Predictably Irrational: The Hidden Forces That Shape Our Decisions

The danger of expecting nothing is that, in the end, it might be all we'll get.

individuals are honest only to the extent that suits them (including their desire to please others)

People are willing to work free, and they are willing to work for a reasonable wage; but offer them just a small payment and they will walk away.

Standard economics assumes that we are rational... But, as the results presented in this book (and others) show, we are far less rational in our decision making... Our irrational behaviors arevneither random nor senseless- they are systematic and predictable. We all make the same types of mistakes over and over, because of he basic wiring of our brains.-pg. 239

MONEY, AS IT turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well.

that when given the opportunity, many honest people will cheat.

most people don't know what they want unless they see it in context.

Ownership is not limited to material things. It can also apply to points of view. Once we take ownership of an idea — whether it’s about politics or sports — what do we do? We love it perhaps more than we should. We prize it more than it is worth. And most frequently, we have trouble letting go of it because we can’t stand the idea of its loss. What are we left with then? An ideology — rigid and unyielding.

But suppose we are nothing more than the sum of our first, naive, random behaviors. What then?

Giving up on our long-term goals for immediate gratification, my friends, is procrastination.

That’s a lesson we can all learn: the more we have, the more we want. And the only cure is to break the cycle of relativity.

we usually think of ourselves as sitting the driver's seat, with ultimate control over the decisions we made and the direction our life takes; but, alas, this perception has more to do with our desires-with how we want to view ourselves-than with reality

A few years ago, for instance, the AARP asked some lawyers if they would offer less expensive services to needy retirees, at something like $30 an hour. The lawyers said no. Then the program manager from AARP had a brilliant idea: he asked the lawyers if they would offer free services to needy retirees. Overwhelmingly, the lawyers said yes. What was going on here? How could zero dollars be more attractive than $30? When money was mentioned, the lawyers used market norms and found the offer lacking, relative to their market salary. When no money was mentioned they used social norms and were willing to volunteer their time. Why didn’t they just accept the $30, thinking of themselves as volunteers who received $30? Because once market norms enter our considerations, the social norms depart.

There are many examples to show that people will work more for a cause than for cash.

human beings are inherently social and trusting animals.

one that we are just beginning to understand- is that trust, once eroded, is very hard to restore.

But because human being tend to focus on short-term benefits and our own immediate needs, such tragedies of the commons occur frequently .

Resisting temptation and instilling self-control are general human goals, and repeatedly failing to achieve them is a source of much of our misery.

Thoreau wrote, “Simplify! Simplify!” And, indeed, simplification is one mark of real genius.

Tom had discovered a great law of human action, namely, that in order to make a man covet a thing, it is only necessary to make the thing difficult to attain.

When people think about a placebo such as the royal touch, they usually dismiss it as "just psychology." But, there is nothing "just" about the power of a placebo, and in reality it represents the amazing way our mind controls our body.

If we all make systematic mistakes in our decisions, then why not develop new strategies, tools, and methods to help us make better decisions and improve our overall well-being? That's exactly the meaning of free lunches- the idea that there are tools, methods, and policies that can help all of us make better decisions and as a consequence achieve what we desire-pg. 241

humans rarely choose things in absolute terms. We don't have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly.

Wouldn't economics make a lot more sense if it were based on how people actually behave, instead of how they should behave?

Without constant suspicion, we can get more out of our exchanges with others while spending less time making sure that others will fulfill their promise to us.

we are pawns in a game whose forces we largely fail to comprehend.

people are sometimes willing to sacrifice the pleasure they get from a particular consumption experience in order to project a certain image to others.

feeling so far is that standardized testing and performance-based salaries are likely to push education from social norms to market norms. The United States already spends more money per student than any other Western society. Would it be wise to add more money? The same consideration applies to testing: we are already testing very frequently, and more testing is unlikely to improve the quality of education. I suspect that one answer lies in the realm of social norms. As we learned in our experiments, cash will take you only so far—social norms are the forces that can make a difference in the long run. Instead of focusing the attention of the teachers, parents, and kids on test scores, salaries, and competition, it might be better to instill in all of us a sense of purpose, mission, and pride in education. To do this we certainly can’t take the path of market norms. The Beatles proclaimed some time ago that you “Can’t Buy Me Love” and this also applies to the love of learning—you can’t buy it; and if you try, you might chase it away.

So imagine two scenarios. Let’s say it’s the holidays, and two different neighbors invite you to their parties in the same week. You accept both invitations. In one case, you do the irrational thing and give Neighbor X a bottle of Bordeaux; for the second party you adopt the rational approach and give Neighbor Z $50 in cash. The following week, you need some help moving a sofa. How comfortable would you be approaching each of your neighbors, and how do you think each would react to your request for a favor? The odds are that Neighbor X will step in to help. And Neighbor Z? Since you have already paid him once (to make and share dinner with you), his logical response to your request for help might be, “Fine. How much will you pay me this time?” Again, the prospect of acting rationally, financially speaking, sounds deeply irrational in terms of social norms. The point is that while gifts are financially inefficient, they are an important social lubricant. They help us make friends and create long-term relationships that can sustain us through the ups and downs of life. Sometimes, it turns out, a waste of money can be worth a lot.

If you're a company, my advice is to remember that you can't have it both ways. You can’t treat your customers like family one moment and then treat them impersonally—or, even worse, as a nuisance or a competitor—a moment later when this becomes more convenient or profitable.