Following the study of books about critical thinking, obviously I couldn’t miss this book by Dan Ariely – yes, I know he was recently accused of forging data, but please remember: behaviors and social science (in general: in soft science) are affected by replication crisis (there are many reason for that, starting with the difficulty to isolate variables in a controlled environment that try to reproduce conditions we find in reality, not to mention all the motivated reasoning and the cherry picking when we don’t want to see some real “Elephant(s) in the brain”, to use the words of Simler and Hanson, like in studies about Noi e il male (fuori e dentro di noi)), so my approach in this field is not taking everything for sure, but merely as suggestion on how we behave. Let’s say I don’t read these books as a manual of engineering (I can’t forget some dense and thick books I used to prepare for engineering exams) where I can find 99.99% of certainty (including probabilistic distributions, a concept that is certain itself and that describe our world not entirely deterministic), but rather as a book of philosophy or religion: good if you’re in search of more questions to go deeper. There’s more: studies and related (possible) explanations are usually provided for “average people”; if you have different experience from the average person, lived in a different society (I find interesting all the studies across very different populations) and/or you are neurodivergent, it’s very likely your behavior might be slightly different from the average person (let’s say: far as 1 sigma or more in a normal distribution). Nevertheless, I find these studies interesting, since they can push us more to test and know ourselves. For example: am I sure I don’t rely too much on advertisement and marketing tricks when I buy something? Am I totally immune from social media (please: delete your accounts from that sh_t) when I vote? (Don’t be so naive to think that Cambridge Analytica scandal was an isolated case). The key is always awareness (about ourselves and about the world we live in).
A major doubt still remains: is it correct to call “irrational” a human behavior? After all, math and all the other tools and models we built are created to explain reality, but so why are we thinking that a behavior is “not rational” when in reality it’s expressed by the majority of the population? Are we trying to say that a map (built by us) should be better than the actual territory and so we are trying to force our territory (in this case, our mind) to adapt to the map? (See the first model in “The Great Mental Models – General Thinking Concepts). For example, when we blame someone reaching for some instant gratification instead of waiting for a greater good, are we sure that waiting and delaying gratification is always the best thing to do or are we missing something more complex in our model? It could be the case that sometimes taking the immediate prize is better for us even in the long term (it could be that our brain knows more, for example that even in the long term the first choice will be better for us, like we are more motivated and have more energy to perform better in the long run when a really important decision will arrive).
With that in mind, I read “Predictably irrational”. As always, please don’t be satisfied with this post of mine: if you find these topics interesting, read the book (which I have summarized here with my own considerations in parentheses, under fair use for the sole purpose of dissemination of knowledge – in our lifelong path from Ignorance to Wisdom).
0. Intro
Why we promise ourself to start a diet and then fail (see: Weight management: no quick useless hacks, but the real hard science into practice!)? We why buy something we don’t need (see: Dopamine Nation)? Why honor codes reduce dishonesty in workplace (see: “Loneliness” by Cacioppo)? The author begins with these and other questions, and with the recount of an accident in his young age (the same way Jessie Inchauspe begin her Glucose Revolution – understanding mechanisms and numbers before mindlessly following “biohacks”): when you have to recover from an accident and your movements are limited (but more or less a lot of people experienced a situation of confinement during the 1st phase of CoViD-19 pandemic), you start observe every activities as an “outsider”, reflecting on goals of different behaviors (and start going deeper in meta-cognition). For a lot of reasons, we don’t think too much on processes, in personal and professional activities, for example: why the majority of nurses with a lot of experience in soaking and removing bandages, still failed to find the right theory on how to do that to minimize their patient’s pain? (The same applies to a lot of work processes we mindlessly follow, without questioning the status quo, instead of developing The Scout Mindset). Our mind and body is amazing even in what we consider small and trivial acts (this is something that researchers in robotic know as Moravec’s paradox). More often than not, we think we are mostly rational all the time, like perfect economists (the “econ”, to use Kahneman’s words in “Thinking fast and slow”). The claim of this book is to show that actually we are not “randomly irrationals” but rather “predictable irrational” (I’m pretty sure some companies are already clustering and labelling us, depending on some tests sneakily appeared in some apps of e-commerce, social media and general browsing, since these information are highly valuable) and knowing this could be a good starting point for improving our decision making (I could suggest some “calibration tests” similar to the one proposed in The Scout Mindset), since we are subjected to “market (and other) forces” every day (if you are interested in psychology, now you probably are thinking about Lewin’s “Field theory“). Psychology (and neuroscience) studies help us to understand specific behaviors to a frame-by-frame narration of the events and examinate single forces (I suggest you to go deeper with the specialization “neuroscience and neuroimaging”).
