predictably irrational, by dan ariely

I’ve always been fascinated by Dan Ariely and his unique way of thinking about the world. His experiments are eccentric and delve into the core of human nature. So it’s no surprise that he opens his book with the lofty goal of helping you to fundamentally rethink what makes you and the people around you tick.

He does this through 15 chapters. Each chapter is its own experiment, with a hypothesis, a method, and an ultimate takeaway. Here are some of my favorite lessons from the book:

• Relativity: As humans, we have no internal calculator to measure value. As a result, we compare things on a relative basis. This is the concept of arbitrary coherence -- although initial prices (for goods & services) are arbitrary, once they are established in our minds, they shape how we think about all other present and future prices
• FREE!: We have an irrational urge to jump for a free item, even if it is not something we really want. Why? Most transactions have an upside and a downside. When something is free, it feels as if there is no downside and so we perceive the item as being more valuable. In business, making part of a purchase “free!” is a superpower, because of the irrational manner in which we react to it 
• Market Norms vs Social Norms: We simultaneously live in two different worlds -- one where social norms prevail, and one where market norms prevail. Mentioning price is enough to move you from social norms to market norms, so refrain from doing this around friends and family i.e. don’t ask your mother-in-law how much you need to pay her for the Thanksgiving dinner she cooked. If companies can genuinely operate on social norms, they build goodwill amongst employees and can enjoy better productivity

• Self-Control: We all set goals and fail to achieve them. That’s because if a particular behavior results in an immediate negative outcome it will be very difficult to promote, even if the ultimate outcome is highly desirable. To overcome this, we should look for tricks that match immediate positive reinforcement with the not so pleasant steps we have to take toward our long term objectives 
• Ownership: The propensity to overvalue what we own is a basic human bias, and reflects a general tendency to fall in love with, and be overly optimistic about anything that has to do with ourselves. I know I’m guilty of thinking my startup ideas are the best
• Expectations: Why is that we as humans frequently look at the same event and see it in totally different terms? That’s the influence of expectations, and being aware of this can allow us to be more open-minded. For example, stereotypes provide us with specific expectations and can influence how we respond to these people. Stereotypes about ourselves can even influence our own behavior. 

Irrationality is commonplace. But we’re lucky that this irrationality has a tendency to be predictable. By understanding some of the quirks of human nature, we can seek to make smarter decisions and live better lives.