Predictably Irrational: The Hidden Forces That Shape Our Decisions

DIAMOND
RATING
Senteo Rating 2.5
04/27/23
views 2054
comments0
Author:Dan Ariely
04/27/23
views 2055
comments0
Author:Dan Ariely
DIAMOND
RATING
Senteo Rating 2.5

Predictably Irrational: The Hidden Forces That Shape Our Decisions
Dan Ariely, HarperCollins Publishers, 2009
Senteo’s Review information

The author of Predictably Irrational is a professor of behavioral economics and seeks to reveal the hidden forces that shape our decisions, including some of the reactive causes of the recent economic crisis.
The book reveals many of the seemingly irrational behavioral habits of people and consumers, combining common experiences with research experiments, primarily involving groups of students. The author reveals how expectations, emotions, social norms and other seemingly illogical forces influence our reasoning in decisions. Chapters are devoted to key behavioral psychology concepts, including: relativity in decision making, the fallacy of supply and demand and how prices influence, the cost of zero cost (or “free” things), the cost of social norms, the influence of arousal, procrastination, why we overvalue what we have, why options distract us from our main objective, the effects of expectations, the power of price, and the context of our character (“the theory of rational crime”). There is little in terms of methodology here, just a series of research experiments and key concepts of human behavior.

The book contains interesting insights as to why we seemingly act irrational in our day-to-day purchase decisions, getting us to think about why we make our decisions from a behavioral point of view. For example, under the cost of social norms section, the author explains how companies try to establish social norms with their employees in the modern economy, no longer expecting employees to punch-in for the 9 to 5 shift, but pay them on a fixed basis with incentives for their creativity and individual achievement, and in turn expecting them to work longer hours (or be connected 24/7). However, at the same timer, the obsession with short-term profits, outsourcing, and draconian cost cutting threatens to undermine it all. The author also devotes a chapter to thoughts about the subprime mortgage crisis and its consequences, discrediting the long-held view by economists that human behavior and the functioning of our institutions are best described by the rational economic model. He shows why people took on mortgages they couldn’t afford, what caused bankers to lose sight of the economy, why we didn’t plan for bad times, and how the government overlooked trust as an important economic asset.

While the book contains many insights as to why we mistakenly think that we are rational in our economic or purchase decisions, the author relies heavily on anecdotal style and un-scientific experiments to prove his point. For example, in questioning whether large bonuses for bankers are justified and therefore incentivize ever-higher results and returns, he assembles undergraduate college students at MIT and offers either a $600 bonus or $60 bonus for performing 4-minute tasks that involve cognitive skills or mechanical skills, showing how the tasks requiring cognitive skills demonstrated a potential higher bonus led to poorer performance. While the outcome may be consistent with the hypothesis, the experimental evidence used for this book mainly concern college students and very small (monolithic) sample sizes. For an academic, this book is very light on hard facts or scientific method.  For more technical research on buyer behavior, see the Senteo review for The Buying Brain.

Why do our headaches persist after we take a one-cent aspirin but disappear when we take a fifty-cent aspirin? Why do we splurge on a lavish meal but cut coupons to save twenty-five cents on a can of soup?
When it comes to making decisions in our lives, we think we’re making smart, rational choices. But are we?
In this newly revised and expanded edition of the groundbreaking New York Times bestseller, Dan Ariely refutes the common assumption that we behave in fundamentally rational ways. From drinking coffee to losing weight, from buying a car to choosing a romantic partner, we consistently overpay, underestimate, and procrastinate. Yet these misguided behaviors are neither random nor senseless. They’re systematic and predictable—making us predictably irrational.

This book is recommended for the general public, but may also be of interest to economists, marketers or business people working in retail or consumer goods. The nature of it is more anecdotal, but the book is entertaining.

Senteo Subject Category
Senteo

This book is research-oriented in the field of economic behavior.

The best book reviews in your inbox!
Subscribe now and receive a special gift with your subscription.


    Leave a Reply

    Predictably Irrational: The Hidden Forces That Shape Our Decisions
    Dan Ariely, HarperCollins Publishers, 2009
    Have you already read this book?
    Here, are people invited to rate the book?

    How useful was this post?

    Click on a star to rate it!

    Average rating / 5. Vote count:

    No votes so far! Be the first to rate this book.

    See content on this topic

    Ian Newman looks back on several years of rapid change in brand and communications in the Russian market, as well as offering his insights into future developments and trends.
    Mr. Ruckman gave insights into the changing role of leadership in modern companies, the changes in business models over the last few decades, focusing on what firms should do.
    Michael Ruckman Talks about Customer-Centric Business Models
    What is the difference between retention and loyalty, and between customer-centric and relationship-centric business models? How exactly can one monetize customer experience? Michael Ruckman answers these questions and more…
    Voice On Demand Retail Podcast: Part 2 – The three faces of Digital for Retailers
    Michael Ruckman talks about Customer Experiences & Customer Journeys, The three faces of Digital for Retailers and the state of leadership in the retail market today.
    Michael Ruckman Talks about Customer-Centric Business Models
    What is the difference between retention and loyalty, and between customer-centric and relationship-centric business models? How exactly can one monetize customer experience? Michael Ruckman answers these questions and more…
    Voice On Demand Retail Podcast: Part 2 – The three faces of Digital for Retailers
    Michael Ruckman talks about Customer Experiences & Customer Journeys, The three faces of Digital for Retailers and the state of leadership in the retail market today.
    How to Build a Business That Lasts 100 Years
    Join strategist Martin Reeves as he explains how executives can apply six principles from living organisms to build resilient businesses that flourish in the face of change.
    Start With Why: How Great Leaders Inspire Everyone To Take Action
    Simon Sinek explains that starting with ‘why’, having a strong driving motivation behind the work you do, can be the deciding factor between success and failure for a business venture.
    Senteo Rating
    Outliers
    Senteo Rating
    Tribal Leadership: Leveraging Natural Groups to Build a Thriving Organization
    Related Book Reviews & Education
    Reicheld builds on the Six Principles of Loyalty: play to win/win; be picky; keep it simple; reward the right results; listen hard, talk straight; and preach what you practice.
    Working Backwards is written by Colin Bryar and Bill Carr, two veteran Amazon executives. The pair share insights into Amazon’s internal methodology and culture, especially the eponymous ‘Working Backwards’ approach.
    The authors apply their knowledge on the subject with their firsthand experience with gaming concepts to create a guide to gamification and its application within the business environment.
    Emotional Branding: The New Paradigm for Connecting Brands to People is the culmination of Marc Gobé and his thoughts on how brands are defined by individual perception.