1. The truth about reality
Our brain rarely thinks in absolute terms (it works most of the time by comparison, as shown in neuroscience), so we focus on relative advantage of one thing over another, and estimate value accordingly (see also “Deviate” by Beau Lotto and all the illusions, optical and not, including the way we recognize musical tones with benefit of a musical tone, except for the rare ones capable of “absolute pitch”). Most people don’t know what they want unless they see it in context, everything is relative (to use the words of a physicist known by everyone).
The reason why you see different subscriptions plan or different models with the top of the line closely followed by one slightly worse is to push you to buy the best one, much more distant from the basic models/subscriptions – this works way more if the difference in price between the first two is almost nothing (also here: in relative weight) but the difference in features in much more the ones you’d expect if the price assigned was linear. The comparison rule works also when you want to find a partner, so you choose to go out with a friend of yours who is slightly (not too much) less attractive than you (yes, this is a well-known old rule, in my circle we made jokes about it, saying: “Are you inviting me to go out since you’re finding “the ugly by comparison”?” – meaning that we empirically knew how it works). So, when we are comparing different plans/models, we can spend a few seconds to understand if some of them (usually the 2nd one from the top) is merely added there as a decoy.
We can use the comparison also at our advantage (I want to stress out also in this case: in a honest way, I like to remember to use this knowledge as a defense, not in attacks), for example when claiming our job done and salary compared to our colleagues (I already wrote about the unfairness experiment with chimps – and this is one of the reason why European Union is imposing a kind of transparency of salaries within companies, maybe a further step will be avoiding HR to ask about current salary to candidates for a new position, meanwhile there are websites where you can find an expected average salary for a certain job role in a company).
The author even suggests (but I disagree for a lot of cases, it’s not bad to found yourself not the smartest in the room) to move to circles with people not better than you, so you can feel better than them (and, by the way, it doesn’t work to boost happiness for some people: try to propose to someone depressed to look at people in worst conditions, this person won’t find any relief in such comparison – but I recognize the idea/purpose of the author in cases like keeping up with the Joneses, well studied for example in La scienza dello stare bene, a reason more to get rid of the social networks, unless you want to constantly be reminded that your are poorer compared to (the image) of some influencers, so you’ll never be satisfied with your life, the perfect way to go to “The happiness trap” – see the book by Russ Harris). Be aware of this relative way of judging also when looking at extra-furniture and options in cars (e.g.: audio systems, seats) compared to the ones you may find in houses (sure you noticed prices associated to luxury goods, specially Veblen goods, that you can’t explain, like the very same simple piece that costs X dollars on a cheap car and 3X dollars on a luxury car), since they know that you’re more likely to spend more if you’re a “premium user” (see also the nonsense prices for Apple stuff like a mousepad or a wiping cloth).
2. The fallacy of supply and demand
There are different fallacies that influence our behavior when dealing with goods, like the anchoring bias: you assume/guess a certain price even if you were “primed” (let’s say unconsciously “set” with a value) with a number even absolutely not related with the good you’re evaluating: studies by MIT professor Drazen Prelec show that we’re influenced in guessing a price even if we a few seconds before, write a random number – in the experiments, the last 2 digits of their social security number – with people with higher digits found associated to guesses with higher prices compared to the ones with low digits.
Other techniques (well known in marketing) includes showing that a certain event or good is “esclusive”, “premium” (think again about Apple brand management, where everything is designed to appear like made for a premium user-experience) or with limited number/access (it applies also to the feeling of urge, like limited time only, in one word: “scarcity”). We are bombarded by prices (see also Beigbeder’s “Lire 26.900”) and anchoring is so strong that it persists even when we move to another place with different prices, like Simonsohn and Loewenstein found in houses price estimation/evaluation in people that moved to another city (not to mention the elderly comparing nowadays prices with “the good old times” – as opposite: we should remember past prices before “on sale discounts”, to be aware of the trick “it costed…” or “suggested price…”). We can also be influenced by people standing in lines (this was functional in the past and still it is, but only in a very exceptional cases), so we have the “social proof” that a restaurant is so good that it’s worth to wait in line (the bandwagon effect that can break through “The Tipping Point” (see the book by Malcom Gladwell) – even if probably other restaurants nearby are better) even self-herding: once we start to go to somewhere or do something, we start collecting a history in our mind that “we already did it” (so creating a routine or even a tradition), like you’re the second person in line behind yourself. And once you’re hooked, for example in a fast food chain, you forget to compare prices with others and start only considering comparisons between the prices in the specific chain (you become a loyal consumer).
Our perception changes also if you don’t pay for something, if you pay or you get paid and, in these cases, anchoring still work, when you propose a price (also, remember the false false dichotomy in choices, like “choose A or B” even when you’re not interested at all). Our perception change so much that we may even stop enjoying an activity we do as a hobby for free (I knew a lot of photographers and musicians that fall in this case – and, from the other side, from client’s perspective, when you pay you perceive receiving more value and are more willing to complete something that costed you money, time or effort, at the extreme falling into sunk-cost fallacy).
