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How can confusing directions actually help us? Why can large bonuses make CEOs less productive? Why is there such a big difference between what we think will make us happy and what really makes us happy? In his groundbreaking book Predictably Irrational, social scientist Dan Ariely revealed the multiple biases that lead us into making unwise decisions. Now, in The Upside of Irrationality, he exposes the surprising negative and positive effects irrationality can have on our lives. Focusing on our behaviors at work and in relationships, he offers new insights about how one unwise action can become a long-term habit, how we learn to love the ones we're with, and more. From our office attitudes, to our romantic relationships, to our search for purpose in life, Ariely explains how to break through our negative patterns of thought and behavior to make better decisions.--From publisher description.… (more)
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In another oddity, Ariely has the bizarre idea that it’s unfair to punish a principal for acts of an agent: getting mad at the Gap, for example, because a Gap salesperson treats you badly. Now, it’s not right to take a sweater from the Gap because you’re mad at the salesperson, but the rule that principals are responsible for the acts of agents within the scope of their employment is foundational to the modern economy, and rightly so: if a Ford employee leaves out a key part when putting together my car and my car crashes, my remedy is against Ford, not against the likely impecunious employee. This rule encourages Ford to monitor its employees and to spread the costs of any mistakes. A contrary rule would require a lot more explanation, but Ariely is puzzled by why we’d attribute an agent’s misfeasance to his/her employer, which leads to a weird emphasis in the chapter about how our emotions contaminate logically unrelated transactions—an interesting topic in itself, since when we yell at our kids because our boss was mean we really are aiming in the wrong direction.
One more significant difference from the first book is that The Upside of Irrationality is more personal; I felt like I got a better sense of who Ariely was, which I appreciated on the whole. There were times when I felt like his judgements went a bit beyond the evidence, but ultimately I decided that that wasn't a fatal flaw. I still enjoyed the book, and found a lot of food for thought there. Particularly noteworthy were the studies about how much people are inclined to favour their own ideas over others (does this explain my RSI problems?) and how emotion influences charitable donations: not only will people give more money to a poor suffering individual than to help an abstract group of people suffering more on the whole, but when they're led to think more rationally (by doing math problems beforehand) they actually just give less overall.
Incidentally, I was finally led to pick up this book when I came across another book, More Than Good Intentions, in the store; that one applies ideas in behavioural economics specifically to the problem of reducing world poverty, and is high on my wishlist, but I felt like I should get to this longstanding TBR book on behavioural economics first.
Part 1 - Work-related Irrationalities
1. Big Bonuses don't work. (Which means CEO high salaries aren't quite logical.) Oh, but this is no way a bad news for your rewards and recognition program.
2. Even though all of us work for a salary to make living. But we all like to find some meaning in the work. For example, if you are a writer who was paid well to research and complete the book, but if for some reason your book does not see light of the day, it is demotivating even if you were paid well for the job. Dan Ariely's team conducts experiments where they pay people to create Lego blocks. For the people, who saw their 'creation' being demolished right in front of them, they found it difficult to go on with work even though they were being paid. So, we all like to find meaning in our work.
3. Ikea furniture works because we overvalue what we ourselves make. We kind of take pride in our creations even if it be a simple origami. Ikea works its not too complicated and yet it gives your bask in that pride that comes when you create your own thing.
4. How sometimes we pass up great ideas because they weren't ours. We didn't think them. So many times, wise aegis is that make your bosses feel that the idea came from them.
5. Why revenge gives us pleasure? Why we punish when we feel things have been unjust. Creative ways customer seek revenge, for example, a viral video about a hotel's bad service. How sometimes apologies can be powerful.
Part 2 - Home-related irrationalities
1. Human power of adaptation. Adaptation of pain. Or, adaption when your prized possessions no longer bring you happiness. How adaption can work for you.
2. On Dating. Hot or Not site, interesting dating patterns. Perception of beauty.
3. More on online dating sites. How market fails.
4. Empathy and emotion - strange phenomenon where we all set out in hordes to help pay for a single person but when it is a genocide or a tragedy involving hundreds and thousands, our capacity to charity sort of diminishes. The 'Drop-in-the-bucket-effect'.
5. Long-term effect of short-term emotions such as anger, jealousy etc - how our decisions are impacted.
6. Lessons from irrationalities - how we should test everything. In short, everything we do is not as logical as it may seem to us.
Style: personal and engaging.
Contains much more autobiographical material than his first book, "Predictably Irrational".
Everyone probably already knows why online romantic matchings are unsatisfying--nobody can be
The IKEA effect--we put so much more investment (affection, attachment) to an object that we have put a bit of effort into constructing. I think that's pretty well known, though, from the creation of cake mixes decades ago.
It can be extended to others' ideas in, say the workplace. We place more value in an idea that we have come up with ourselves, so if you really want that thing, let your boss think he came up with the notion.
