Predictably Irrational by Dan Ariely. Unpredictable.

Predictably Irrational

Read November/December 2013
★  ★

First, major shout-out to Carly for inspiring me to read this one. While I love stretching my science muscles, it isn’t my first choice for enjoyment reading material, especially during the school year.

Despite initial enthusiasm, I find I remain ambivalent about Predictably Irrational. The basis of the book is a number of studies Ariely has authored or co-authored, and his subsequent application of the results to various social issues. I’ve started to think of the genre as Social Science Lite, essentially an opportunity for an author to weigh in on choice issues, appearing authoritative by tying it to various studies (current king of the genre is undisputedly Malcolm Gladwell). His research, largely done with college students and frequently involving small payoffs, provides interesting insight on decision-making and our efforts to be ‘logical.’ While his analysis of larger social issues is usually interesting, his efforts to tie the social and political commentary to his research a significant s-t-r-e-t-c-h.

In keeping with Social Science Lite, citations are collected together by chapter at the end of the book. Which, as an aside, is one of the problems of these types of books for me. I tend to go into academic mode, so I start analyzing according to more professional standards. Some of his citations highlight the ‘lite’ part of this book. For instance, Chapter 7 cites four studies, all 1991 or earlier, and all done by some combination of the same four men. In fact, many of the same individuals reappear in different citations. It could be the double-edged sword of a specialty; only so many people studying one’s topic. Or it could be that there is a very limited body of work that actually supports Ariely’s suppositions (I hate it when I start a paper and can’t find enough studies to support my thesis!). In fairness to Ariely, almost all of his/co-authored papers are published, meaning they’ve passed profession standards.

Chapter 4  is interesting, especially to anyone who uses social media, and Chapter 7 is a nice look at how our values change with ‘ownership.’

As I did this as a shared read, I made many more notes than I normally do. As such, detailed notes are below the line/break. Feel free to skip! I promise, no offense taken.



Chapter 1: The Truth about Relativity: a fascinating concept, it essentially boils down to the idea that we usually need context to ‘know’ what we want. When I go bike shopping, my selection is partially determined by the ‘high’ and ‘low’ ends of the bikes I see. It has a corollary–we compare things that are similar and avoid comparing things that can’t be easily compared. Ariely uses an example of house-shopping to demonstrate; it is easier for a buyer to compare a ranch house to another ranch house, and not a Colonial style.  These tendencies to need context often work against us in two important ways. One, marketing specialists know this, so frequently provide a ‘false choice’ to lure us towards their intended goal. Research into restaurant prices demonstrates this. Studies show people will rarely order the most expensive item on the menu, but they will frequently order the 2nd or 3rd, rationalizing that it isn’t the most expensive. The other way it works against us if far more significant–if we measure ourselves by the context around us, it often leads us towards dissatisfaction. It’s hypothesized to be one reason why happiness self-assessments don’t increase commensurate with salary.

Chapter 2: The Law of Supply and Demand:  although economic theory likes to believe that supply and demand are proportional to each other and independent of other factors, studies show that the human brain doesn’t ‘demand’ in isolation. Price points for our wants are ‘anchored’ to an initial experience. Thus, you have my 67 year old mom bemoaning the price of gas and reducing driving because she remembers the days when it was $1.25 a gallon, and you have 20 year-olds accustomed to $3.00 a gallon that don’t adjust their consumption habits because that’s the price they expect to pay.  And unfortunately, supply and demand aren’t independent when we are reacting to price points suggested by manufacturers–consumer willingness to pay is as influenced by manufacturer price point as it is the demand for that item.

Chapter 3: The Cost of Zero Cost: my favorite chapter so far. I’ve long been anti-stuff (a fond shout-out to The Story of Stuff people) and few people understand why I wouldn’t want free Advance Reader Copies of books, or the “buy-one-get-one-free” pizza offer, or any of a hundred things because they are free or ‘cheap.’ Even e-books. I’ve never been particularly acquisitive, except for books, but even e-books create a sort of mental burden on me, a sense of clutter in my e-reader space. Ariely focuses on studies that show we ‘short circuit’ when we think we are getting something ‘free,’ and preferentially pick the item that comes with the ‘free,’ even if the one at a reduced cost is truly a better deal. He has a nice little study involving Hershey’s and Lindt chocolates, and a telling anecdote about Amazon and their ‘free shipping’ offer.  My case in point? The number of people I know with thousands of ‘free’ books on their e-readers, and no physical way to read them all.

Chapter 4: The High Cost of Social Norms: aka, “Ariely proves to be a sexist author.” The premise is that we tend to conceive the world in terms of ‘social’ and ‘economic’ worlds. In the social world, we rely on social exchanges for value. In the economic world, value is determined by dollars. Mixing the two often results in highly emotionally charged situations. His first example is a Thanksgiving guest attempting to pay for a meal with family, resulting in offense. His second example of sex within a relationship and sex with a prostitute is too charged and too erroneous to be effective.

