Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

by Dan Ariely

Book Overview

"A marvelous book... thought provoking and highly entertaining." --Jerome Groopman, New York Times bestselling author of How Doctors Think "Ariely not only gives us a great read; he also makes us much... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0061854549
• Release Date: May 2009
• Publisher: Harper
• Length: 400 Pages
• Weight: 1.30 lbs.
• Dimensions: 9.0" x 1.3" x 6.1"

Customer Reviews

This was really an eye-opener

We like to believe that we are rational. Many investment philosophies are based on efficient market theory, which assumes that market participants are well-informed and act rationally. I always found efficient market theory to be flawed, because when I looked at individual investors, I would get surprised more and more every day by how irrational their behavior was. So how it is possible for markets to be efficient, when most investors I know are completely irrational? Well, this book has some really good explanations. The author of this book shows us that even though we believe that we act in a rational way, in reality we act in predictably irrational way. As a result of this irrationality, we frequently make poor decisions with our money, life partners, and health. For example, we tend to overvalue things that we own. We might be made to believe that something works even when it doesn't. A placebo is perfect example. This book was really an eye-opening experience. We all do the things the author talks about. As I read this book, I kept catching myself and saying, "Yes, I did this, too." I enjoyed reading this book, and I would recommend it. - Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

Made me think through some things I'd overlooked about market behavior

I have been thinking about economics seriously for nearly 30 years. Classical economics is built to no small degree on the notion that people will generally act in their own best self interest, after rationally and intelligently examining their options. This fit my world view fine in my first career as an engineer (BS and MS in Electrical Engineering). From my 2nd Career as a Business Development person (MBA), I began to have to deal with people's tendency to not entirely think things through. Here in this book, we have a professor who runs socioeconomic tests on his MBA students. These students are smart enough, worldly enough, experienced enough, and educated enough to approximate the standard economic assumptions and produce reasonably rational behavior. Guess what. Even among broad experiments conducted on multiple MBA classes over time, one can predictably pre-bias the outcome of a particular run of a socioeconomic experiment by what seeds you plant in the class members' minds before the experiment. For example, in one experiment in estimating prices, the author requires his students to write the last two digits of their social security numbers on the top of the paper. Simply the act of writing a high number (e.g., 88) versus a low number (e.g., 08) produced statistically significant correlatable influences on the students' later price estimates. Those compelled to write "88" at the top of their papers would reliably estimate higher prices than those compelled to write "08" at the top of their papers, to a statistically significant degree. Extrapolating to "real life." Watching Fox News will tend to make you more conservative without you knowing it. Watching MSNBC news will tend to make you more liberal without you knowing it. If you want to understand "real truth," you are just going to have to do a little more than self-select your news feeds. You are going to have to seriously consider a diversity of viewpoints. Moreover, if you have Social Darwinist beliefs as I once did, you may need to re-think the concept of the Poverty Trap. Early pre-conditioning really does make a difference. Here is the way I think of it as an Engineer. Classical Economic Theory is analogous to Classical Newtonian Physics. There is nothing badly wrong with it, and it is a good approximation for most real world problems at the middle of the distribution. However, General Relativity is indeed more correct that Classical Newtonian Physics, and the additional knowledge makes a real difference in certain special cases. And, those special cases are sometimes the really important ones. Likewise, Behavioral Economics is adding something very valuable to our knowledge of Classical Economics. Read this only if you are brave enough to contemplate that the world might be a little more complex than we wish it were.

