Dr. Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University. He is also a founding member of the Center for Advanced Hindsight, where researchers investigate the real world and help people avoid “hindsight bias”, in which people is more aware of something after it has been occurred.
In Predictably Irrational, I particularly enjoyed Dr Ariely's discussion of daily, real world examples. Many common things are talked about in the book, such as free items, consumerism, jealousy, honesty, health and etc. Amongst I picked three aspects that I personally feel are the most interesting.
Free things: impulse over rationality
Normally, we make decisions by observing the surrounding and comparing things. However, when free things come to the place, it makes us conflict between the free choice and a desirable one we would normally choose from. Usually, we end up making unwise decisions, such as buying things we do not need.
Each deal has pros and cons. Free means zero, and the magic of zero is that it makes us ignore the cons of a deal. It creates an impulse that if we choose the free good, we would not lose apparently than normal situations (e.g. compromise in price, utility), because it is free and no extra efforts needed to get it! For instance, every time we eat outside or buy food from the supermarket, we would take disposable utensils. We think we will use them later, but actually we always forget and will throw them away one day.
We usually overrate things we possess
Dr Ariely believes that the more time and effort we spend on something, the more we are enthusiastic about it. Many companies adapt this rule to attract and propel consumers to buy more. This is called “IKEA Effect”. This term comes from the furniture company IKEA, where customers group up pieces of furniture based on instructions. It is an okay task, but they are pleasant with their outcome: a complete piece of furniture made by themselves. Later, they tend to stick with IKEA: whenever it is about furniture, they automatically would think of IKEA.
There are a few ways to avoid sinking into the “IKEA Effect”. Firstly, we would better always held the perspective “I do not own the thing.” for every deal. In this sense, we are somehow distant from the product and thus can think more wisely. Another approach is to request feedback from people close to you, such as friends and families. Their thoughts would give you a clearer perspective on something. In this case: it is just a piece of furniture, it serves for me. I am the person to choose it, not it chooses me.
Consumerism: too much to choose
The advent of the internet has spurred booms of consumerism. From daily sales to Black Friday, more and more of us love buying products online. While some fascinate to us, we end up buying more and more things that we do not ever use. Nowadays too many doors are opening for us to choose from, explaining how we are trapped by the consumerism. To deal with the remorse after consumerism, Dr Ariely suggests us to close some doors. In other words, we need to prioritize things, so that we can save more energy and space for more valuable things in the daily life.
This makes me think of my personal experience that does not necessarily relate to the Economics. A while ago, I was conflicted between housing choices next year: Should I live in Myles or Warren? On one hand, I like Myles because it has the Global House, where I can learn and strengthen my third language, Portuguese. But the only problem with Myles is that it is relatively far away from my classes! I have to take buses or Ts to maximize the efficiency. On the other hand, Warren is just five minutes’ walk from classes so it is more convenience (also has more daily facilities around like City Convenience, in-building dining hall). It is a dilemma, but when I calm down, I realize that learning Portuguese is the priority for me. Hence, I decide to live in Myles next year. From the dilemma of mine, we can see that by closing certain doors, we actually find a more desirable choice and will have more time focusing on more meaningful things. There is no perfect choice, only more desirable ones. It really depends on what you want.
In short, we are not as rational as we thought. Who we are in normal situations are largely different from those in impulse. This apply to anyone, even if you are the most intelligent or highly educated. However, it is useful to realize our irrational side, which overtime would help us think more wisely and make better choices.
Work Cited:
Ariely, Dan. Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions. Revised and Expanded ed., Harper Perennial, 2010.