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Kindle Notes & Highlights
by
Dan Ariely
Read between
February 13 - February 18, 2018
Every injection day, I would stop at the video store on the way to school and pick up a few films that I wanted to see. Throughout the day, I would think about how much I would enjoy watching them later. Once I got home, I would give myself the injection. Then I would immediately jump into my hammock, make myself comfortable, and start my mini film fest. That way, I learned to associate the act of the injection with the rewarding experience of watching a wonderful movie. Eventually, the negative side effects kicked in, and I didn’t have such a positive feeling. Still, planning my evenings that
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closely with the fun of watching a movie than with the discomfort of the side effects, and thus I was able to continue the treatment. (I
Sadly, most of us often prefer immediately gratifying short-term experiences over our long-term objectives.* We routinely behave as if sometime in the future, we will have more time, more money, and feel less tired or stressed. “Later” seems like a rosy time to do all the unpleasant things in life, even if putting them off means eventually having to grapple with a much bigger jungle in our yard, a tax penalty, the inability to retire comfortably, or an unsuccessful medical treatment.
From a rational perspective, we should make only decisions that are in our best interest (“should” is the operative word here). We should be able to discern among all the options facing us and accurately compute their value—not just in the short term but also in the long term—and choose the option that maximizes our best interests. If we’re faced with a dilemma of any sort, we should be able to see the situation clearly and without prejudice, and we should assess pros and cons as objectively as if we were comparing different types of laptops. If we’re suffering from a disease and there is a
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quite often our observations lead us to the conclusion that human beings are irrational.
To get a clearer idea of how dangerous it can be to assume perfect rationality, think about driving.
Car manufacturers and road designers generally understand that people don’t always exercise good judgment while driving, so they build vehicles and roads with an eye to preserving drivers’ and passengers’ safety. Automobile designers and engineers try to compensate for our limited human ability by installing seat belts, antilock brakes, rearview mirrors, air bags, halogen lights, distance sensors, and more.
Behavioral economists want to understand human frailty and to find more compassionate, realistic, and effective ways for people to avoid temptation, exert more self-control, and ultimately reach their long-term goals.
As we gain some understanding about what really drives our behaviors and what steers us astray—from business decisions about bonuses and motivation to the most personal aspects of life such as dating and happiness—we can gain control over our money, relationships, resources, safety, and health, both as individuals and as a society.
Instead, I invite you to think about experiments as an illustration of general principles, providing insight into how we think and how we make decisions in life’s various situations. My hope is that once you understand the way our human nature truly operates, you can decide how to apply that knowledge to your professional and personal life.
in Predictably Irrational, I explored the downside of our human biases. But there is a flip side to irrationality, one that is actually quite positive. Sometimes we are fortunate in our irrational abilities because, among other things, they allow us to adapt to new environments, trust other people, enjoy expending effort, and love our kids. These kinds of forces are part and parcel of our wonderful, surprising, innate—albeit irrational—human nature (indeed, people who lack the ability to adapt, trust, or enjoy their work can be very unhappy). These irrational forces help us achieve great
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Second, you will notice that this book is divided into two distinct parts. In the first part, we’ll look more closely at our behavior in the world of work, where we spend much of our waking lives. We’ll question our relationships—not just with other people but with our environments and ourselves. What is our relationship with our salaries, our bosses, the things we produce, our ideas, and our feelings when we’ve been wronged? What really motivates us to perform well? What gives us a sense of meaning? Why does the “Not-Invented-Here” bias have such a foothold in the workplace? Why do we react
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In the second part, we’ll move beyond the world of work to investigate how we behave in our interpersonal relations. What is our relationship to our surroundings and our bodies? How do we relate to the people we meet, those we love, and faraway strangers who need our help? And what is our relationship to our emotions? We’ll examine the ways we adapt to new conditions, environments, and lovers; how the world of online dating works (and doesn’t); what forces dictate our response to human tragedies; and how our reactions to emotions in a given moment can influence patterns of behavior long into
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We are usually quick to assume that there is a link between the magnitude of the incentive and the ability to perform better. It seems reasonable that the more motivated we are to achieve something, the harder we will work to reach our goal, and that this increased effort will ultimately move us closer to our objective. This, after all, is part of the rationale behind paying stockbrokers and CEOs sky-high bonuses: offer people a very large bonus, and they will be motivated to work and perform at very high levels.
