Brief Summary of Predictably Irrational: The Hidden Forces That Shape Our Decisions
Chapter 1: The Truth About Relativity
The idea of this concept bore down to comparison for e.g., jobs with jobs, holidays with holidays, boyfriends and girlfriends, etc. Using the concept “Decoy “as tactic to lure consumer into purchasing behavior.
Recommendation: Ariely’s only cure for this is to break the cycle of relativity.
Chapter 2: The Fallacy of Supply and Demand
Ariely discusses the existence of arbitrary coherence. initial prices are “arbitrary”, once those prices are established in our minds they will shape not only present prices but also future prices. Price tags become anchors when we contemplate buying a product or service at that particular price.
Recommendation: Awareness of our vulnerabilities is advised with everything we do; training ourselves, questioning our repeated behaviors, as such this certainly will impact on all our decisions in our buying pattern.
Chapter 3: The Cost of Zero Cost
Zero or free pave the way of decision in purchasing pattern and its most time a struggle when deciding between a free item and another item. Often lost better deal and settle for something that was not what we originally wanted because we were lured by the items or service FREE!
Recommendation; Free offer! Create irrationality in our decision process as such, its affect our Purchasing decision pattern. So we pay attention to our product or idea and not the excitement of nothing not to loose
Chapter 4: The Cost of Social Norms
Two important points:
- When people work for a cause or do a favour they make more of an effort than when they are paid.
2. When people get mixed messages, get a gift, but know the price, they work less hard.
Recommendation: Monetary compensation seem to be the most expensive way in human motivation, Social norm are equally expensive but have lasting effect when compared.
Chapter 5: The Influence of Arousal
In other to make better decisions, we must learn how to put caution on our decision when we are aroused. Preparatory knowledge in managing this aspect of our life is of utmost importance in other not to make bad decisions when excited
Recommendation: we should be careful and the need to recognize these two sides to ourselves and how this benefits and hinders our decision-making.
Chapter 6: The Problem of Procrastination and Self-Control
Using compulsory deadlines could be our panacea for procrastination (e.g students with homeworks). Complete flexibility doesn’t seem to help, but setting our own deadlines does help keep a check and stay ahead.
Recommendation: Controlling how you spend, Ariely discussed his past idea of creating a self-control credit card that helped people manage their credit wisely. This obviously didn’t sit well with the Credit card companies who knew that they will be out of business if people can control expenditures with cards. So a precommitment that can’t be changed could a way out
Chapter 7: The High Price of Ownership
The IKEA effect is at play here whereby a piece of furniture we put together is worth a lot more to us than another one we bought complete. We tend to overprice it when we intend to resale it. Have you noticed the difficulty in time selling the house we built, because we want a higher price for the much emotion, history etc., the house put on my mindset. However, in the eyes of a potential new owner, these might just be things to get rid of, hence the gap between the asking price and what the buyer is willing to pay widens. Three basic reasons as summarized are.
- We fall in love with what we already have
- We focus on what we may lose, rather than what we may gain
- We assume other people will see the transaction from the same perspective
Recommendation: As Dan points out, there is a widespread application of this phenomenon in marketing. Smart marketers know that once we own something, we have a hard time letting it go. That’s why they give us stuff for free to try or give us back the money if we don’t like it, because unless the product is awful and adds no value to our lives whatsoever, we’ll want to keep it. Our aversion to loss and feel of ownership dictates that we hang on to it. So we need to weary of ills of ownership and we should try to see our transactions as if you were a non-owner to help create distance between yourself and item.
Chapter 8: Keeping Doors Open
The part basically talked about “Options” human beings always want to keep more than one option in terms of everything, like a backup plan, such moves most of the times blinds us to greater opportunities. Dan conducted a several experiment which made him establish the findings that we can’t tolerate the loss of options even if keeping all of them open is in no way beneficial to us.
Recommendation: A simple summary would be that we should keep our focus meaning and specific instead general and inconsequential
Chapter 9: The Effect of Expectations
“WHEN WE BELIEVE beforehand that something will be good, therefore, it generally will be good—and when we think it will be bad, it will bad.” The trick our mind plays on us! With the following experiment with overwhelming outcome. Illustrating this instances. Beer with vinegar tastes better provided that you are not told that it has it before drinking it. Coffee tastes better drunk from fancy cups. A sports car feels better if you had high expectations before the test drive and so on.
