Predictably Irrational: The Hidden Forces that Shape Our Decisions*
Dan Ariely, 2008 (HarperCollinsPublishers: London)
I believe that humans are irrational. I believe that we like to pretend we’re logical but make decisions which are the complete opposite. What I didn’t believe - until I read this book - was being irrational could be, oddly, rational and predicted.
Dan Ariely’s book is full of interesting experiments which show how easy it is to predict irrational behaviour – but only if you’re a scientist. One of the key points of his book is that we are unable to predict our own irrational behaviour, resulting in social, moral and financial choices we might not always intend to make.
He covers a range of fascinating behavioural economics and social science ideas in this book, illustrating each with anecdotes and a couple of experiments, including:
- ‘Anchoring’, where our future decisions are influenced by an historic idea
- How social norms and market norms cross over
- ‘Priming’, where people are subtly encouraged to think of a subject before an action
- Personal versus reputational utility (how much use it is personally or social)
Applying theory to practice
One of my favourite parts of this book was how Ariely applied each of the findings about irrationality to a bigger, social issue. He gives ideas on how we can use our knowledge of humans’ predictable, irrational behaviour in finance, social and health industries, like “the self-control credit card” and sex education actually based on how crazy people get if they think they’re going to have sex (one of the weirdest experiments I’ve ever read about).
This application of what could be mind-bending stuff to real life makes this book exciting and politically pertinent. Some of his ideas around how irrationality and finance need to work together are particularly useful – Predictably Irrational* was published in the year the credit crunch was really felt, and you can see why some of his ideas about better economics are given such weight in the book.
Proving the power of branding
For marketers and advertisers, there’s also plenty to enjoy: experiments about buying cheap or posh chocolate, about always choosing the ‘middle option’, about how our expectations dramatically affect our perception of a product. It’s not hugely new stuff, but it’s the science behind it which is so fascinating.
For example, Ariely describes an experiment where people’s brain activity was measured when drinking Coke, Pepsi and in a blind test. When the participants knew the drink they were supping was Coke, there was greater activity in the memory and conceptual parts of their brain, leading to a better overall perceived experience. Hey, branding does actually work!
Top quotations to use from the book
On the difference between social and market norms:
If you’re a company … remember you can’t have it both ways. You can’t treat customers like family one moment and treat them impersonally … a moment later when this becomes more convenient or profitable. (p79)
On education:
We should also work hard on making education a goal in itself, and stop confusing the number of hours students spend in school with the quality of education they get. (p86)
On decision making:
What [people had] failed to do when focusing on the similarities and minor differences between two things was to take into account the consequences of not deciding. (p152)
On marketing:
…we’ve seen that the perception of value … can become real value. If people actually get more satisfaction out of a product that has been hyped, has the marketer done anything more than sell the sizzle along with the steak? (p190)
Enjoyed this review? Buy the book on Amazon here.*
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