Predictably irrational: The Hidden Forces that Shape Our Decisions,Dan Ariely – Book Notes

The ONE Thing

Predictably irrational

I am simply noting several learnings from the book. Author has done series of experiments (explained in the book) that lead to these findings.

  • People dont know what they want until they see things in context
  • Relativity helps us make decisions in life
  • Use decoys
  • Survey: Man’s happiness depends on wife’s sister’s salary
  • Tip: Go from narrow to broad, stop wanting more
  • Law Homan action, to make a man covet a thing only make it difficult to attain (Black diamond example)
  • Arbitrary cohesion – anchoring – imprint / arbitrary coherent
  • Herding (Starbucks example)
  • Tip: Question decision. Specially first.
  • Tip: Question how it began, the amount of pleasure, could you do something better with that money
  • Fear of loss – 0 or free is important
    • 0 is not just a discount, it’s huge.
    • Difference between 2 and 1 is not huge but 1 to 0 is
    • Tip: Don’t look at absolute value look at relative benefit
  • Cost of social norms – happy to do things but not when we are paid to do them
    • Social norms – people will go extra mile to help, market norms – people compare with what they are getting paid
    • Gift: People are willing to work for free and they are willing to for a reasonable wage but not for small value.
    • Gift is already and also small value gift but not value of gift. Just making them think of money will bring market norms
    • When Social norm collide with market norm, social norm goes away for long time. Social relationships are not easy to establish
    • We behave differently when we are cold vs when hormones are raging. Emotional high
    • Need to understand both sides of us
    • Aware that we are prone to make wrong decision when emotionally charged

 

  • Problem of procrastination and self control – why we can’t do what we want to do
    • Everyone has procrastination Those who recognize and admit can use tools for pre commit
    • Dictatorial – self commitment
    • Each problem has self control mechanism.. Pre deduction, excercise with friends

 

  • High price of ownership : why we over value what we have
    • we fall in love with what we already have
    • we focus on what we may lose rather than what we may gain
    • we expect other person to exhibit same emotions. See same world

 

  • Keeping doors open – why options distract us from our main objective
    • In running back and forth between things that might be important we forget to spend enough time on thing that really is important
  • The effective expectations-why the mind gets what it expects
    • When we believe before hand that something will be good therfore it will be good, if generally wwe think it will be bad, then it will be bad
    • Expectations affect every part of our lives
    • Don’t underestimate power of presentation
    • Server food in nice container, invest in good wine glasses
      Increase enjoyment of movies by telling it got great reviews
      Providing someone information that will heighten anticipated and real pleasure
    • Expectations build stereotypes
    • Even our own behavior can be affected by stereotypes
  • Power of price – why a 50c aspirin can do what 1p aspirin can’t
    • In general two mechanism shape the expectations make placebo work
      • Belief
      • Conditioning – dogs salivate, body conditions based on expectations
    • Familiarity may or may not breed content but it definitely breeds
    • Price affects our experience
    • Irrational instinct – discount means low quality
  • Context of our character part 1- why we are dishonest and what can we do about it
    • Super ego
    • What is honesty – Adam Smith great economic thinker – humans have natural desire to please and original aversion to offend his brothers… The success of most people almost always depends on good opinion of
    • Cost benefit analysis for honesty and dishonesty
    • Individuals are honest only to the extent that suits them. Including their desire to please others
    • We care about honesty and wwe want to be be honest, but our internal honesty meter is only active when we contemplate bigger transgressions for eg taking full box of pen against taking just 1 or 2 wwe don’t even consider how these action reflect our honest so our super ego sleeps, without super ego’s help in monitoring and controlling of honesty our only defense is cost benefit analysis, in these cases cost benefit analysis will help. Comparing benefit of item theft vs cost of getting caught.
    • Ten commandments experiment, Remind of morality, Professional oath
    • Honor code experiment, moral reminder eliminates cheating
    • People cheat when they have chance, but not as much as they could, moreover when they start thinking of honesty they stop cheating. In another words when we are removed from any benchmark of ethical thaougut ewe tend to stray into dishonesty but if we are reminded of honesty at the moment when we are tempted then we are more likely to be honest.
  • Context of our character part 2: why dealing with cash makes us more honest
    • Cheating is easier when one step away from cash.
    • Pencil from office experiment

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