Predictably Irrational
Recommended by a manager, a book on irrationality and how to navigate it. Nothing too new compared to other similar books like Thinking, Fast and Slow, cited several times, but I appreciated how he ran engaging experiments himself with his students. The book is very clear; I would recommend it to someone starting out, compared to Kahneman, which is more technical.
Notes
- This is a book on JDM, judgment and decision making
- Not only are we irrational, but predictably irrational; we make the same mistakes, again and again.
- Knowing the patterns and rules behind this irrationality can be very useful to avoid falling into the same biases
- Sunk cost fallacy: once we have spent 25k on a car, 3k in accessories does not seem so unreasonable
- Anchoring: various experiments (e.g., give a random number then negotiate something). -> if we have a high number in mind, we are more likely to assign more value to things, even if unrelated. Concept of arbitrary coherence
- Zero cost: even when counterproductive, people are strongly attracted to the prospect of free
- 🔑 We live in two worlds: one where social norms prevail, one where market rules prevail. If we keep them distinct (e.g., do not talk about money) people tend to be much more willing if you ask a favor. As soon as you offer to pay, they switch. People work much more for a cause than for cash
- Deadline: people perform better with an assigned deadline. Because without precommitments, we keep on falling for temptation.
- Endowment effect: when we own something, we value it much more than other people do
- Closing doors: people hate “closing” doors and making irreversible choices. But we have to accept it; sometimes it hurts more to keep a foot in two shoes.
- Fake painting: better to reveal AFTER the evaluation any detail that could strongly influence it. Expectations can influence nearly every aspect of our life. Placebo effect.
- Dishonesty: there are two types, the classic and the opportunistic. If there is an opportunity, many honest people can slip, but only a little. And once the decision is made, they do not seem influenced by the possibility of being caught.
- This changes with money, as noted: no problem taking a pen from work, but cash left there? No.
- Ordering: if someone orders in private, it differs from ordering in public, for example by favoring variety.
If I were to distill one main lesson from the research described in this book, it is that we are pawns in a game whose forces we largely fail to comprehend. We usually think of ourselves as sitting in the driver’s seat, with ultimate control over the decisions we make and the direction our life takes; but, alas, this perception has more to do with our desires—with how we want to view ourselves—than with reality.