Book Review: Predictably Irrational, by Dan Ariely
December 29, 2008 :: Joe Loong
Okay, so, strictly speaking, Dan Ariely’s Predictably Irrational isn’t what I would call a social media book. However, I think it’s a useful read if you’re a marketer, a consumer, or someone who just wants to understand a little bit about how and why you make silly choices.
It’s also an easy, accessible read.
Now, if you haven’t heard of the book (and it’s gotten a lot of press, especially in light of economic bubbles inflating and collapsing), it’s about the theory and practice of behavioral economics.
Traditional economics takes as given that, with proper information, people will always act rationally — they’ll be able to accurately gauge the costs of their choices, then make decisions based on their best interests.
If you’re ever bought something you couldn’t afford, or just know any, well, people, you’ll intuitively know that this is bogus. (This is why most people don’t like economists — because the people that economists talk about don’t sound or act like real people.)
Ariely’s premise is that people are irrational — that is, we don’t make perfect decisions, even with perfect information, and that we are influenced by seemingly unrelated things — and what’s more, we’re consistent in how we’re irrational. So we might as well try to use that knowledge so we can make better decisions.
A lot of this information will be equally useful to people who sell stuff, and to people who get sold to. Also, for those of us who like to think we’re generally rational people, a lot of this is pretty off-putting.
I won’t go through the entire book, but a few examples:
* Relativity: We’re always making comparisons, even if those comparisons don’t really make sense. And, we can be influenced by decoys — a well-known example is how restaurant menus will feature high-priced entrees, so that the mid-priced stuff won’t look so expensive by comparison. Or hanging out with less-attractive friends, so you look better when you’re on the prowl.
* Anchoring: Once we associate a value with something (even if it’s completely arbitrary), we’ll end up using that as a baseline for our subsequent decisions.
* We’re just nuts for free stuff: We’ll make really silly decisions just because something is “free” (like pick something that’s free, even if we’d get more value from something that wasn’t free). Also, there’s a huge difference between “cheap” and free. (”Free shipping” does tons better than “1 cent shipping.”)
There’s a lot of interesting stuff pertaining to beating procrastination, the costs of ownership, how sexual arousal affects our decision-making, an experiment on expectations that involves putting balsamic vinegar in beer, people drinking Coke in MRI machines, the effect of the Ten Commandments and honor codes on cheating, and how ordering out loud influences your menu choices.
I guess there is one section particularly relevant to social media consultants — the section on the placebo effect, and how people think the 50-cent aspirin does a better job than the identical 1-cent aspirin. In fact, I know a guy who shares all of his social media knowledge on his blog, for free, but his clients insist on paying him for the exact same information (presumably because they don’t really value it until they have to pay for it…)
Anyway, I highly recommend this book as an interesting read, broken up into discrete, easy-to-digest chunks, perfect for your holiday break.
In fact, I’m giving it to my sister, as one of her Christmas gifts. (In point of order, I’m not saying she’s irrational. At least, not any more so than the rest of us.)
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