Sunday, November 28, 2010

Predictably Irrational

There is always a danger that the back-cover summary of a book does not match up to its content. While the back-cover summary sounds interesting, the book hardly lives up to it. And that is especially true for a non-fiction management book.

Thankfully, Predictably Irrational, is not one such book. The back-cover summary is what caught my eye in the plethora of books that wanted to jump into my bag through my wallet. (Too cheesy, isn't it? but I loved writing that line).

We've all grown up 'knowing' that there are two decision centers in our life - the logical mind and the emotional heart. We've all been told that we should take all our decisions using our logical mind weighing the different things and to try and ignore our heart tugging decisions from the gut. Mind always rules true in the long run. At the other end when we learn about the market dynamics we have learnt that market forces always determine the way a market operates in the long run. Demand and Supply, my friend, determine what sells, how it sells, why it sells etc etc.

And that's the truth, right? It works all the time, right? WRONG. That's what Dan Ariely wants us to know.

Predictably Irrational 'exposes' the fact that our decisions are primarily based on our social norms which combine our logical thinking and emotional state of mind. Dan Ariely tries to prove this not through subjective philosophy but bases it on numerous multiple 'experiments' that he and his fellow psychologists have conducted to test each assumption. This is the science of 'behavioral economics'.

Some of what Dan writes in his book and informs us are facets that we knew as truth but it provides some great validation though scientific study. Given a FREE thing don't we always graduate towards it? Do you end up buying six pairs of socks if there is a FREE offer with it even though you may not need the socks at all? To test this hypothesis Dan and his team did a chocolate experiment giving random people different types of chocolates, then discounting them by the same percentage which made one sample free. What do you think happened?

To test what effect sexual arousal has on our decisions they asked a group of men some questions first, then asked them to answer them again as they saw porn on a laptop. To test if our headache reduces if we take a higher cost painkiller, they zapped some students with an electric shock then gave them different pills letting them know the costs. Some were just sugar! To find out if dealing with cash makes us more honest, they did experiments where they asked students to answer a quiz then split them into groups that had to show the answers and take some amount for each correct answer. Another group had to only tell the evaluator how many answers were correct and take the relevant cash while the third group did not have to tell anyone but could take the money from the box. To test if we are inherently dishonest they made people recall the Ten Commandments before taking a test or doing an activity.

Interesting tests, all of them. I will not divulge what the results were but trust me that when you read the book some of the results will surprise you and make you think. Some will make you want to put some actions in your workplace.

This is a very interesting book and I am fascinated by the science of 'behavioral economics' and how the psychologists can take simple experiments and apply it across our behavior. Are we really like that and can we be explained by these experiments? Some chapters will make it very clear why so many of us are in credit card debt and why debit cards are the best thing. Why condoms in schools may not be that great an idea as compared to sex education.

I suggest that you read this book to open your mind. I rate it 3/5, if only because I am just not sure about the science but it is fascinating reading.

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