Predictably Irrational

Summary

To me this book can be mostly summarized by its own title and subtitle. It's about how people often behave irrationally, but how there is still method to the madness. We are not just irrational, we are predictably so. Humans have lots of biases that create suboptimal decision making, and we can predict when, how and where people are going to behave in these irrational ways. This challenges the notion that economists used to have, namely that humans act as rational decisionmakers. We now know for a fact, that we often don't act rationally at all and Arielly shows examples of where this happens.

A few to illustrate:

• The study where judges are more likely to look benevolently on a case when it is presented to them after instead of before their lunch break.
• The prices people are willing to pay for an item when they buy it, is lower than the prices they want to get when selling the exact same item.
• The story of the cop that is more likely to become violent and shoot a black person than a white one in America due to racism and in-group out-group bias.
• We are more likely to buy a more expensive thing, if we are presented with an even more expensive thing first. When buying an expensive car, the 300€ extra for the "comfier seats" feel like they don't matter, yet if we were to buy only the seats, we would care. The contrast of spending a lot of money for the car, makes the "small" extra expense seem less consequential.
• We value furniture that we assembled ourselves more, than if we purchased it already assembled => also known as the IKEA effect.

Key Takeaways and Biases

• Relative value and comparisons: People judge value based on comparisons rather than objective assessments, which can lead to irrational choices.
• Power of "free" and anchoring: People are heavily influenced by "free" offers and initial price anchors, often leading to irrational decisions. We want to reciprocate.
• Ownership and effort bias: People overvalue their own possessions and things they have invested effort in, leading to irrational attachment (IKEA Effect)
• Emotional influences: Emotions can easily cloud judgment and lead to choices that conflict with one's best interests. But we also need emotions to make decisions in the first place
• Procrastination and self-control: Lack of self-discipline often undermines long-term goals, but commitment devices can help counteract procrastination.

To summarize the book in Arielys own words:

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 are neither 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.

I think Predictably Irrational didn't add anything meaningful to the discussion of how human behavior works, at least not for me because of the other books I read before. It seemed a bit like of a re-hash of ideas from other thinkers such as Daniel Kahnemann or Robert Cialdini. I'd say, you can safely skip this book and read Thinking Fast and Slow and Influence instead and get all the main ideas, packaged better and from the "original" sources. In this sense, this book is similar to Blink by Malcolm Gladwell