Since often costs are arbitrary (after all, Nietzsche said “Of everything we know the price, of nothing the value”), when we can’t rely too much on market forces, the politicians and the technicians of a state can help in fixing utilities, services and primary goods prices (hoping we’re not in a corrupted country ruled by idiots).
Choice is affected also by some motivated reasoning when we fool ourselves: we can try to say ourselves we are willing to find the perfect cheapest car according to some characteristics, then we may find ourselves tampering with parameters on a website comparison configurator, to “slightly nudge” the result, to fall more near the idea we already had and that our “The Elephant in the Brain” didn’t want us to see (the same it happens when we adopt a “Soldier mindset”, like Julia Galef would say, trying to minimize the defects and maximize the virtues of what we chose, in our confirmation bias).
3. The Cost of Zero Cost
There are people that collect a lot of “free” coupon (same is for discounts, focusing only on money saved but not on time and stress to decide, space to store stuff, environment for the fuel you spend to drive there and for all the stuff (specially food) you throw away when you don’t really need all that quantity and as a paradox the money to pay something else complementary to work, not to mention the money to store and to recycle the stuff… remembering after all that we’re not born just to accumulate and move stuff, as well said in “Early Retirement Extreme”). There are a lot of people in line when there’s something free (or even a small discount).
In several experiments, it was found that we fail our evaluations (e.g.: in $/kg) when something it’s added/marked as “free” or we have to choose between something of low value a little bit discounted and something of high value with huge discount: when chocolate of low value is given for free, people preferred that one instead of spending even a single cent for better chocolate of higher value – there’s a fatigue like a pain in the act of paying even 1 cent (free, so zero dollars, mean also zero friction to us, it’s a special number in our mind, not one to use normally in basic operations, that’s why we fail). There’s more: we may easily fall in the trap of the (paid!) zero cost, think about all the promotions telling that you pay something but then you’ll have some features included or “for free!” (I know a lot of people telling me, long time ago, before smartphones era, “I’m calling you with my free minutes of call!” – I tried more and more times to explain them that they paid a subscription, so it’s not “free” at all). This concept works (for the masses, of course, there can be exception, included the case I wouldn’t spend a single cent more on something I can’t use) also for the “free shipping” if you reach a certain minimum purchase value, like Amazon if you don’t have the “Prime” subscription: you’ll feel “pushed” to spend a little bit more for a better product or to add something in your shopping cart to avoid paying the shipping costs, that you perceive as a avoidable cost (same it applies for free beverages when you spend at least a certain amount, a greater discount after a certain amount or some offers like you won’t pay the cheaper thing if you buy at least 4 pieces and so on).
But coming back to “physical activities” (and not only), there are some downsides: the time you waste. Will you wait 1h in a queue during the day of free museum access, considering also the greater confusion in the museum, just to save a few dollars? It’s up to you – what I saw is that for a lot of people their most precious resource, time, is considered like the less important asset in their life, they don’t think in terms of opportunity cost: you could have done a lot of different things in that time, enjoying more that part of your life that will never come back.
4. The Cost of Social Norms
Margaret Clark, Judson Mills and Alan Fiske suggested we can imagine we are living in the parallel worlds:
- one where social norms prevail: could you please help me do that? Leveraging our social nature and need/sense for community;
- one ruled by market norms: individualism, costs-and-benefits comparisons, prices, interests and everything we know associated to these concepts.
When we keep these worlds separated, everything works fine (even if I don’t think it’s always the case, for example even if in unconscious way, some parents pretend/expect from the children certain behaviors/results since they spend a lot of money, time and effort to grow them up). When you mix the the two worlds, for example inviting a partner or a date to a dinner out and then remarking the cost, so suggesting you’re expecting something in return, there’s a violation! Yes, Woody Allen and others said that “the most expensive sex is free sex” (same said in other words in South Park 13×09 “Butter’s Bottom Bitch”) and actually romantic relationships can provide useful insights into a lot of areas of behavioral economics.
From results coming from several studies, it seems that people prefer to do something in exchange of “decent” money or absolutely for free as a favor or for a cause, but not for a small pay, so: ask something as a favor or offer to pay for real, don’t try to pay a small amount – the same is on the other side: don’t ask anything or ask to be paid seriously (here’s I would add that if we pay something, for example a course, we usually perceive more value and we are more likely to stick to it and to complete, since we committed also with money). Another example to keep these worlds separated: exchanging gifts are considered an acceptable way to behave, but not thinking too much in a cold/rational way (see the episode of “The Big Bang Theory” where Sheldon explains why this practice of exchanging gifts is not fair – better don’t do it in real life – but on gifts I would also add that, even if they can be a warm lubricant for social relationships, they can be used to try to bribe in the future or to make the others feeling (un)consciously in debt toward us, as explained in Cialdini’s “Influence”, chapter on “Reciprocation”).
