Predictably Irrational by Dan Ariely
This week, Christine Cairns takes a look at Predictably Irrational (The hidden forces that shape our decisions) by Dan Ariely.
"A Great Read especially for its day"
Predictably Irrational is a popular science book, aimed at a general rather than an academic audience. The content of the book is something that could appeal to readers from all walks of life. But is particularly useful to anyone interested in psychology and economics as well as individuals working in business and marketing.
About Dan Ariely
Dan Ariely is the James B. Duke Professor of Behavioural Economics at Duke University. He is also the founder of the research institution The Centre for Advanced Hindsight. His work has been featured in numerous academic journals on topics ranging from psychology and neuroscience to business and economics. He has also appeared in many popular publications including The New York Times, Washington Post and Scientific American.
In 2018 Ariely was named one of the 50 most influential living psychologists in the world.
“Most people don’t know what they want unless they see it in context”
“Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well”
Quotes from Predictably Irrational
Outline of the book
Predictably Irrational details the different ways our decision-making is influenced and holds up a challenge to traditional rational choice theory. We believe that we make smart, rational choices – or at the very least, we believe that we have control over the choices we make. Ariely poses arguments against this notion and explains how the decisions we make are not as rational as we think.
In 15 chapters, the book covers a wide range of factors that subconsciously affect our decision-making. These situations and models of thinking include context, perceived demand, price, emotion, anchoring, stereotypes, the decoy effect and the endowment effect.
While the theories and factors detailed in Predictably Irrational can be applied to any type of situation, Ariely chooses to exemplify them with economic decisions mostly. In turn, this provided insight into how businesses use these flaws in human nature to influence the choices that consumers make.
The Decoy Effect
The Decoy Effect is a simple but common way of manipulating people’s behaviour. It works by offering up an intentionally poor option in order to sway choice a certain way. In Predictably Irrational, one example Ariely uses is that of magazine subscriptions:
- Option 1) Digital subscription: $59
- Option 2) Print subscription: $125
- Option 3) Print and digital subscription: $125
The budding subscriber is automatically drawn towards comparing the two options that are equally priced (options 2 and 3) and will very quickly identify the third option as the better deal of the two. Not only this but they also start to see that third option as the best overall because that initial comparison has primed them think of the third option as being superior.
I found this point particularly interesting because when written down it seems so transparent that you can’t envisage it being effective, but it is and I’m sure everyone has fallen victim to this trick at some point.
Market leaders and differentiation
Being different doesn’t necessarily mean a brand only appeals to a niche market, it can make you a leader. In the book, Ariely uses the example of Starbucks starting off as a company that tried to distinguish itself from other coffee shops by giving it a more European feel and helped to justify its price point vs other coffee chains; but in turn, this strategy has been so successful that it is now considered a leader in the market with their style coffee shop now being mimicked by other brands.
While the placebo effect is very well known, the extent of research into it surprised me. I was already familiar with experiments comparing paracetamol and vitamin C tablets but Ariely discusses a couple of more extreme examples involving surgery.
The first example was of a heart surgeon who performed both real and dummy operations. Interestingly he found that both the real and fake procedure produced the same outcomes – both psychologically and more tellingly, physiologically. In addition to this, both procedures only provided short term relief.
The second case Ariely discusses is that of knee surgery. This research involved those who had the full procedure and those who had a placebo. But unlike the heart surgery case above, there was also a third condition which sat somewhere between the real surgery and the placebo conditions. Again, it was found that there was no difference between the conditions: all had decreased pain and increased movement in their knee. Unfortunately, while the patients were followed for two years after the surgery, there is no mention of the true longevity of the effects.
Would definitely recommend Predictably Irrational. It is an essential read for anyone who is interested in understanding the psychology of decision-making. It serves as a thought-provoking introduction to the topic and it’s clear to see why it became a best seller.
The book’s biggest strength is that is very accessible, explaining behavioural concepts in an easy to understand and entertaining way. The book is well laid out, each chapter details a different phenomenon, research findings and anecdotes to demonstrate each point. It brings the theories to life and prevents them from getting bogged down in academic jargon. Moreover, Ariely provides suggestions on how these theories can be put into practice to make positive changes in the real world.
Overall, Predictably Irrational makes a fantastic starting point for anyone who wants to learn more about behavioural economics. Alternatively, anyone who is simply curious about the peculiarities of human behaviour.