SOMETIMES OUR INTUITIONS about the links between motivation and performance (and, more generally, our behavior) are accurate; at other times, reality and intuition just don’t jibe.
when the intensity of the shocks was at its highest, the rats could not focus on anything other than their fear of the shock. Paralyzed by terror, they had trouble remembering which parts of the cage were safe and which were not and, so, were unable to figure out how their environment was structured.
The solid dark line represents Yerkes and Dodson’s results. At lower levels of motivation, adding incentives helps to increase performance. But as the level of the base motivation increases, adding incentives can backfire and reduce performance, creating what psychologists often call an “inverse-U relationship.”
Corporate boards generally assume that very large performance-based bonuses will motivate CEOs to invest more effort in their jobs and that the increased effort will result in higher-quality output.* But is this really the case? Before you make up your mind, let’s see what the empirical evidence shows.
We decided to offer some participants the opportunity to earn a relatively small bonus (equivalent to about one day’s pay at their regular pay rate). Others would have a chance to earn a medium-sized bonus (equivalent to about two weeks’ pay at their regular rate). The fortunate few, and the most important group for our purposes, could earn a very large bonus, equal to about five months of their regular pay. By comparing the performances of these three groups, we hoped to get a better idea of how effective the bonuses were in improving performance.
We found that those who could earn a small bonus (equivalent to one day of pay) and the medium-level bonus (equivalent to two weeks’ worth of work) did not differ much from each other.
As you can tell from the figure above, the data from our experiment showed that people, at least in this regard, are very much like rats. Those who stood to earn the most demonstrated the lowest level of performance.
The more cognitive skill involved, we thought, the more likely that very high incentives would backfire. We also thought that higher rewards would more likely lead to higher performance when it came to noncognitive, mechanical tasks. For example, what if I were to pay you for every time you jump in the next twenty-four hours? Wouldn’t you jump a lot, and wouldn’t you jump more if the payment were higher? Would you reduce your jumping speed or stop while you still had the ability to keep going if the amount were very large? Unlikely. In cases where the tasks are very simple and mechanical, it’s
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we hadn’t expected the effect to be just as pronounced for the tasks that were more mechanical in nature, such as the Dart Ball and Roll-up games.
With these questions in mind, we next set out to see what would happen if we took one task that required some cognitive skills (in the form of simple math problems) and compared it to a task that was based on pure effort (quickly clicking on two keyboard keys). Working with MIT students, we wanted to examine the relationship between bonus size and performance when the task was purely mechanical, as opposed to a task that required some mental ability.
Our experimental design had four parts, and each participant took part in all four of them (this setup is what social scientists call a within-participant design). We asked the students to perform the cognitive task (simple math problems) twice: once with the promise of a low bonus and once with the promise of a high bonus. We also asked them to perform the mechanical task (clicking on a
keyboard) twice: once with the promise of a low bonus and once with the promise of a high bonus.
When the job at hand involved only clicking two keys on a keyboard, higher bonuses led to higher performance. However, once the task required even some rudimentary cognitive skills (in the form of simple math problems), the higher incentives led to a negative effect on performance, just as we had seen in the experiment in India.
The conclusion was clear: paying people high bonuses can result in high performance when it comes to simple mechanical tasks, but the opposite can happen when you ask them to use their brains—which is usually what companies try to do when they pay executives very high bonuses.