Some other experiments (like the one by Vohs, Mead and Goode) show that just priming (so just thinking) with money concepts makes us generally behave as most economists believe we behave, less like social animals. What’s worst is that, when conditioned with money, for example asking to pay a fine in case of some infringement like being late to an appointment (experiment by Gneezy and Rustichini), not only we behave worse compared to just observing social norms (unless the fine is huge), but we will behave even worse when the fine will be removed, meaning we probably are not so likely to easily come back from market norms to social norms (I would highlight that some societies are different, for example in south-eastern Asian countries or in some African villages where social norms are usually stronger). This division between the 2 worlds is even more important at work: don’t confuse favors and with job (or: don’t rely too much on claims like “we’re a family” – and, from my experience as a manager, better don’t be too much friendly at the beginning, since it’s not easy to come back to a more rigid and formal environment if/when needed in the future), but try to create and maintain a sense of trust with other employees, since good social norms are one of the best ways to keep everyone more loyal and motivated. Some companies try to motivate with some benefits (even if sure there are employees that will be happier in receiving cash instead of perks, think of the introvert ones that would prefer to receive more money to buy food outside instead of eating at work with others, not to mention the “social events” like dinners or even vacations with colleagues).
There are also particular jobs, usually at community service like policemen, firefighters, soldiers that (despite the fact they risk their life, they live under pressure and limitations and they’re really important – sure much more than social media employees that are paid to sell you sh_t with toxic ads) the salary is lower than the one they could get in the private sector: they accept it since they’re proud to serve the country (also, it could be “dishonorable” for a military man to be rich – even if sometimes the pay are high, specially for politicians or judges, to try to minimize corruption risks).
Another example of usefulness of social norms over market norms is open-source software (or projects like Wikipedia): contributors are happy to help for a cause and to be part of a good community. Try to not destroy everything just because you try to maximize money in the short term.
5. The power of a free cookie
(Coming back to the concept of friction already observed in the “Zero cost”) Uri, Ernan and Ariely observed that, when candies are available for free, a higher number of people will stop by to take a candy, but on average people profit less compared to the case where candies cost 1 cent, where 1/3 of the people stopped by to buy, but each one bought a lot of candies (when it’s free, we feel more the pressure that we are scrounging if we take too much and, at the same time, once we “break” the friction to pay something, we are more likely to buy more than just one single piece). This could explain why the last piece in a buffet remains there untouched since we don’t want to be the last one to finish a common resource (but compare this with the opposite feeling, in the disaster of commons and the thought of Aristotle mentioned in “The Great Mental Models – General Thinking Concepts”, that we care much less when something is not owned only by us, so I wouldn’t run for the optimistic social interpretation of the author that we care more when there’s a shared good – see the waste when water is provided almost for free and have a look in some poor cities when green areas are common).
6. The Influence of Arousal
There was an experiment in Berkeley, with participants falling into the category “male, heterosexual, 18 y.o.” (I see sexism and prejudice against gay, here) were asked to answer questions in a cold state and during arousal, questions regarding also “moral integrity” and behavior considered unacceptable or even illegal. The result was clear: even for the more savvy young guys, the probability to answer “yes” to some bad or unsafe behaviors was higher (I can add here, even if it can be a lot controversial, that the proposed aggressive behaviors could be seen actually as more “functional” to the maximization of chances to reproduce, so we may not like at all, but this is how our “selfish gene” (as Richard Dawkins would say) works – and this can open to several interpretation like: should we perhaps consider the arousal state as a mitigating factor during a trial, since we are less capable of controlling, specially in case we didn’t want to reach that arousal point?). We should peacefully accept that we are like Dr Jekyll and Mr Hyde (but we still want to try to convince ourselves that education can ovveride every natural instinct – no, we can’t eradicate it, unless we want to use heavy drugs and/or physical containment in a preemptive way). Even if unpleasant to tell: we can’t educate ourselves to improve with time and experience during arousal states (we can’t defeat 100% natural forces, no matter what, we’re still animals). What we can do when we feel the urge to do something is learning to wait (and the usual advice to count up to 10 or even more, even if there is the small backfire, when waiting for too much, to dampen the enthusiasm if we wanted to do something a little bit “crazy”, then we may lose the interest forever – but it’s a price we can pay if waiting can help us to take bad decisions like quickly reply with anger to our boss or spouse). Since we can’t block teenagers from having sex (as unpleasant as it is to think about it for the church and for some parents), we can at least be aware of the risks (higher in an arousal state), so make sure they have condoms at hand when needed (as for Atomic Habits and for “The Great Mental Models Volume 2” for gravity, better make sure they have good things nearby and bad things far away). Even if difficult, we must face that we can’t be angels 100% of the time, so better design safe environments, for example cars should decrease speed when there’s a young person driving and perhaps switching the radio to more relaxed music or even automatically call the mother.