What was fascinating was the attempt to try and mix the world of social and market norms by ‘gifting’ or ‘paying’ students for their work and discovering students would work for a small ‘gift,’ but not an equivalent small amount of money.  He then extrapolates to discussing how businesses who attempt to use social norms to inspire loyalty (hello, Facebook business!) are entering into very delicate territory when they fail the appropriate social reciprocating–hello, Goodreads!

Chapter 5: The Influence of Arousal: as an aside, Ariely is being a dick again in this section, complaining that MIT’s School of Management asked him “unwarranted” questions about his study. He was proposing to study decisions made during sexual arousal, and the board was asking questions such as “what to do if participants in a study uncovered abuse memories or showed signs of sex addiction?” Hmm. He says ‘unwarranted,’ I say, ‘legally and ethically responsible.’

Now, to the chapter itself: one study on arousal, huge draw in conclusions. He equates sexual arousal with other forms of emotional arousal such as anger and fear. I would love to see brain hormone studies on this one–I have absolutely no doubt that sexual arousal impairs our decision-making in predictable ways (particularly in achieving satisfaction), but I’m doubtful that generalizes to all emotional states. Rage, for instance: some internalize all too well, some externalize in an outburst, and some “flip a switch” into calculation. Most of the chapter seems to then be devoted to strategies for mitigating decision-making when aroused and in particular, safe sex and driving among youth.

Chapter 6: The Problem of Procrastination and Self-Control:  Well, crap. This is the chapter that I was hoping for some insight, but was wasted promise. He starts out with example of declining numbers of people saving, then says, “I suppose one answer is that Americans have succumbed to rampant consumerism.” He supposes, eh?
Then he ascribes “the other half of the problem” to explosion in credit. From there he blames our decision making on ‘hot’ states of decision-making. He relates these everyday examples of money management to studies done on college students procrastinating on papers and class workload. I don’t contest his results on procrastination, college work and results at all; I just doubt his extrapolation of it. I really would have liked a detailed discussion of the topic, and not his prescription for national health care changes and savings.

I think the actually issue of procrastination/control is fascinating. He uses preventative health care as another example of how people procrastinate in ways that are irrational. There are so many, many reasons people don’t get preventative health care–I don’t think they are easily comparable to a study on delaying oil changes in a car. There are complicated beliefs about health and authority, cost and value, and what about all those anxieties? People that know something is wrong and never go, and people that know something is wrong and go every chance they can. Different outcomes, same underlying mechanism.

Just too simplistic for a really interesting topic.

Chapter 7: The High Price of Ownership: Okay, this section is very interesting. I liked his study about ticket value among students for a high-profile football game. The study looked at how much students were willing to pay pre-purchase, and how much they were willing to sell tickets for post-purchase–or how much they were willing to pay from scalpers if they weren’t successful. Surprisingly, I just bought some concert tickets for a high-profile show. I was clicking the “find seats” button again and again when I chanced on an excellent pair of tickets. Went through the checkout, thought “what if,” and tried a couple times more on another window. Didn’t see anything better. Tried to buy the tickets and the system failed. Went back to the beginning and repeated the search. Went through it all again, but I had the lure of those awesome tickets out there that were almost mine. How could I settle for significantly less than what I had (even though I didn’t have them). Good ones came up again and I was again booted. Third time, I learned my lesson and didn’t check for any more, I just bought as fast as I could. But it was interesting how those tickets I almost had then became my standard for what I should get, instead of anything more than the nothing I currently had.

There’s also a supposition that by buyers putting together their own Ikea furniture, they are more invested/in love with the results. While it makes emotional sense, although I don’t know that he supported that with a real study. The idea that the labor invested gives an ownership beyond the actual cost is a popular one, but I wonder if it is one of those things that feels true, or is true. Ditto with his examples for on-line auctions, ‘trial’ packages/promotions and ‘money-back guarantee.’ All excellent examples, I’ve seen the psychology in action… but he really has nothing to support it. His appendix sites 4 studies–three of them by the same author, or same author in a group. Whoops.

Chapter 8: Keeping Doors Open: As usual, I was intrigued by the ideas and felt like there was a whole book in that chapter. Wait–there was–How We Decide. Whoops!  There’s huge wasted potential here. The idea is that we irrationally try to keep all options available, even to the extent of enduring negative effects. Unfortunately, Ariely’s presentation was undeniably sexist. He presented two examples that confirmed his bias–a male student agonizing about his major/career, and a female student agonizing about two boyfriends. You mean to tell me he had no female students agonizing over career?

Once again, he then takes relatively straight-forward experiments–college students playing  specifically designed simplistic video ‘games’–and generalizes them to real-world behavior. The first study looked at choices made regarding going through doors and linked them to small monetary outcome.  I liked the subsequent steps of seeing how choices changed when participants were told the outcome. I do wonder how the rules of video gaming might effect even what one is told is true–habit, as he points out earlier, is very powerful.

