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on March 7, 2017
Among the various books available that cover the topic of human behavior, Predictably Irrational is among the top ten (interested readers should also read Sway by Rom Brafman). It's not quite an economics book (for a much better analysis of the many failings of neoclassical economics, read Debunking Economics by Keen) and it's not quite a behavioral psychology book (read Sway) so it falls somewhere in the middle - and therein lies its main weakness.

There are some very interesting anecdotes (for example, do you know why we think black pearls are valuable when originally no one wanted to buy them at any price?) and these are where most of the book's value lies.

The principal weakness comes from Ariely's conclusions based on the work he's carried out. He acknowledges that we humans are "irrational" compared to the straw man of the "rational optimizer" beloved of neoclassical economic theory, but while some of his examples are interesting he fails to see the entire picture. Thus whereas Keen shows that the neoclassical model is computationally impossible, Ariely merely shows that we have different decision-making processes in two distinct contexts: interpersonal and financial. This is valid, but Ariely then goes on to show that he hasn't really explored the interpersonal context with any degree of rigor.

A couple of examples will illustrate what I mean. In the first example Ariely talks about how companies strive to create a "social exchange" in the workplace because people generally work harder and more diligently in social exchange settings than in compensation-based settings. We can think of how we might keep on struggling to get a friend's piano up the stairs of a narrow apartment building long after we'd have given up if we were simply being paid $10 per hour by a stranger to perform the same task. So Ariely notes that companies try to exploit our social side in order to get more work out of us (he doesn't look at the ethics of this attempt, or even at its many infeasibilities). Then he suggests that in order to reinforce the social dynamic and avoid corrupting it with the financial dynamic (because it's not possible to combine the two) companies should not give bonuses but instead should send employees off on a paid-for vacation. The problem, of course, is that most employees don't want to be placed in a parent-child relationship. Most employees think of themselves as independent adults. Saying "here's a vacation we've arranged for you" violates an employee's independence. Worse still it assumes the employee's plans for their free time are irrelevant (the cost of leaving one's home, family, and friends for the duration of the enforced vacation are apparently zero where the company is concerned...). Obviously this recommendation would be disastrous under real-world conditions and one wonders how Ariely failed to think through his proposal.

A second example of this failure to think things through comes with Ariely's analysis of cap-and-trade. Rightly he points out that when you set a price on something (in this case pollution) then people may elect to pay more in order to get more. Just as we might only take a single candy from a tray being passed around the group but might buy ten if the candies are being sold, so too might companies pollute less if pollution were a "social good" rather than a priced good. With cap-and-trade companies might simply elect to pay more in order to feel free to pollute more. So Ariely proposes making pollution a "social good." But again a moment's thought shows this to be absurd. Not only do we have far too many examples of companies being quite happy to pollute when it's a cost-free exercise, Ariely's own book shows that executives will ignore social factors when their focus in on financial rewards. As executives are almost exclusively motivated by fat financial rewards, the notion that they would take social norms into account when deciding whether or not (or how much) to pollute is like saying that investment bankers would put the needs of their clients and the financial system in general ahead of their own desire for the $100 million bonus they get from pushing CDOs onto unsuspecting dupes.

So in the end the book is worth reading for its anecdotal value but not for Ariely's own conclusions or policy suggestions. He's not-quite an economist and not-quite a behavioral psychologist and ultimately that means he's not-quite useful as a guide to policy formulation on either the micro or the macro scales.
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on May 5, 2015
Alas, I read “Thinking, Fast and Slow (TFS)” before I read this book. So, a lot of stuff in this seemed to be a repetition.

So, how is this different from TFS. While both the books are on the subject of Behavioral Economics, hower, Dan has kept the topics brief and discussions to the point, so that the interest is sustained. While he would have conducted innumerable number of experiments in course of the research, he has only referred to a select few in this book. And whatever his criteria for selection was, it was pretty good, as it kept the interest of the readers on. I would prefer it over TFS

A brief overview of the interesting concepts in this book, which can of good use in product and pricing decisions are:
Relativity – to make a line look smaller (or a product affordable), draw a bigger line next to it (or a more expensive model). You need not really put an effort to sell the expensive model, but it gives a relative idea. The important thing is that the products should be comparable, as human mind cannot function with incomparables.