(We should accept we can’t fully control our thoughts in some states like during arousal or even during craving for chocolate, even with time we may have some behavior we don’t fully know, the Mr Hyde in us that is like the blind spots in the “Johari Window” – in a world ruled like in “Minority Report”, should we assume we are deterministically subjected to the influence of our selfish gene and thus should we linked to a h24 Intrusion Prevention System toward others and ourselves?).
7. Procrastination and Self-Control
Generally speaking, we have issues in delaying gratification: the average USA citizen lives on debt, meaning they can’t wait to save first and then spend money. We strive to follow a diet (I summarized the physical and psychological reasons in Weight management), to fix appointments with medical doctors for checkups and, more in general, we procrastinate. When left free, the only way to try to respect final deadlines is to fix intermediate checkpoints/deadlines, evaluating public commitment of paying a fine if we skip an appointment we should respect, like going to a gym or to a park for some physical activity – a proposal for a country, to save all the money spent for lack of prevention, could be charge people a few hundred dollars and then giving them back only if they show up to the doctor.
Checkups could be easier in bundle, as Honda and Ford demonstrated introducing the concept of maintenance schedules for car owners (actually, this is something that technical military personnel has been doing since ages, due to the fact that maintenance and efficiency can change the result of a battle): better going at fixed intervals (measured in km and years) even if not “perfect” (they estimates averages) rather than not going at all.
Even in savings, someone tried freezing the credit card so they need to wait a lot of time before reading the numbers to put on e-commerce websites so they have time to cool-down their urge (really!?), someone tried writing on a web page their credit, so they have public commitment to reduce debts (feeling the possible shaming coming from other people) or fixing a certain amount per month (budgeting).
Another urge to try to reduce is the one related to checking emails (generally: the FOMO about reading comments, scrolling social media pages and everything we know, you can read Cal Newport’s “Digital Minimalism” for more, this include also the Nomophobia, so the anxiety to stay too much time and too distant from mobile devices), where studies like the ones on “schedules of reinforcement” with Skinner’s box provided possible explanations on behaviors observed for example in people affected by addiction in gambling: we keep pressing the slot-machine lever until we get our reward – the same is for notifications and emails. The easiest way to reduce this effect is to check emails/notifications only at certain time intervals, disabling all the popup and sound (you can see also here the importance of being deliberate, for all the other tips you can see the books on digital minimalism and on dopamine that I already mentioned). There are many ways to reduce instant gratification and maximizing the chance to do “the right thing” (from the classical methods like “stick and carrot” to more complex solutions, you can see my post on Atomic Habits to PRO2).
8. The High Price of Ownership
Experiments by Knetsch, Thaler and Kahneman on the “Endowment Effect” made it clear what everyone already knew: people tend to value the things that they own more than they are worth to them or to others. It could be anything, from a car, to a violin, to a ticket, to a house (this is extremely evident in places like pawn shops and all the shops that evaluate your jewelry and gold).
Adam Smith wrote that “Every man […] lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society”. When you try to put a price on your old VW bus, you’ll start recall all the trips you made, so adding more emotional value that has nothing to do with the commercial value that others would pay. Also: the more work you put into something, the more ownership you begin to feel for it, for example the effort and time spent to assemble forniture – what Ariely and Norton call “The Ikea effect”. The endowment effect starts even before owning, for example at the time of purchasing something online. The same effect applies also to our long-time-built point of view (this attachment is better explained in The Scout Mindset). A “cure” to that is trying to reduce our stuff (you can try the minimalistic approach of Marie Kondo’s “The Life-Changing Magic of Tidying Up”), we can easily detach from what we have thinking that we can have something else (at least freedom, specially if you use the money back to retire earlier) and we can try to think as the potential buyers of our things: should we pay that amount of money for that if we don’t consider the associated feelings? Also, try to reduce the better-than-average syndrome: the things we have aren’t necessarily better than others, so probably there’s no reason to over-evaluate them, ask yourself if you’re falling into the positivity bias.