An excellent book which provides valuable insights

This book and Dan Ariely have recieved a lot of media attention, so I approached the book with some skepticism, thinking that it might be overhyped. I'm pleased to report that my skepticism turned out to be unwarranted. The book has many strengths, the main one being that it convincingly presents many ways people are wired and/or conditioned to be irrational, usually without even being aware of it. This eye-opening revelation can be a bit disheartening, but the good news is that we can fix at least some of this irrationality by being aware of how it can arise and then making a steady effort to override it or compensate for it. That's not an easy task, but it can be done. As a simple example, I've programmed a realistic exercise schedule into my PDA, and I've been very consistent with my exercise because of that. The PDA imposes a discipline on me which I couldn't otherwise impose on myself (as I know from experience). The book is also well written, and I would even say enjoyable to read. The many experiments described in the book are presented in a lively way which elicits interest, and Ariely goes into just the right amount of detail -- enough to convey the basic experimental designs, results, and plausible interpretations, without boring the reader by getting into esoteric points which are more appropriate for journal papers. The one criticism I have of the book, which applies to most of Western pscyhology, is that most of the described experiments used US college students as subjects. That raises a serious question regarding the extent to which the results can be generalized to people of the same age who aren't college students, people of other ages, and people outside the US. Study of cultural psychology reveals that differences due to these factors can be profound, and Ariely himself notes a Korean study where such differences were observed, but he doesn't really elaborate on the point. Despite this one criticism, I think this is an excellent and authoritative book, and among the better ones in the "why smart people do dumb things" genre, so I highly recommend it. The insights revealed are both fascinating and practical, if you can muster the discipline to apply them.

Welcome to the fuzzy world of being human.

Dan Ariely is the guy you'd want at your dinner party. He's witty, smart and also very inclusive - sharing his passion for the way humans tick in a way that makes us feel great about the fact that, rational as we like to think we are, we make bad snap decisions, we cheat and we get ruled by our heart precisely when the facts are screaming "go the other way!" There's a lot in this writing which celebrates our human-ness. Why do we do this? What Ariely has done here is shift a lot of the thinking developed by such pioneers as Kahneman & Tversky who worked in behavioural economics, and moved it into the everyday sphere. And he's done a great, insightful job. Where the behavioural economists are focused on financial decisions (why we buy high and sell low - and confound the assumptions of the classic economists who assume 'the rational man,) Ariely eschews the technical language and walks us through everyday examples of our often fuzzy and quite irrational decision-making. The result is utterly engaging - and this easy 300 page read still has academic rigour and strong foundations. Ariely cites many experiments and examples, and shows that we often get things wrong because we frame things the wrong way, mis-judge probabilities, apply heuristic rules of thumb that don't always work, or we just plain let our emotions rule. We love to think that we're educated, rational and moral. Yet who hasn't overestimated the upside on a sure-fire investment, bought some clothing that we knew was a mistake even as we bought it, or got our wires crossed between work-rules and social rules? This book is fascinating, entertaining and very, very illuminating. - Recommended for the general public, but I'd urge marketers, market researchers and business people to read this one carefully. Dan provides excellent dinner-party insights, but they apply to our real world and explain why so many poor decisions are made - whether by customers or by the 'rational' business people who make million-dollar decisions. - Recommended companion book: Nudge: Improving Decisions About Health, Wealth, and Happiness here one of the godfathers of behavioural economics discusses the way we can manage the "choice architecture" in our world.

Exploring why so much of what we do doesn't make sense

I had the privilege of taking Dan's class at Duke last fall, where all of us got the chance to read preview copies of Predictably Irrational. Of course, not everyone will get the chance to hear Dan's excellent lectures, but the book does a great job of capturing his wit while providing a wealth of information about why human behavior can be as fallible as it is. The joy in this material lies in the fact that every few pages you will find yourself smiling because you too have behaved in the irrational manner being described, and now that you look back on it, it's hard to remember why. Why are we so excited about free stuff, even if we just throw it out later? Do we convince ourselves that an expensive meal will taste better than a cheap one? And why are we motivated to act on some humanitarian disasters, but not others? We all make irrational decisions at times, but this book provides the rare opportunity to reflect on those decisions and observe the behavioral patterns underneath. If you enjoyed Freakonomics or any of Malcolm Gladwell's writings, you will also enjoy Predictably Irrational. The pace is quick, and nearly every page contains some nugget of surprising information that you'll want to tell your friends. It is more like Freakonomics than Blink or The Tipping Point in that it is structured around experiments, with each chapter covering the results of experiments in a specific area of irrational behavior, the implications for society, and what individuals might do to mitigate it. It's a hard book to put down, and it's both entertaining and interesting from start to finish. For those who are curious about the world, this might be the ultimate beach or airline reading!