Predicably Irrational
Predictably Irrational by Dan Ariely was one of the first books I intentionally bought for pure interest, not being related to Tech in any way. I’ve always been interested in why people act the way they do, and I’ve always head incredible feedbacks from lots of sources, so I had to get it and read it.
This book offers a collection of situations or causes for which which people act in ways that are actually inconvenient and/or irrational, while being convinced of doing the right thing, lead by a fallacious logic, social influences or erroneously-perceived benefits.
The book contains 13 chapters, each one covering a “predictably irrational” situation, precisely described and followed by actual studies and/or research, I will not actually list or resume them (yep, I guess you’ll have to read it 😁), but I’d like to write a few of the topics I found the most interesting.
Anchoring and Imprinting
The anchoring effect is a psychological phenomenon in which an individual’s judgments or decisions are influenced by a reference point or “anchor”. Wikipedia
In psychology and ethology, imprinting is any kind of phase-sensitive learning (learning occurring at a particular age or a particular life stage) that is rapid and apparently independent of the consequences of behaviour. Wikipedia
In various chapters, Ariely talks about how a first input can produce a long-lasting influence on a person’s perception, even if totally unrelevant to the actual subject of the decision, which are ultimately attributable to the concepts of Imprinting and Anchoring.
While relatively close and causing similar behaviour, they have some key differences:
- Cause: Imprinting is caused by a first experience/impression of something, while anchoring can be caused by some particular cause which gets stuck to an individual for some specific reason, but not necessarily the first.
- Duration: Anchoring is usually limited to the specific context of the situation, while imprinting is usually more long-lasting, if not permanent in time.
Those two factors influence people’s choices in everyday life, from minor things like where to buy coffee, to major desitions like evaluating in which country to move for the rest of one’s life.
Expectations and Prices
In Finance, there’s the so-called Efficient Market Hypotesis, which claims that prices reflect all available information on something, hence somehow making the market price its actual “fair value”, but outside of the markets, the world isn’t efficient at all, and sometimes the roles between information and price is reversed.
This book widely covers plenty of situations where the price does influence the expectations on things, and often also their perceptions. From situations where prices dictates a decision (especially if that price is zero), to instances where a more expensive aspirine has better effects than a cheper one, price is can be an active force on one’s will, instead of being simple friction.
But it’s not only price that can shape someone’s perception, it all comes down to setting expectations for something. The book itself mentions the black pearls discovery and introduction to the market. Those pearls were initially considered less valuable than white ones, until a famous jeweler started displaying them next to prestigious gems like diamonds, rubies and so on, until now, where the black pearls are worth more than white pearls.
Too many options are bad
Last but not least, the book discusses the negative impact of having too many options and trying to avoid losing those chances at all costs. Having plenty of paths to take is usually thought to be a good position to be in, but can often cause a choice paralysis, where opting for one of the options results hard if not impossible.
Moreover, people often actively spend resources to keep as many doors open for them, even if one of those is clearly convenient for a reason or another, resulting in a high inefficiency and worse results (but maybe with less volatility 😉).
The key is probably not trying to take the best choice, but to pick a good one and stick with it. Consistency is often key, and even if have picked wrong, you will still probably end up in a good spot.