9. Keeping Doors Open
We try to maximize our possibilities (enhance and maintain optionality) keeping all the doors open, but it comes with a cost: we spend a lot of time and energy (as well as other resources) compared to just focusing to one (or a couple of) option. So we can buy a PC with a lot of features and software that probably we’ll never use, “just in case”, and overwhelm children with a lot of activities afraid they can’t figure out which ones will lead to best outcomes; when it comes to studies and careers, it’s even worse (this is better explained in “Designing Your Life” – in the military, there’s a saying: “Once you decided, burn your boats“, recalling historical facts that you can find if you’re curious :)). Taking too long to decide is a loss in itself (thinks of the well-known mental fatigue when you try to decide which series you want to see on a streaming platform with thousands of options, there’s the risk to spend all the night just scrolling everything or starting to look only the first 2minutes of everything, then you’ll go to sleep without a single episode seen – better on “The paradox of choice” and remember that our life is limited, see “Four Thousand Weeks”, so try to establish a reasonable time limit depending on the importance and effects on the choice, there’s always an opportunity cost). The main issue is that, as Erich Fromm wrote in “Escape from Freedom”, we’re living in a time where you have so many opportunities that you can feel like missing/wasting something if you don’t try something, like you’re obligated to do something instead of just decide for example to enjoy what you’re already doing (see also Baricco’s Novecento: with too many options, how can you decide a street, a partner, a job, … – and I can say I knew a lot of restless people, continuously asking themselves if they can find a better job, a better partner, a better place to live, instead of simply enjoying the present, the here and now; I know that the will to improve our conditions is a major drive to our evolution, but I suggest reading “The Happiness Trap” to try to get rid of this mechanism when it becomes dysfunctional). This continuous thinking has often effects even in the short term: you may decide between too many models on sale, so you start looking carefully at every details; once you finally decided, for days, the offer isn’t available anymore; this apply to a lot of different situations (not only time is limited, but some conditions change really fast, think for example when you have different job options, but there are also other candidates waiting and maybe the company will freeze the new hires before you decide or you start looking for the best seat instead of just taking the first place and you may end up without a place). The worst situation is when you have 2 alternatives quite similar and both pleasant: if you can’t decide, it would be stupid to die like the Buridan’s ass (and this is valid also with the corollary: “better done than perfect”, since if you can’t decide the details, you’ll never finish the work or you’ll finish it late).
10. The Effect of Expectations
When we are fans of a team during a match, probably we’ll be more likely to “genuinely” see that the referee is favoring the other team. When we read labels on bottles or food, we’ll probably be influenced in the way we will perceive smell and test (for good or for bad), since expectations can influence nearly every aspect of our life (our brain is great in set up expectations, that’s why confirmation bias is one of the most powerful and this is also the reason why studies and tests are usually conducted in double-blind, since even the examinator can unconsciously influence us). If you want to impress/enhance the experience of your guests drinking wine, invest in a nice set of wineglasses. To understand more about the interactions of this prejudice with the actual taste, a group of neuroscientists (McClure, Li, Tomlin, Cypert, Montague) performed a fMRI study on people drinking Pepsi and Coke. They saw that drinking alone activated the VMPFR (Ventromedial Prefrontal Cortex), more associated to emotions, whereas showing associated images (of Coke or Pepsi) while drinking, activated the DLPFC (Dorsolateral Prefrontal Cortex), associated with the higher human reasoning like working memory, associations, ideas – they also found that Coke response was higher, and much higher for Coke fans, so basically it’s not the taste but the marketing of the red-white beverage.
Expectations also shape stereotypes (a good example is the Pigmalione effect and a recent massive study in Italy (Lievore et al. 2022) that proved that girls systematically receive higher grades compared with boys at the same competence level: the stereotype that female are diligent pupils created the effect of actually reinforcing the stereotype by giving them higher grades). The problem is that when we see with “different lenses”, we lose our objective way to see and decide (see again “The Scout Mindset“), so escalations rise and for people fighting/supporting and for people outside there’s always the feeling to be right against the other, so one of the solution usually suggested is to present facts without the labels/context, so you can evaluate without cheering according to your ideology (this will reduce also the “double standard” issue). The power of the context in our judgment works both way: if we see a great violin player like Joshua Bell playing in the street we will give him much less credit compared to an average violin player who plays in a famous theater; if we eat an average hamburger in a fancy restaurant we may appreciate it more than eating a 3-stars level dish in a motel; not to mention all the cases in which people contemplate the Mona Lisa only because they’re told it’s a masterpiece (but it can be sometimes also the opposite: when we set higher expectations, we can be disappointed, but… of course only if we are connoisseurs and can appreciate details!). For a more objective perception, we can follow the advice of Alexander Pope: “Blessed is who expects nothing, for he shall never be disappointed”.
11. The Power of Price
We’re familiar of the placebo effect about drugs, but what about surgery? It was found out that mammary artery litigation for angina pectoris and arthroscopic surgery for the knee where were absolutely equivalent to placebo simulating surgery (that is: patients “opened” the same way but left untouched for the first case and anything inserted in the second case; this reminded me also of the other studies on Iatrogenesis – the causation of a disease, a harmful complication, or other ill effect by any medical activity, including diagnosis, intervention, error, or negligence – like the famous one reported in Taleb’s “Antifragile” where some children were suggested to go for tonsillectomies even without symptoms, just because the motivated reasoning of doctors supposed that statistically someone in the room could have had issues; not to mention here the fashionable bloodletting and the more recent horrors of lobotomy). Famous cases of placebo include Gerbi’s worm secretions supposed to cure toothaches, “mummy powder” as a remedy for epilepsy and different ailments, but there are still a lot of placebo in this period (including some debatable alternative cures).
