Predictably Irrational: The Hidden Forces That Shape Our Decisions

by Dan Ariely

We can start by becoming aware of our vulnerabilities. Suppose you're planning to buy a cutting-edge cell phone (the one with the three-megapixel, 8× zoom digital camera), or even a daily $4 cup of gourmet coffee. You might begin by questioning that habit. How did it begin? Second, ask yourself what amount of pleasure you will be getting out of it. Is the pleasure as much as you thought you would get? Could you cut back a little and better spend the remaining money on something else? With everything you do, in fact, you should train yourself to question your repeated behaviors. In the case of the cell phone, could you take a step back from the cutting edge, reduce your outlay, and use some of the money for something else? And as for the coffee—rather than asking which blend of coffee you will have today, ask yourself whether you should even be having that habitual cup of expensive coffee at all.*

Zero is not just another discount. Zero is a different place. The difference between two cents and one cent is small. But the difference between one cent and zero is huge! If you are in business, and understand that, you can do some marvelous things. Want to draw a crowd? Make something FREE! Want to sell more products? Make part of the purchase FREE!

MONEY, AS IT turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well.

When the boss criticizes us publicly, we might be tempted to respond with a vehement e-mail. But wouldn't we be better off putting our reply in the “draft” folder for a few days? When we are smitten by a sports car after

a test-drive with the wind in our hair, shouldn't we take a break—and discuss our spouse's plan to buy a minivan—before signing a contract to buy the car?

Suppose your doctor tells you that you need to get your cholesterol checked. That means fasting the night before the blood test, driving to the lab the next morning without breakfast, sitting in a crowded reception room for what seems like hours, and finally, having the nurse come and get you so that she can stick a needle into your arm. Facing those prospects, you immediately begin to procrastinate. But suppose the doctor charged you an up-front $100 deposit for the test, refundable only if you showed up promptly at the appointed time. Would you be more likely to show up for the test?

Another example of the same hook is the “30-day money-back guarantee.” If we are not sure whether or not we should get a new sofa, the guarantee of being able to change our mind later may push us over the hump so that we end up getting it. We fail to appreciate how our perspective will shift once we have it at home, and how we will start viewing the sofa—as ours—and consequently start viewing returning it as a loss. We might think we are taking it home only to try it out for a few days, but in fact we are becoming owners of it and are unaware of the emotions the sofa can ignite in us.

So we learned that people cheat when they have a chance to do so, but they don't cheat as much as they could. Moreover, once they begin thinking about honesty—whether by recalling the Ten Commandments or by signing a simple statement—they stop cheating completely. In other words, when we are removed from any benchmarks of ethical thought, we tend to stray into dishonesty. But if we are reminded of morality at the moment we are tempted, then we are much more likely to be honest.