Read Online Predictably Irrational by Dr. Dan Ariely - Free Book Online
Authors: Dr. Dan Ariely
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anchoring plays a role. We decide whether or not to purchase Big Macs, smoke, run red lights, take vacations in Patagonia, listen to Tchaikovsky, slave away at doctoral dissertations, marry, have children, live in the suburbs, vote Republican, and so on. According to economic theory, we base these decisions on our fundamental valuesâour likes and dislikes.
But what are the main lessons from these experiments about our lives in general? Could it be that the lives we have so carefully crafted are largely just a product of arbitrary coherence? Could it be that we made arbitrary decisions at some point in the past (like the goslings that adopted Lorenz as their parent) and have built our lives on them ever since, assuming that the original decisions were wise? Is that how we chose our careers, our spouses, the clothes we wear, and the way we style our hair? Were they smart decisions in the first place? Or were they partially random first imprints that have run wild?
Descartes said, Cogito ergo sum ââI think, therefore I am.â But suppose we are nothing more than the sum of our first, naive, random behaviors. What then?
These questions may be tough nuts to crack, but in terms of our personal lives, we can actively improve on our irrational behaviors. We can start by becoming aware of our vulnerabilities. Suppose youâre planning to buy a cutting-edge cell phone (the one with the three-megapixel, 8Ã 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 coffeeârather 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. *
We should also pay particular attention to the first decision we make in what is going to be a long stream of decisions (about clothing, food, etc.). When we face such a decision, it might seem to us that this is just one decision, without large consequences; but in fact the power of the first decision can have such a long-lasting effect that it will percolate into our future decisions for years to come. Given this effect, the first decision is crucial, and we should give it an appropriate amount of attention.
Socrates said that the unexamined life is not worth living. Perhaps itâs time to inventory the imprints and anchors in our own life. Even if they once were completely reasonable, are they still reasonable? Once the old choices are reconsidered, we can open ourselves to new decisionsâand the new opportunities of a new day. That seems to make sense.
A LL THIS TALK about anchors and goslings has larger implications than consumer preferences, however. Traditional economics assumes that prices of products in the market are determined by a balance between two forces: production at each price (supply) and the desires of those with purchasing power at each price (demand). The price at which these two forces meet determines the prices in the marketplace.
This is an elegant idea, but it depends centrally on the assumption that the two forces are independent and that together they produce the market price. The results of all the experiments presented in this chapter (and the basic idea of arbitrary coherence itself ) challenge these assumptions. First, according to the standard economic framework, consumersâ willingness to pay is one of the two inputs that determine market prices (this is the demand). But as our experiments demonstrate, what
But what are the main lessons from these experiments about our lives in general? Could it be that the lives we have so carefully crafted are largely just a product of arbitrary coherence? Could it be that we made arbitrary decisions at some point in the past (like the goslings that adopted Lorenz as their parent) and have built our lives on them ever since, assuming that the original decisions were wise? Is that how we chose our careers, our spouses, the clothes we wear, and the way we style our hair? Were they smart decisions in the first place? Or were they partially random first imprints that have run wild?
Descartes said, Cogito ergo sum ââI think, therefore I am.â But suppose we are nothing more than the sum of our first, naive, random behaviors. What then?
These questions may be tough nuts to crack, but in terms of our personal lives, we can actively improve on our irrational behaviors. We can start by becoming aware of our vulnerabilities. Suppose youâre planning to buy a cutting-edge cell phone (the one with the three-megapixel, 8Ã 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 coffeeârather 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. *
We should also pay particular attention to the first decision we make in what is going to be a long stream of decisions (about clothing, food, etc.). When we face such a decision, it might seem to us that this is just one decision, without large consequences; but in fact the power of the first decision can have such a long-lasting effect that it will percolate into our future decisions for years to come. Given this effect, the first decision is crucial, and we should give it an appropriate amount of attention.
Socrates said that the unexamined life is not worth living. Perhaps itâs time to inventory the imprints and anchors in our own life. Even if they once were completely reasonable, are they still reasonable? Once the old choices are reconsidered, we can open ourselves to new decisionsâand the new opportunities of a new day. That seems to make sense.
A LL THIS TALK about anchors and goslings has larger implications than consumer preferences, however. Traditional economics assumes that prices of products in the market are determined by a balance between two forces: production at each price (supply) and the desires of those with purchasing power at each price (demand). The price at which these two forces meet determines the prices in the marketplace.
This is an elegant idea, but it depends centrally on the assumption that the two forces are independent and that together they produce the market price. The results of all the experiments presented in this chapter (and the basic idea of arbitrary coherence itself ) challenge these assumptions. First, according to the standard economic framework, consumersâ willingness to pay is one of the two inputs that determine market prices (this is the demand). But as our experiments demonstrate, what
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