Anchoring – Daniel had labored on this a lot in his book TFS. For a consumer to make a purchase, an appropriate anchor is important, which could be even the MRP. So, low MRP does not necessarily help to sell. The interesting revelation was that “ our first decisions resonate over a long sequence of decisions”!! So, get the customer first. Of course, one can de-anchor (don’t know if there is a word like that), for which uncomparable variants need to be introduced (Starbucks case ) and for which its own MRP becomes the anchor

Reaction to price changes : It lasts only as long as the memory of the old price persists, demand soon normalizes

Zero cost : Free is a powerful tool, although expensive to the consumer ( Woody Allens quote that “The most expensive sex is free sex” is so apt, although that was quoted more from the social norms context). So, make the consumers buy something for nothing. Add freebies for upselling, nothing much new about it. But using FREE! to drive social policies is interesting.

Social norms : Very powerful, but cuts both ways. Once a social norm it established, bringing in market norm will destroy it forever (the example of late pickup being charged at day care is a perfect example). Keep sending small gifts to the customer , they will yield good returns.

Influence of arousal : Frankly, not of much use in commercial, but was quite astounded to read and the experiment was an eye opener.

Price of ownership or endowment effect: Giving an option of refund if not satisfied is a very powerful hook in durable segment, as the endowment effect generally inhibits any urge to return.
Keeping doors open : This concept is quite detailed out in the book Paradox of Choice by Barry Schwartz. Too many options only destroy value

Effect of expectation and power of price : When we believe something beforehand that something will be good, it generally will be good an vice versa. So, manage your customer expectation. A high price only enhances the expectation

