The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home

by Dan Ariely

THIS IS WHERE behavioral economics enters the picture. In this field, we don’t assume that people are perfectly sensible, calculating machines. Instead, we observe how people actually behave, and quite often our observations lead us to the conclusion that human beings are irrational.

This is the real goal of behavioral economics: to try to understand the way we really operate so that we can more readily observe our biases, be more aware of their influences on us, and hopefully make better decisions. Although I can’t imagine that we will ever become perfect decision makers, I do believe that an improved understanding of the multiple irrational forces that influence us could be a useful first step toward making better decisions.

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.

To summarize, using money to motivate people can be a double-edged sword. For tasks that require cognitive ability, low to moderate performance-based incentives can help. But when the incentive level is very high, it can command too much attention and thereby distract the person’s mind with thoughts about the reward. This can create stress and ultimately reduce the level of performance.

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.

the way we pay people can have powerful unintended consequences.

our jobs are an integral part of our identity, not merely a way to make money

But if work also gives us meaning, what does this tell us about why people want to work? And what about the connections among motivation, personal meaning, and productivity?

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?”

“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.

What this analysis tells me is that if you take people who love something (after all, the students who took part in this experiment signed up for an experiment to build Legos) and you place them in meaningful working conditions, the joy they derive from the activity is going to be a major driver in dictating their level of effort. However, if you take the same people with the same initial passion and desire and place them in meaningless working conditions, you can very easily kill any internal joy they might derive from the activity.

though we can recognize the effect of even small-m meaning on motivation, we dramatically underestimate its power.

THIS EXPERIMENT TAUGHT us that sucking the meaning out of work is surprisingly easy. If you’re a manager who really wants to demotivate your employees, destroy their work in front of their eyes. Or, if you want to be a little subtler about it, just ignore them and their efforts. On the other hand, if you want to motivate people working with you and for you, it would be useful to pay attention to them, their effort, and the fruits of their labor.

From this perspective, division of labor, in my mind, is one of the dangers of work-based technology. Modern IT infrastructure allows us to break projects into very small, discrete parts and assign each person to do only one of the many parts. In so doing, companies run the risk of taking away employees’ sense of the big picture, purpose, and sense of completion. Highly divisible labor might be efficient if people were automatons, but, given the importance of internal motivation and meaning to our drive and productivity, this approach might backfire. In the absence of meaning, knowledge workers may feel like Charlie Chaplin’s character in Modern Times, pulled through the gears and cogs of a machine in a factory, and as a consequence they have little desire to put their heart and soul into their labor.

If companies really want their workers to produce, they should try to impart a sense of meaning—not just through vision statements but by allowing employees to feel a sense of completion and ensuring that a job well done is acknowledged. At the end of the day, such factors can exert a huge influence on satisfaction and productivity.

Sure enough, once Pillsbury left out the dried eggs and required women to add fresh ones, along with milk and oil, to the mix, sales took off. For housewives in the 1950s, adding eggs and one or two other ingredients was apparently enough to elevate cake mixes from the realm of store-bought to servable, even if the dessert was only slightly doctored. This basic drive for ownership in the kitchen, coupled with the desire for convenience, is why the Betty Crocker slogan “You and Betty Crocker can bake someone happy” is so clever.

through investment of thought and effort, we come to love our creations much more. Does this mean that companies should always require their customers to do the design work and labor on every product? Of course not. There is a delicate trade-off between effortlessness and investment. Ask people to expend too much effort, and you can drive them away; ask them for too little effort, and you are not providing the opportunities for customization, personalization, and attachment. It all depends on the importance of the task and on the personal investment in the product category.

Our experiments demonstrated four principles of human endeavor: • The effort that we put into something does not just change the object. It changes us and the way we evaluate that object. • Greater labor leads to greater love. • Our overvaluation of the things we make runs so deep that we assume that others share our biased perspective. • When we cannot complete something into which we have put great effort, we don’t feel so attached to it.

how important is it for us to come up with an idea, or at least to feel that it is ours, in order to value it?

But even if their ideas weren’t superior to ours overall, it could have been that our participants’ notions fit better with their own unique perspectives of the world. This principle is called an idiosyncratic fit.

Each person may prefer his or her idea to ours—not because he or she came up with it but because it idiosyncratically fits with his or her underlying beliefs and preferences.

Companies, in general, tend to create cultures centered around their own beliefs, language, processes, and products. Subsumed by such cultural forces, the people working within a company tend to naturally accept internally developed ideas as more useful and important than those of other individuals and organizations.

Acronyms confer a kind of secret insider knowledge; they give people a way to talk about an idea in shorthand. They increase the perceived importance of ideas, and at the same time they also help keep other ideas from entering the inner circle.

Regardless of what we create—a toy box, a new source of electricity, a new mathematical theorem—much of what really matters to us is that it is our creation. As long as we create it, we tend to feel rather certain that it’s more useful and important than similar ideas that other people come up with.

On the positive side, if you understand the sense of ownership and pride that stems from investing time and energy in projects and ideas, you can inspire yourself and others to be more committed to and interested in the tasks at hand.

if I had run my presentation for the bankers less like a lecture and more like a seminar in which I asked them a series of leading questions, they might have felt that they had come up with the ideas on their own and hence adopted them wholeheartedly.

As we had discovered in our first experiment, people who were annoyed by the phone call were much less likely to return the extra cash than those whose conversations were uninterrupted. More surprisingly, we found that the tendency to seek revenge did not depend on whether Daniel (the agent) or I (the principal) suffered.

Based on the original experiment, we expected the annoyed people to be much less likely to return the extra cash, and indeed that is what the results showed. But what about the third group? Surprise!—the apology was a perfect remedy. The amount of extra cash returned in the apology condition was the same as it was when people were not annoyed at all. Indeed, we found that the word “sorry” completely counteracted the effect of annoyance. (For handy future reference, here’s the magic formula: 1 annoyance + 1 apology = 0 annoyance.) This showed us that apologies do work, at least temporarily.

satisfaction among British workers was strongly correlated with changes in workers’ pay rather than the level of pay itself. In other words, people generally grow accustomed to their current pay level, however low or high. A raise is great and a pay cut is very upsetting, regardless of the actual amount of the base salary.

A SUBSTANTIAL AMOUNT of research over the past decade has reinforced the idea that although internal happiness can deviate from its “resting state” in reaction to life events, it usually returns toward its baseline over time.

You may think that taking a break during an irritating or boring experience will be good for you, but a break actually decreases your ability to adapt, making the experience seem worse when you have to return to it. When cleaning your house or doing your taxes, the trick is to stick with it until you are done.

if you are considering whether to invest in a transient (scuba diving) or a constant (new sofa) experience and you predict that the two will have a similar impact on your overall happiness, select the transient one. The long-term effect of the sofa on your happiness is probably going to be much lower than you expect, while the long-term enjoyment of and memories from the scuba diving will probably last much longer than you predict.

What if we are more like the fallible, myopic, vindictive, emotional, biased Homer Simpson than like Mr. Spock?

Imagine how much more profitable a firm might be if, for example, its leaders truly understood the anger of customers and how a sincere apology can ease frustration (as we saw in chapter 5, “The Case for Revenge”). How much more productive might employees be if senior managers understood the importance of taking pride in one’s work (as we saw in chapter 2, “The Meaning of Labor”). And imagine how much more efficient companies could be (not to mention the great PR benefits) if they stopped paying executives exorbitant bonuses and more seriously considered the relationship between payment and performance (as we saw in chapter 1, “Paying More for Less”).