Placebo mechanisms are still a little bit of a mystery, generally it works due to the conditioning like the Pavlov’s dogs and also due to the doctor or caregiver looking at the patient (see the “Kiss the boo boo” effect in “The Elephant in the Brain”). So, again, we fall into confirmation bias and effect of expectations and this is also the case for the price: when we pay more, for example asking for the famous brand of drugs instead of the cheaper alternative, even when it’s just a common vitamine. An experiment with a sponsored Veladone-Rx showed that decreasing the price from 2.50$ to 0.10$ reduced to half the number of participants that experienced relief. This effect sums to all the other effects of expectations: a study on a drink with caffeine called SoBe showed that when sold at high price, participants had better performance compared to the one that bought it at a lower price; when associated to a campaign claiming that some scientific tests supported results of the drink, both groups performed better, still with better results for the one that spent more for the same drink – and, by the way, fake claims and higher prices work more than the beverage content itself. A study in 2003 found that doctors who knows that patients expect something anyway, for example during a viral cold, sometimes provide them antibiotics that in the best case are useless, otherwise do harm and contribute to the massive problem of drug-resistant bacterial infections (so again: iatrogenesis). People keep (un)consciously believing that spending more (even when it’s not needed) is better, so here there’s a dilemma for marketers, since their profession requires to stretch the truth or outright lying and this effect, alongside with raising prices, seems actually “helping” people who strongly believe something even if it’s a placebo. There’s also an ethical dilemma: should we question every treatment so taking the risk to provide placebo to some patients to test them against the real treatment? This could lead to pain and to really bad consequences (and legal issues). (The truth is that we’re like children that rather prefer the delusion of believing in some fantasy character – not talking about religion here, even if… – instead of facing the truth, since we want to have something that support us during painful situations, even if it’s just a placebo).
12. The cycle of Distrust
The first place for our distrust is perhaps the spam box and in general all the places where we receive “offers too good to be true” – this is also linked to the “Free!” effect already discussed, so we become suspicious (I can say, generally speaking, that an excess of distrust can lead to avoidance of real good occasions, but at the same time, when we miss some “true positives”, we protect ourselves from “true negatives” like scams or entering bad situations).
Gneezy, Spiller and Ariely set up an experiment to see how much people are suspicious: when giving free money on a table, only a few participants stopped by to take 1$, but when they raised the money up to 50\$, 19% of participants stopped, asked if they had to do something in return, then walked away, so people are generally suspicious. We’re facing issues due to the current “tragedy of the commons” – this time it’s not that we don’t just have grass for livestock, it’s that we’re running out resources in the long run: individuals use more and more (see everything is happening for example on the fast fashion industry, as well as for the rare elements on Earth, I already mentioned it in “Early Retirement Extreme”, you can see more in general the issues in our indiscriminate resource consumption and waste production well explained here: “Man” by Steve Cutts). The “Public goods game” explains clearly what happens when someone start to cheat (so: contributing less to the community – and this is actually what’s it’s done in reality with tax evaders and people who steal cheating from the common fund): we end up trusting no more and contributing less and less. And this because some people focus only on the short term, hence preparing the collective failure in the long run. When someone sell something that is actually a scam, like depicted in the movie “Little Big Man”, the effect is that not only this persone, but also others will face much more difficulties to sell something even if it can be good (actually, people has too few “collective shared memory”, so we easily forget failure of the past, plus the desire to believe in a quick solution is somehow still present, you can see a lot of young people trusting systems of every kind and even following very young idiots claiming they know the secret for wealth and success). Another problem is the “inflation” of description/signaling that makes harder for honest people to remain honest while trying to attract others: if on a dating site every man exaggerates earnings and height (2 of the main factors looked by women on dating site), should a new joiner remain honest, knowing that everyone is cheating and so looking, in comparison, less attractive? Then, once started, it becomes an habit and the same behavior is observed in inflated résumé (and I still find hilarious some descriptions on LinkedIn, where people who can barely sum 2 numbers in Excel become Spreadsheet Expert!).
The distrust is influenced also when we associate a sentence to a party we don’t like: Ayelet, Stephen and Ariely asked participants if they agreed with simple sentences like “the sun is yellow” and everybody agreed, but when the sentence became “The Democratic party said that the sun is yellow”, someone started questioning (like before, I suggest in this case, to try to think about a sentence without labels, since you can be intellectually honest to admit that someone you don’t like said something true, this is further explained in The Scout Mindset). Curiously, our distrust in marketing went so far that we don’t even trust too much a brochure of the manufacturer and we may start thinking they exaggerated descriptions of the features.
Some companies see trust as a public good and try to do everything to gain and maintain trust of their customers (but attention here: there are a lot of bad companies that just want to fake that behavior, for example with greenwashing or adding a costless sticker during some “pride” periods, showing (fake) support with no cost, just to signal they’re good). Like in Aesop’s tale “The boy who cried wolf”, people can accept and forgive a little bit of lying (also, people are quick to forget scandals), but generally trust, once eroded, is difficult to restore.
