Jul 6, 2016

Book Review: Predictably Irrational by Dan Ariely

Do you believe in coincidences/signs/serendipity?

I'm not sure if I do but a recent event that happened has made me curious. I recently met someone who had been living in the same apartment as mine for the last 7-8 years. We have hardly met or crossed paths while our respective kids knew each other very well. Turned out that she was decluttering her home as she was relocating to another country. She sent an email to our community with the list of fiction books that she planned to give away. I don't read much of fiction and so I didn't go through the mail thoroughly.

But her last sentence in the mail got me interested. She said that she loves reading non-fiction and maintains a google spreadsheet of books she has read and books she plan to read. She was willing to share the spreadsheet with anyone who might be interested. I wrote to her about the kind of books I have read, areas of my interest etc. The email chain turned out to be an interesting one for both of us as we discovered that our interest areas are very similar. We met up at her place one Friday evening and chatted for nearly 4 hours about various things - books, careers, startups, aspirations, kids, ecommerce, women's challenges in workplace, tech industry etc. Though we met for the first time, it felt like a friendly conversation between two friends who are catching up after a long time.

In the 2 weeks that followed, she borrowed my copy of Elizabeth Gilbert's "Big Magic" (my favorite book of last year) while I borrowed her copy of Dan Ariely's "Predictably Irrational". It was a very interesting read where the author talks about various aspects of human behavior that trigger irrational decisions, well supported by insights from his various experiments.

One of the concepts that intrigued me and made me experience the "aha" moment was "arbitrary coherence" that is tied to the way we anchor price of a certain product/service.

"Although initial prices are arbitrary, once those prices are established in our minds, they will shape not only present prices but also future prices. Our first decisions resonate over a long sequence of decisions. The sensitivity to show to price changes might be largely a result of our memory for the prices we have paid in the past and our desire for coherence with our past decisions."

The author talks about the difference between social norms and market norms in one of the chapters. I could relate to many of the examples shared.
Social norms - friendly requests people make of one another
Market norms - you get what you pay for

"Companies can get a lot more work done from their people when social norms are stronger than market norms."

I also enjoyed the chapter on the power of "free" and how we fall for it every time.

"Zero is an emotional hot button - a source of irrational excitement.", the author says.

The experiment on the choice between free Amazon $10 gift certificate and a $20 gift certificate for seven dollars is a clear proof of how irrational we can be.

The chapter on high price of ownership showed how we overvalue what we own (loss aversion). The author states
"Moving back to our pre-ownership state is a loss, one that we cannot abide. Downgrading to a smaller home, giving up on comforts etc are tough."
The cure he proposes for this tendency is to put some distance between yourself and the item of interest (concept of detachment that Bhagavat Gita emphasizes)

"Predictably Irrational" is definitely a deep read that requires time to absorb the material shared and to reflect upon the same. Examples of various experiments convey the underlying message of certain irrational behaviors we exhibit all the time.

Overall, I loved reading it and will revisit my notes when I notice such irrational behaviors either from myself or from others. Do read if human psychology, behavioral theories, motivation principles, biases etc are topics that intrigue you. Take your time to read this book, skimming through it may not be effective.

And on the person I met, she has now relocated and we are in touch through various communication mediums. But I miss the "real" face-to-face conversations. Lesson learnt from this experience - do reach out to people proactively in your community, office or social gatherings. You never know - you might find a friend with similar interests as yours. Move beyond Facebook likes and Instagram hearts. Make time for real conversations with real people.

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