Hedonic adaptation, another useful concept or explanation. I have lived in some very ugly Asian cities or the ugly parts of them. The ugliness may assault you on first sight--how about entering Tokyo from the airport? But we do adjust to it *somewhat*. The harsh edges get rubbed down. Sad thing is, the shock of beauty or comfort or the breezy view from your new apartment get filed down as well.
I guess this also applies to how Ariely adapted to the pain and discomfort of his injured hand but there's also the Ikea effect involved: he has invested so much effort and suffering getting the hand to function to the extent it does--reducing the pain through amputation becomes less appealing.
Our ability to find meaning in work
Our ability to fall in love with our creations and ideas
Our willingness to trust/ care about others
Our ability to adapt to new circumstances.
The most useful thing I got from this book: be REALLY careful when making
I expected a bit more discussion regarding the "upside" of irrationality, given the title of the book. Instead it appeared to be more of a continuation of Ariely's previous (and interesting book). Nevertheless, he DOES point out some upsides, and the book is fun to read.
Ariely's use of humour and his honesty about his own decisions and how his past informed them give the book a personal appeal which makes it easy to read and sometimes down-right fun.
This book will probably not change my own decision-making process, but it will make me a bit more aware of the influences around me and how my state of mind is a key player in my decision-making process. An informative and entertaining read.
Standard economic theory assumes that people are rational, utility-maximizing creatures, and behavioral economics repeatedly disproves this notion through various, often humorous, experiments. Ariely is a behavioral economist who
A few points:
Don't pay your workers bonuses that are too high. This creates too much pressure that distracts; the effect is worse if it's a loss-aversion experiment.
Clutch players don't perform/shoot any better at "crunch time," they just take more shots.
People prefer to work for a reward rather than have it handed to them. Studies show that people do not by-and-large just put in the minimum effort in order to get the maximum reward. I wrote a personal observation of this on an assembly line years ago. They put in effort and desire to achieve goals, they value their work. But people want to know their work serves a higher purpose. If your boss gives you an assignment and you work very hard on it, and even get recognition for it, if the work gets shelved or the project is canceled, it crushes motivation. This isn't rational-- you know you did a good job, you got paid for it, you got praised by your boss. But those rewards aren't enough. The next time you're given such a task, it will affect your motivation and the quality of your work.
Connecting even the lowliest worker's tasks to the overall goals of the company will increase productivity. I remember this being best exemplified by SRC Holdings in Springfield, MO which includes all its employees in its monthly financial meetings-- all employees (from the janitor to the CEO) see how their work affects the bottom line, the success of the company, and therefore their paychecks. This is considered "best practice" in management and is encouraged by current ISO standards.
Playing "hard to get" in love really does work, when we have to struggle to accomplish or build something we take greater satisfaction than if it was easy. When the task is a big struggle and we fail to complete it, we feel worse than if the task had been easy and we failed.
The IKEA effect. IKEA may sell cheap furniture, but the assembly process it requires causes us to value it more-- we created something. We become attached to and take greater pride in our own creations, which leads to overvaluation of them. My wife and I recently decided to purchase a used house rather than build a new one, even though the new one would have been nicer and was within our price range and had more positive upside. We made this choice, in part, because I remembered how attached my family was to a house we built in my childhood, where my parents designed it and included input from all of us; it was tailor-made. Among the hardest things we ever did was leave that home, part of me still misses it. We don't intend to live in our current location for very long, so we felt that investing in the creation of a new home would have rooted our hearts more than we wanted. It also would have been harder for us to put our clunky, used furniture into a shiny new house.
People who have experienced a great deal of pain develop higher pain tolerance. Our bodies, minds, and attitudes adjust to our surroundings. Studies have found that people who moved from the cold Midwest to sunny California may have been happier temporarily, but over time reverted to the previous baseline of happiness-- and vice-versa for those who moved to the Midwest from California.
Much of the book deals with Ariely's fascination with assortive mating and the "inefficient market" that is the U.S. dating market. He hypothesizes that those who have obvious shortcomings-- like horrible burns-- may compensate by seeking a less-attractive mate who is, say, funnier or smarter than average. Studies find that men tend to be more "optimistic" and "aim higher" in dating activity than women. They seem to be less aware, or less influenced by, their shortcomings.
Emotions affect our decisions long after the emotions fade. If you decide on a particular course of action because you were influenced by an emotion you felt at the time--positive or negative--you will likely continue on that course of action (even if irrational or inefficient) even though you got over the emotion you were feeling. People have a strong "status quo bias," which makes them loathe to change and we often fall for the "sunk cost fallacy" of becoming attached to things just because they're there.
In the end, Ariely praises the biblical Gideon for testing everything. That is sort of Ariely's motto.
The book was pretty good. I still would recommend Kahneman's seminal Thinking Fast and Slow (my review here) before reading this book, but I would add Ariely's book to the "behavioral economics" reading list. 3 stars out of 5.