Predictably Irrational: The Hidden Forces That Shape Our Decisions

by Dan Ariely

Imagine that you work for me, and that I want to give you a year-end bonus. I offer you a choice: $1,000 in cash or an all-expenses-paid weekend in the Bahamas, which would cost me $1,000. Which option would you choose? If you are like most people who have answered this question, you would take the cash. After all, you may have already been to the Bahamas and may not have enjoyed being there very much, or maybe you’d prefer to spend a weekend at a resort closer to home and use the remainder of the bonus money to buy a new iPod. In either case, you think that you can best decide for yourself how to spend the money. This arrangement seems to be financially efficient, but would it increase your happiness with your work, or your loyalty to the company? Would it make me a better boss? Would it improve the employer-employee relationship in any way? I suspect that both your and my best interests would be better served if I simply didn’t offer you a choice and just sent you on the Bahamas vacation. Consider how much more relaxed and refreshed you would feel, and how well you would perform, after a relaxing weekend of sun and sand, compared with how you would feel and behave after you got the $1,000 bonus. Which would help you feel more committed to your job, more enjoyment in your work, more dedication to your boss? Which gift would make you more likely to stay long hours one night to meet an important deadline? On all of these, the vacation beats the cash hands down.