Have you ever wondered why you buy things that you don’t really need or why you are likely to be more honest after recalling the ten commandments? These are just a few of the questions researcher and author Dan Ariely answers in his book ‘Predictably Irrational’.
In the book, he debunks the myth that we think and act rationally and helps us to understand what really influences the everyday decisions we make.
The book in a nutshell
Most of us, if asked, probably believe that our decisions are pretty rational. In fact, the idea of rationality is the foundation of many economic ideas; the assumption being that we are able to make the right decisions for ourselves. The reality, Ariely says, is very different. Not only are we irrational but our behaviours are quite systematic and as a result quite predictable.
In the book, Ariely combines scientific experiments with real-life, every day experiences which makes it easier to understand and apply sometimes complex concepts. He demonstrates, in a number of scenarios, how irrational thought takes over and leads to strange behaviours. He also explains that irrationality is inherent to the way our brains work and by understanding that we are better equipped to navigate through it. Here are a few of these in action:
1.Everything is relative
Most of us don’t know what we want unless we see it in context. Just think, how many times have you been presented with 3 options on a sales page and selected the one smack dab in the middle. That’s not accidental. Ariely explains that we don’t have what he calls an internal value meter that tells us what things are worth. Instead, we focus on the relative advantage of one thing over another in coming to a decision about the best option to select.
Relativity pervades other areas of our lives too. For instance, we don’t know that we want something until we see someone else with it. This is a real downside of relativity because although it helps us make decisions it can also make us miserable if we keep comparing ourselves and our lives to others and come up short. This is especially relevant now in the age of social media.
2. We lack self control and procrastinate
The author makes the point that in the mid-2000s, average family credit card debt was about $9,000 and about 70% of US households used credit cards to pay for basic living expenses like food and utilities. This is in stark contrast to previous generations who saved before buying. Why aren’t we able to do the same today? Why can’t we delay buying something until we can afford it? Why can’t we save and resist going into debt to have what we want right now? Why do we lack self-control?
Ariely explains that it comes down to emotions and how they influence our view of a situation. We may tell ourselves we’re going to save but when we see that new pair of shoes, for example, we feel a hot rush of emotion which compels us to get it now. We in effect give up on our long-term goals for immediate gratification. Could we even begin to quantify how much we lose in the long run when we give in to our impulses?
Procrastination is a universal problem so what can we do to resist temptation and assert more control? Experiments showed that when given an opportunity to commit up front to what they want to do, people were better able to resist procrastination. Perhaps that is a way forward.
3. We get what we expect
How could any two parties look at precisely the same event and interpret it as supporting their opposing points of view? That is the question posed by Ariely when he discusses expectations and how they influence our view of subsequent events. His experiments revealed that when people were told up-front that something might be distasteful, the odds were good that they ended up agreeing. This is important because it wasn’t because of their actual experience but because their expectations had been set. In essence, when we believe beforehand that something will be bad it generally will be and vice versa.
Expectation can influence nearly every aspect of our lives and it’s useful because it creates shortcuts as we try to make sense of complex input. It also creates stereotypes which are a way of categorizing information so that we can predict experiences rather than start from scratch. Ariely gives some examples of expectation in action: it’s the reason we can make sense of a conversation in a noisy room even when we can’t hear all the words and why we can read text messages even when some of the words are scrambled. However, expectation can be dangerous too as it can also negatively influence both our perceptions and our behavior, for instance when we have a stereotype of a certain group of people.
So how do we avoid its pitfalls? The author makes the point that it starts with acknowledging that we are trapped within our perspective and therefore blinded, in part, to the truth. If we’re in conflict, using a neutral third party could be useful in helping us see past our biases.
This book is a fascinating read and gives remarkable insight into the hidden biases that affect our decision-making and the negative impacts that some of these decisions can have. If you want to understand what makes you tick and why all of us make irrational decisions then Predictably Irrational is a book you must dive into.