The continuum message is that human beings are mere pawns in a game whose forces they largely fail to comprehend. And that is where behavioral economics will be a strong feed into marketing – making sure that consumers make the right choice!!
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on October 5, 2016
The author does a good job of presenting a wide range of psychological traps and irrational tendencies to which humans fall prey. The book is well written(although somewhat wordy at times) and easy to read. There are many enlightening passages which resonated well and were profound. If anything, most people will come away much better informed about a range of human flaws after reading this book. Some of the reasons that I didn't give this book the full five stars is that the author often rehashes previous research and findings by other scholars and taylors experiments which confirm already known ideas. Also, the book is written rather unevenly in the sense that you have to get through many tedious and laborious passages to get to an interesting point. I definitely felt at many points while reading this book that the author was adding a lot of non-value added filler material to meet a certain page # quota for the publisher. Still, this is a good book which I recommend as the author has gathered some very interesting information from which many people can benefit.
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on November 1, 2016
It might be because of the high expectations but this book only offers a few truly interesting revelations about the predictable irrationality of people. I liked the first chapter about the irresistibility of the middle path when offered several options and the clever use of decoys in marketing and also the fourth chapter about the distinction between social exchange and market exchange. The main downsides of this book is the lengthy writing, trying to make a sensation of something that is quite common-sense and also sometimes quite dubious scientific methods: quite often the experiments suffer from over-generalization and a very small and biased sample size. All the shortcomings aside, it still is an interesting and sometimes entertaining read.
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on February 9, 2017
Dan Ariely’s book Predictably Irrational is a fantastic and eye-opening read. The author describes how he at age eighteen fell victim to a terrible accident and had to spend several years in hospitals. The separation from society that came from this led to an ability to objectively observe people and society as well as question certain behaviors. The book consists of countless behavioral experiments carried out by Ariely to understand why we act the way we do. It turns out people behave irrationally extremely frequently and it also turns out that the irrationalities are not random. People are guilty of portraying the same irrational behavior over and over again in a very predictable fashion. As Ariely puts it in the conclusion of the book, ” ”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 of our life takes; but, alas, this description has more to do with our desires - with how we want to view ourselves - than with reality”. The purpose of the book is to enlighten the reader on the mistakes they may make on a daily basis without realizing it and helping them regain the driver’s seat they believe to be in but aren’t. The book is excellent and a well worthy read.
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on November 2, 2016
I thoroughly enjoyed reading this book. Dan is a behavioral economist who strips away the layers of our decisions and attempts to show how we truly form opinions, make decisions, what actually motivates us (hint, it's money), and other similarly interesting topics. He theorizes humans frequently, almost habitually, make irrational decisions, and the kicker is that we can't be aware of our irrationality. I would recommend this book to most people. The reason why it earned four stars, instead of five, was that I feel like Dan's central point, human's are fundamentally irrational in almost every category of our existence, becomes repetitive. He does a fantastic job explaining his theories and providing numerous scientific and social experiments to substantiate his claims. That being said, his last few chapters were bland and uninspiring in my personal opinion. His book started to drone on as he referenced and re-explained previous concepts that had already been thoroughly explained. Don't let the four star deter you, it's an excellent book that'll definitely make you rethink a variety of things!
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on April 21, 2017
This book was recommended by a mentor I'm following and boy am I glad I got it from the library. I decided to first see if I like it or not. After reading it, I decided to buy it here on Amazon. This is one of the best books I've ever read on marketing and sales. Absolutely fascinating!! Crazy how these tactics work. This is a must for anyone in business and selling products or services.
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on June 5, 2017
It is fascinating how we think our choices are coming from intellect, but they're actually coming from emotion. This book shows how we fool ourselves, thinking we are such rational beings when in fact, not only are we really not, but in predictable ways. His writing style worked too hard at being cute, though. It made it a little hard to read sometimes.
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on February 8, 2017
Predictably Irrational, by Dan Ariely is a book I would recommend any college student to purchase and read. I thoroughly enjoyed reading about Ariely’s version of behavioral economics. He takes a normally dense subject and displays it in a way that makes the reader think and laugh all at once. He gives the reader relevant examples that make his teachings very understandable. In each chapter, Ariely touches on several psychological and irrational tendencies that people make each and every day without thinking. Then, he backs each of his ideas up with experiments to explain why, we as humans do the things we do. Ariely really makes the reader think about what he or she does in certain situations. For instances, the lesson that I connected to best was the chapter on FREE!. First of all, FREE! doesn’t always mean FREE!. Many times there is a catch to FREE! Think of this, when a website (*cough, cough* Amazon.com *cough, cough*) offers you free shipping on your products if you spend $100.00. I know what you’re thinking….seems really appealing right. But if you look in your cart, you have only purchased $70.00 worth of merchandise. What do you do? Do you look for another cool purse to go with the wallet you just ordered for that extra $30.00 in order to get that free shipping? Heck yeah, most of you probably would. However, you would actually be saving more money if you just continued to order your $70.00 in merchandise. But, we are only human and we make mistakes. In this case, you get another purse…whatever right? Now you’re thinking…Ariely has a great point. So, having praised Professor Ariely, read his book. All in all, this book will really make you think about your day to day decisions and it is written were many audiences will understand. 5 stars!
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on February 2, 2017
Predictably Irrational gives you an in depth view behind what we as a society do in order to make decisions. One may at first think of themselves as an individual, and in turn their ideas are their own. This just isn't the case when you take into account personal bias which occurs due to how you're raised, heritage, regional and cultural norms. Unless one is a purely corrupt individual, they will keep in mind the wants and needs of those around them. Even then as anyone who has watched Scarface, the corrupt still think of what "high" society viewpoint is. The book really makes you think back on previous situations and decisions, that you may have subconsciously made. Moving forward, I'm sure many will reflect back on the ideas and material which is presented in this book. One example which many can relate to, is when you’re at a restaurant or a party. There is always a slice of pizza left, or a bread roll from the basket. Everyone at the table is eyeballing the tasty morsel, yet out of concern for others around them leave it. Only the bravest of individuals will reach in and take the holy object. Another example comes with money and the weird relationship one has with being honest around it. Many a person has taken a pen or pencil from an office, either by accident or choice. Now, this same person would most likely never take the equivalent value of the utensil if it was money. There’s a subconscious honesty when money is involved. This is somewhat scary, as the world moves towards a more digital monetary system. Overall I give a good rating for the book due to the fact it makes you think.
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