A more telling question is why do we keep all options? For instance, keeping options open professionally is about economic viability/survival. If I maintain contacts with people on the cardiac unit (not my specialty) or medical imaging (not my interest), that’s one way for me to keep professional options open in high demand specialties. I might even take a class now and then. Rather than calling that wasting time to keep doors open, I’d call it maintaining financial viability.

Biologically as well, scientists know that generalists do better. Ecological niche specialists become too specialized and if you get some dramatic event–say, climate change–biology no longer enables survival. It’s why we see the American crow in almost every state because it is adaptable to all climates, landscapes and variety of foods, but not meadowlarks. You might be able to argue that by keeping their options open (both with degree and mate), the students in the first examples were attempting to minimize the risk of choice/maximizing a successful choice until something tilted it clearly one way or another. The door study is largely one-way variable decision-making. It would have been more interesting, perhaps, with larger financial values attached to it–would people seek to keep doors open if one door had a larger financial reward?

Of course, I agree with his extreme extrapolation of the idea that some doors disappear. Children are only young once, etc. But indirectly, what he is suggesting is that by keeping in mind the consequences of goals/choices, he might be inviting further choice paralysis.

Chapter 9: The Effect of Expectations: is an interesting chapter. The premise is that our expectations influence our experience–but Ariely takes it a step further. One study looks at price and expectations with coffee. The other examines whether or not fore- or after- knowledge of drinking adulterated beer influences opinion on how ‘good’ that beer is. He then reviews some of the earlier Coke and Pepsi comparison studies and analyzes results in terms of expectations. Even more interestingly, he then discusses a few studies that looked at priming participants by a “neutral” task (such as a word-jumble, or asking questions about race and gender) and then having them take an objective test. Interestingly, the women who were asked gender questions did worse on the math test while the women who were asked questions about their Asian background did better. His interpretation is that we will always, therefore, disagree on ‘facts’ because of our perception. The solution is to present information stripped of preconceived ideas.  Well, sure. Much more easily said than done, and some might argue that context is everything.

Chapter 10: The Power of Price: or, the last good chapter. Subtitled, “Why a 50-cent aspirin can do what a penny aspirin can’t.” Good support, interesting ideas about what people believe influencing results. He cites a couple pre-1960 medical experiments where subjects thought they had medical procedures done–and the results were exactly the same as those who had the procedures done in actuality. Placebo studies are well known, and reasons why they work aren’t always understood. However, when tied to the information from the Expectations chapter, one can start to see where higher prices create an expectation of a more positive result; thus, we want the brand-name expensive medicine over the biologically equivalent generic. Really, an ingenuous idea that Ariely and company investigated by testing a placebo for pain relief–both the ‘cheap’ and ‘expensive’ versions. The ‘expensive’ placebo gave more relief. Thankfully, he goes on to point out that by reflecting on the price/quality, participants were able to break that connection. Conclusion: don’t be an unconscious consumer. However, he goes on to state that the solution is to have more studies allowing placebos, a practice that is largely unacceptable in medicine.  (Studies are done using ‘controls’ or a group that doesn’t undergo the tested condition). Dingy conclusion to an interesting set of studies.

The next two chapters have to do with character: Chapter 11, The Context of Our Character, Part I, and Chapter 12, Part 2. Interesting, but again subject to the problem of using small-stakes testing and extrapolating to high-value real-world conditions. He looks at dishonesty in people tasked with a set of math problems who receive a small financial reward, and extrapolates it to Enron executives who robbed the company’s pension fund. I do appreciate his point that ‘white-collar’ crime of fraud and theft causes more loss and more wide-scale damage than ‘blue-collar’ crimes of robbery/theft. Love the Upton Sinclair quote: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

The last chapter is Beer and Free Lunches which wasn’t nearly as fun as it sounded. It discussed our need to affirm identity (choosing differently) over pleasure. Hmm.

Finally, in the later edition, he goes back and reflects/shares anecdotes about chapters. Essentially, he got his chance to include material one would go back and say if you were arguing with a person in a mostly friendly way, but later that night thought “oh, if only I had remembered to say…” Unfortunately, it mostly falls under ‘anecdotal’ and not under further scientific support.

The very last section is an extensive piece on the Subprime Mortgage Crisis and Its Consequences, and I read it because I’m stubborn, not because I cared. Except he didn’t really explain the crisis well, just presumed reader knowledge. Since I have almost zero economic and high finance knowledge, I was lost almost from the start.

About thebookgator

avid reader and Goodreads reviewer looking for a home.
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1 Response to Predictably Irrational by Dan Ariely. Unpredictable.

  1. Zanna says:

    Great analysis! Sounds like a poor cousin to Thinking Fast and Slow which as well as being awesomely wise is pleasingly unsexist – since Kahneman needs to talk about so many hypothetical people, he alternates casually between she and he, slightly favouring the former, and slightly more often (I felt) giving negative roles to hims = ) Also, the research is nearly all his own, and he demonstrates its value with interactive examples! He doesn’t really apply a political spin, showing rather than telling that classical economics is as useful as a chocolate kettle

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