(As the prolific author and journalist Upton Sinclair once noted, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”)
Would they solve more anagrams in public—when their performance mattered more—or in private, when there was no social motivation to do well? As you’ve probably guessed, the participants solved about twice as many anagrams in private as in public.
As it turns out, overmotivation to perform well can stem from electrical shocks, from high payments, or from social pressures, and in all these cases humans and nonhumans alike seem to perform worse when it is in their best interest to truly outdo themselves.
there are additional forces that could make a difference in performance. These include the characteristics of the task (how easy or difficult it is), the characteristics of the individual (how easily they become stressed), and characteristics related to the individual’s experience with the task (how much practice a person has had with this task and how much effort they need to put into it). Either way, we know two things: it’s difficult to create the optimal incentive structure for people, and higher incentives don’t always lead to the highest performance.
very high bonuses, can create stress because they cause people to overfocus on the compensation,
while reducing their performance.
First Knight, a movie that came out in 1995 starring Sean Connery and Richard Gere, demonstrates one extreme way of dealing with the way motivation affects performance.
When Mark asks Lancelot to teach him, Lancelot pauses for a moment before giving his lesson. He offers Mark three tips:
Up to that point, Mark smiles and nods happily, sure he can learn to do those things. Lancelot’s final tip, however, is a little more difficult to follow. He tells his eager student that he can’t care about living or dying.
Judging from this advice, it seems that Lancelot fights better than anyone else because he has found a way to bring the stress of the situation to zero.
Seen from this perspective, the findings presented in this chapter suggest that our tendency to behave irrationally and in ways that are undesirable might increase when the decisions are more important. In our India experiment, the participants behaved very much as standard economics would predict when the incentives were relatively low. But they did not behave as standard economics would predict when it really mattered and the incentives were highest.
what is the correct way to pay people without overstressing them?
offer employees smaller and more frequent bonuses. Another approach might be to offer employees a performance-based payment that is averaged over time—say, the previous five years, rather than only the last year. This way, employees in their fifth year would know 80 percent of their bonus in advance (based on the previous four years), and the immediate effect of the present year’s performance would matter less.
Then he offered me the following thought experiment. “Imagine,” he said in a low, sad voice, “that you work for some company and your task is to create PowerPoint slides. Every time you finish, someone takes the slides you’ve just made and deletes them. As you do this, you get paid well and enjoy great fringe benefits. There is even someone who does your laundry. How happy would you be to work in such a place?”
a story about my friend Devra, who worked as an editor at one of the major university presses. She had recently finished editing a history book—work she had enjoyed doing and for which she had been paid. Three weeks after she submitted the final manuscript to the publishing house, the head editor decided not to print it. As was the case with David, everything was fine from a functional point of view, but the fact that no readers would ever hold the book in their hands made her regret the time and care she had put into editing it. I was hoping to show David that he was not alone. After a minute
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“Contrafreeloading,” a term coined by the animal psychologist Glen Jensen, refers to the finding that many animals prefer to earn food rather than simply eating identical but freely accessible food.
it has two features that are new to you. The first is an automated food dispenser that releases food pellets every thirty seconds. Yum! The second is a bar that for some reason is covered with a tin shield.
The food dispenser releases food pellets every so often for twenty-five minutes, until you have eaten fifty food pellets. At that point you are taken back to your cage and given the rest of your food for the day.
You’re ravenous but unhappy because this time the food dispenser doesn’t release any pellets.
You wander around the cage, and, passing the bar, you realize that the tin shield is missing. You accidentally press the bar, and immediately a pellet of food is released. Wonderful! You press the bar again. Oh joy!—another pellet comes out. You press again and again, eating happily, but then the light goes off, and at the same time, the bar stops releasing food pellets. You soon learn that when the light is off, no matter how much you press the bar, you don’t get any food.
Just then the man in the lab coat opens the top of the cage and places a tin cup in a corner of the cage. (You don’t know i...
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you just want the bar to start producing food again. You press and press...
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