The real interesting thing is that it’s not just perception. Expectations change the actual experience we have. So we don’t just imagine that beer with vinegar tastes bad, it actually does (but only if we know it’s in the beer in advance). How is that possible? How can information change the physicality of our experience? The answer lies in our trick on mindset
Recommendation: Expectations also shape stereotypes. A way to view this positively is to perhaps at least acknowledge that we are all biased.
Chapter 10: The Power of Price
Ariely explores placebos and how they can prove effective. Beliefs and expectations affect how we perceive and interpret sights, tastes and other sensory phenomena. This research is nothing new but Ariely takes the perspective that it hasn’t been explored in terms of how price affects our experience. Can a pricey medicine make us feel better than a cheaper brand? He finds that prices drive the placebo effect with pharmaceuticals and argues that this is also applicable to consumer products. The experiments suggest that more expensive things (higher perceived value) have a better placebo effect. The most solid proof seems to be the experiment where people drank some energy drink, and those who had the more expensive version did better in a puzzle. Also, the group who had the drink whose bottle specifically said that it helps people do better in puzzles, they actually did better than the group with the blank bottle.
Recommendation: Acceptance of placebos as an effective treatment has increasingly produced tremendous result that Dan, basically focused on application of this placebos, indicating prices drives them controversially.
Chapter 11: The Context of Our Character Pt. I
Ariely explore the idea that there might be two types of dishonesty in work places and in general. One type is the kind that would go intentionally to Rob and the other type would be the ones who considers themselves honest but usually they sneakily cheat as well. This chapter suggests this reality of this kinds of frauds differs When we think about honesty and morals, we tend to think that there are good people and bad people. Dan’s experiments find that when given the opportunity, many honest people will cheat. Most of them cheat just a little bit. Also, once tempted to cheat, participants didn’t seem to be as influenced by the risk of being caught as one might think.
Recommendation: That people cheat much less if they are reminded of morals and honesty. This works by just making them think of the ten commandments or signing a code of honor or something similar.
Chapter 12: The Context of Our Character Pt. II
Interesting findings that people do without taking note of it, Dan’s was simple and precise with his thought on this chapter, but I intend to illustrate with a simpler form of reasoning we should follow. Now think about your work place, for example you work at McDonalds, and properly if you on your way own and you need some food items taking a little portion for self-use won’t be considered much as crime based on our thought on it. But what happens if its monetary then technically we won’t want such a dent on our image if caught.
Recommendation: This chapter argues that while we will take bits and pieces of stuff that don’t belong to us without having second thoughts, we don’t do the same with cash. For some reason, cash is something that we’re very honest about in general. In the advent of digital money, that’s not too encouraging. (Sited from an Online post http://zsoltbabocsai.org/)
Chapter 13: Beer and Free Lunches
Ariely summarized the other chapters, in brief and also show influence our friends have on our choice of meal at a restaurant. His advice is to be sure you know what you want and stick with you first decision. Be especially conscious when your friends order out loud before you as this is when you’re most likely to change your mind. I got this summary from an online post, which credit goes to the writer on the blog: http://zsoltbabocsai.org/dan-ariely-predictably-irrational
Summary – Key Takeaways
- We have no idea of the real value of things. We can only make choices in comparison to similar options.
- The old supply and demand theory explains only a fraction of what happens in the marketplace.
- When appropriate, giving things away for free can make all the difference.
- Social and marketplace norms don’t always mix well.
- The only way to make sure we don’t give in to temptation is to make it impossible before the temptation arises.
- Do not try to get the sentimental value for an item you’re selling and you’ll make a quicker sale.
- Keeping too many doors open often has a higher cost than what those opportunities are actually worth.
- Our experience is largely determined by our prior beliefs, perhaps more so than the quality of the actual product.
- People are generally honest and will be even more so when reminded of honesty.
- People easily steal things, but not cash.
Note: The provided summary to this book : Predictably Irrational by Dan Ariely, was for the purpose of generating my own ideas, i have also sited some blog post that i also used their words in making this successful. I enjoyed it and still want to keep it on shelf for future reading. Thank you Dan Ariely, i hope that someday i will meet you in person and take a selfie pic with you. I really like the insight you provided in this book. I employ you all to have a copy:
Writer: Benjovi Benson 2016
Phd Marketing @Ozyegin University