13. The Context of Our Character, Part I
In 2004, the combined financial cost of robbery, burglary, larceny-theft and automobile-theft was about $16 billion, much less than the circa $600 billion estimated for employees’ theft and fraud every year and estimated $350 billion of tax evasion, plus other billions for fraud to insurance companies, the secondhand clothes returned for full refund and so on. Mazar, Amir and Ariely questioned themselves why some crimes, usually committed by people that we imagine honest – usually white collar and the average person, not our stereotypical image of a criminal robbing from a shop – are judged less severely than others, even when there’s a huge scandal like the one of Enron in 2001. An experiment took at the Harvard Business School, where a lot of CEOs comes from, showed that students with chance to cheat do it, but only a little bit and it’s not dependent on the risk to be caught, it’s like they don’t want to cheat too much. This could be explained by Adam Smith, who wrote that we evaluate honesty and want to observe regular conduct within our peers, and by Sigmund Freud who wrote that we internalize social virtues (this obviously depends on the context we grow in, see Think of the children (development)), so we stop at a red light on the street even in the middle of the night and we return a lost wallet, acts that stimulate the reward centers in nucleus accumbens and caudate nucleus. The problem is that we start thinking ourselves as criminals only when we steal a lot and so we miss the rational cost-benefit analysis, like the benefit of stealing a towel from a hotel compared to the cost of being caught. In other experiments, it was found that if the question was about remembering some random 10 stuff, like 10 books, compared to remembering the 10 commandments, the second group seemed to cheat less: probably, it was the act of recalling something linked to morals that helped to prevent cheating. A similar behavior was observed in cases which participants had chance to cheat, but the group who signed a honor code like “I understand that this study falls under the MIT honor system”, obtained the same results of the control group that didn’t have chance to cheat – where the group who could have cheated, but without being asked to sign a honor code, reported a higher score (by the way, this is probably the reason why Coursera platform ask to sign for a similar honor code before starting tests).
14. The Context of Our Character, Part II
Following the chapter before, the idea is: when you associate cash (physically) to the idea of stealing, it’s a different context. For example, the people responsible for the mentioned bankrupt stolen old people “virtually” (but it’s however real money, this different perception is well known when people deal with cash/bills or credit card or numbers in an online account), not stealing banknotes from the purses of old women. A similar behavior is empirically observed when you have a box of pens and a box with coins in the office: would you feel more comfortable to take a pen when you suddenly need it for your children for the day after at school or to grab a dime when you suddenly need a dime to buy a pen from the closest shop when you don’t have money with you?
Ariely tried another experiment with 3 group of students at MIT, so again one control group without chance to cheat, one group who could cheat in exchange of tokens for their correct answers – tokens that would be exchanged for real money right after – and one who could cheat in exchange of real money immediately. It was observed that students are more likely to cheat when there are token instead of real money: in a few words, when we’re just one step away to money, like coupons or tokens to be exchanged for real money, we are probably much more likely to cheat in exchange of the very same amount of money.
In general, it seems that for people stealing some money from an account is seen differently from stealing physical money.
Ariely added also that probably it’s not so casual that on US bills it’s reported the name of the country and also “In god we trust”- see the previous effect of remembering the 10 commandments or the bible before a trial. One trick that Ariely suggests to minimize this discrepancy is to add a label on coupons and objects, reporting their price, so probably we will see differently things stolen in the office.
(I think it’s possible to expand this concept to every kind of effects that are “transferred”: if you consume electronic gadgets and fast-fashion clothes, you’re probably guilt of child labor and massive pollution, but they are consumed very far away from your eyes, so you don’t feel so guilt as if the same children were producing the same good in front of you and producing waste near your home).
15. Beer and Free Lunches
An experiment involving decision on which beer drink showed that people were happier with their choice when the order was done in private compared to the ones that ordered in the classical way in a pub, asking loudly and sequentially in a group (it’s not a big news that we are influenced by others), so Dan suggests to think clearly in your mind what to order before you’re approached by the waiter at the table.
All the book basically tried to explain that, for behavioral economics, people are not completely informed/aware about their decision, so not choosing accordingly to the rationality from standard economics.
Finally, the author highlight that is great to study human behavior, but at the same time social sciences are not perfect yet, quoting Nobel laureate Murray Gell-Man: “Think how hard physics would be if particles could think” (the same concept expressed in the intro of Cacioppo’s “Loneliness”, quote from “The Peculiar Institution,” April 30, 2002, p. 8: In an issue of the popular science magazine Scientific American, the editors observed that “whenever we run articles on social topics, some readers protest that we should stick to ‘real’ science.” The editors went on to say: Ironically, we seldom hear these complaints from working physical or biological scientists. They are the first to point out that the natural universe, for all its complexity, is easier to understand than the human being. If social science seems mushy, it is largely because the subject matter is so difficult, not because humans are somehow unworthy of scientific inquiry).
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