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Ariely's "Predictably Irrational"

December 27, 2008

Dan Ariely’s "Predictably Irrational" is a fast and valuable read.  Here are a few observations and comments:

(1) I was nagged throughout most of to book by an idea I outlined back in April in Cognitive Biases — the idea that every time we identify an example of our (predictably) irrational brains, we have also discovered how we evolved and survived as a species. Every example of loss or foolishness from bad decision making also has a parallel counter example of utility for the long term survival of the species.  It seems that to get a full picture of rationality and to improve our odds of making rational decision is the largest possible context (systemic vs narrowly local) we need to understand the limitations and the benefits of our thought habits.

(2) Ariely describes in detail experiments where we regularly make poor decisions based on value distortions. He seems to gloss over the issue that in the moment, value distortions are not fixed by merely realizing the truth. Our immediate and only perceptions are the only truth we have access to in the moment.  The trick seems to be to reframe the question of value rather than reforming our perceptions in the moment.  

(3) Decisive vs. Considered decision making.  Ariely discusses the cost of not making a choice between similar options, making many valuable points.

We sometimes take up a lot of time and energy making a decision even when the overlap between the benefits of the options is high.  Somehow the differences become very significant to us and demand acute focus.  Even more troubling is that the often the differences are based on hypothetical use cases that are unlikely to present any realized limitation.  We often have a hard time making rational assessments:

What is the supporting no use cases at all because no decision has been made?

What is the cost of research? What is the incremental payoff from a few more hours of research?

For a difference in features supporting use case x, what is the probability I will be limited by the lack of use case x?

What is the cost to remedy the limitation when it occurs some time in the future?

(4) In the section of PI on honesty, it seems Ariely completely ignores the issue of assumed and explicit agreements.  We often rationalize bad behavior though asymmetrical information with regard to agreements.  It is more common to "pull one over" on someone than to knock them on the head and take their wallet.  Is one any less honest than the other? One might argue that knocking on the head (pure banditry) is more honest because at least it is in real time and one-on-one.  Yet, much more is stolen in our society by asymmetrical agreements where the weight of a large organization, a faceless policy or complex payoff chain are common.  Airline blackout dates, hidden credit card fees, office supplies (all examples from the book) seem more about asymmetric information regarding agreements than simple dishonesty.  It seems that any discussion of dishonesty should start with how we think about, create and deal with agreements.

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