere around us we see the temptation to improve the quality of our lives by buying a larger home, a second car, but once there - we have a real problem letting go and going back down

Does an economic crisis have a side effect in breaking this loop and therefore explain why it provides a lag to take up as those who go back may be less willing to 'large' again


Normally, we cannot stand the idea of closing the doors on our alternatives...

In the context of today's world, we work just as feverishly to keep all our options open.

We might not always e aware of it, but in every case we give something up for those options... we forget to spend enough time on what really is important. It's a fool's game, and one that we are remarkably adapt at playing


What is it about options that is so difficult for us? Why to we feel compelled to keep as many doors open as possible, even at great expense? Why can't we simply commit ourselves?

Life gets faster, but we still want all the information and refuse to use technical filters, but we do trust our social group to be an editor/ filter. May be there is a role for twitter?


How can we unshackle ourselves from this irrational impulse to chase worthless options? In 1941 the philosopher Erich Fromm wrote a book called Escape from Freedom.  In a modern democracy, he said, people are beset not by a lack of opportunity, but by a dizzying abundance of it.

Closing the information overload is going to prove hard


We have a irrational compulsion to keep the doors open. It's just the way we are wired.

Note to self - when a sales man has an old pipe line - what does this tell you about the person? Busy fool?


Suppose you've close so many of your doors that you have just two left. I wish I could say that choices are easier now, but often they are not.  In fact, choosing between two things that are similarly attractive is one of the most difficult decisions we can make.  This is a situation not just of keeping options open for too long, but of being indecisive to the point of paying for our indecision in the end.

You die as you cannot decide which one to chase so you doing nothing and starve. 

Regulation gets held up and does nothing


When we believe beforehand that something will be good, therefore, it generally will be good - when we think it will be bad, it will be bad.... In other words, can previous knowledge actually modify the neural activity underlying the taste itself, so that when we expect something to taste good (or bad), it will actually taste that way.

If it is going to take 15 minutes - don't say 5


That's what marketing is all about - providing information that will heighten someone's anticipated and real pleasure.  But do expectations created by marketing really change our enjoyment?


All these experiments teach is that expectations are more than the mere anticipation of a boost from a fizzy Coke. Expectations enable us to make sense of a conversation in a noisy room, despite the loss of a word here and there, and likewise, to be able to read text messages on our cell phones, despite the fact that some of the words are scrambled.  And although expectations can make us look foolish from time to time, they are very powerful and useful


In general, two mechanisms shape the expectation that make the placebos work. One is belief - our confidence or faith in the drug, the procedure or the caregiver.

The second is conditioning, The body builds up expectancy after repeated experiences and releases various chemicals to prepare us for the future.


Thus familiarly may or may not breed contempt, but it definitely breeds expectation.  Branding, packaging and the reassurance of the caregiver can make us feel better.

Can we assume that high price means higher quality, and do our expectations translate intro the objective efficacy of the product


Even if the analogy is not exact, honesty offers a related lesson: once professional ethics (the social norm) have declined, getting them back won't be easy.... There lacks a platform of trust

Does marketing and poor experience undermine trust, in a wide context.


None of this makes logical sense, but when the medium of exchange is nonmonetary, our ability to rationalise increases by leaps and bounds


All these electronic transactions, with no physical exchange of money from hand to hand, might make it easier for people to be dishonest - without ever questioning or fully acknowledging the immorality of their actions

We have not adopted from money to electronic.  I am sure the same happened when we shifted from chickens and eggs to money.


Even good people are not immune to being partially blinded by their own minds.  This blindness allows them to take actions that bypass their own moral standards on the road to financial rewards. In essence, motivations, can play tricks on us whether or not we are good, moral people.


We need to recognise that once cash is a step away, we will cheat by a factor bigger than we could ever imagine. 

New Social rule for a digital age.


In essence, people , particularly those with a high need for uniqueness, may sacrifice personal utility in order to gain reputational utility.


The result is that we are presumed to be making logical and sensible decisions. And even if we make a wrong decision from time to time, the standard economics perspective suggests that we will quickly learn from our mistakes either on our own or with the help of "market forces".  On the basis of these assumptions, economists draw far reaching conclusions about everything from shopping trends to law to public policy

But we don't learn - or pass on the learning. However, will social media help.  Does rating and voting add value and will it help up service, that assumes that everyone participates. 


So, what do food pellets, and slot machines have to do with email?  If you think about it, email is very much like gambling.  Most of it is junk and the equivalent to pulling the lever of a slot machine and losing, but every so often we receive a message that we really want - hence we become addicted to checking for the good bits


As it turns out, positive expectations allow us to enjoy things more and improve our perception of the world around us.  The danger of expecting nothing is that, in the end t might be all we get.