Time to close a door?

Predictably Irrational:
The Hidden Forces That Shape Our Decisions
by Dan Ariely

A hungry donkey approaches a barn one day looking for hay and discovers two haystacks of identical size at the two opposite sides of the barn. The donkey stands in the middle of the barn between the two haystacks, not knowing which to select. Hours go by, but he still can’t make up his mind. Unable to decide, the donkey eventually dies of starvation.

We like options. My friends will tell you that options are bad for me, they joke that I need to get to a restaurant at earlier than everyone else so that when they show up, I know what I want to eat and drink and can order with the rest of them.

But we have a problem. We don't like to close doors. Ariely conducted various experiments with students to study this behavior and found that even though picking a single door would have been more beneficial for the student, every student made sure to explore each door and worked to make sure those doors remained open.

Besides decision making and having options, there's another area in our lives where this impacts us. This is where behavioral economics comes into play. We don't like the idea of losing something and this is very evident on sites like Ebay where bidding is at play. When someone places the highest bid on an item, they start to anticipate ownership of that item and imagine life with that item. They take a virtual ownership. And this drives them to keep the highest bid. They can no longer imagine not having the item.

We have an irrational compulsion to keep doors open.

We need to allow some doors to close, lest we become like the donkey and starve ourselves in indecision.


Also see Decision Making: Everything is Relative for more review on this book.

Decision Making: Everything is Relative

Predictably Irrational:
The Hidden Forces That Shape Our Decisions
by Dan Ariely

As it turns out, positive expectations allow us to enjoy things more and improve our perception of the world around us. The danger of expecting nothing is that, in the end, it might be all we’ll get.

Thanks to Facebook, of which I both like and dislike, I was presented with an add for Blinkist. Blinkist is a site that promotes learning and personal growth. If your "to-read" list is like mine, I have more books I want to read than I'll ever be able to get through. Blinkist solves this by giving providing subscribers the key ideas and concepts from over a thousand non-fiction books in under 15 minutes in audio or print form. Think of it as Spark notes in a way.

That's how I came across Predictably Irrational. This is not a book I'd normally pick up, but to test how Blinkist works, I thought I'd listen to their audio snippet, then start reading the book to see how the they compare and what is missed by not reading the book. All in all, Blinkist is nice if you want to get the general idea, but obviously reading the book will lend to more incite on what is presented.

Anyway, enough about Blinkist. Now, time for some "bright ideas" I am getting from this book.

Psychology of Marketing

The book is basically about behavioral economics, the way in which humans behave and make decisions. Back in college, I remember talking about the use of psychology in marketing. Everything from the way a store is laid out to the colors on the walls has to do with how we respond and make decisions.

In this book, there were some very revealing details that I never put much thought into. For example, the way we determine whether or not the price for a product is a good deal. Ariely conducted a study in which studetns were to right down the last two digits of their social security number, then they were asked what they would be willing to pay for a number of products. The result? Students whose last two social security digits were higher were willing to pay more for products than students with lower numbers. This is what Ariely referred to as the anchor. And it can be anything really. It could have been the current temperature. It's relativity in pricing, we see a number and use it as a baseline for purchasing decisions. He also talked about first impressions (the first new product to market sets the price, the anchor, by which we compare all other related products).

We also try to compare similar products and base pricing on that. Restaurants will often overprice their most expensive item on the menu so that when you compare it to the second most expensive, the second meal looks like a better deal.

perception of value, in medicine, soft drinks, drugstore cosmetics, or cars, can become real value.

Another interesting thing is how we perceive value. Ariel conducted a study in which students were given pain medication. In one group, students were told the medication was very expensive, and they reported higher percentage of relief than the students who were given the medication and told it was less than a $1. The result: we expect more when we pay more, and sometimes this blinds us to value the more expensive item higher.

All in all, this was a very good book on our buying habits and how we don't really have a rational way in which we make decisions. I highly recommend this book, especially now that we are coming up on the holidays and everybody is out buying stuff.