As Mark Twain once
noted about Tom Sawyer, “Tom has discovered a great law of human action namely,
that in order make a man covet a thing it is only necessary to make the thing
difficult to attain”. As per Dan Ariely, in his book ”Predictably
Irrational”, this is exactly why Tahitian black pearls are today considered prized
possessions.
Dan Ariely is a professor of Behavioural Economics at Duke
University. This book is an excellent compilation of the results of his
experiments on human rationality or the lack of it. While the book could serve
as an excellent introduction to the field of Behavioural Economics, the stated objective
of the book is to make its readers more aware of their propensity to make
irrational decisions. The author’s conviction is that by understanding our
predictably irrational behaviours, we can adjust for them in our decision
making process and make better, more rational decisions. In short, this book
aims to do for behavioural sciences what Stephen Hawking did for space science
with “A Brief History of Time” to become the coffee table book on human irrationality.
The premise of the book is that while everyone (except several
traditional economic theories) acknowledges that humans are not rational beings
at all times, we do not fully appreciate the extent of our irrationality. In the
introduction to the book, Dan promises to help us understand why we fail to
stick to our diet plans when the dessert cart rolls around, why we buy things
we do not need, and why honour codes reduce the incidence of cheating. By the
end of the book, he achieves this and some more.
Each chapter introduces and discusses a different type of
irrational behaviour. The brilliance of the author and the editors lies in the
fact that a chapter starts with carefully chosen and perfectly worded questions
to get us thinking about the specific irrationality that he would be discussing
in that chapter. For example, he starts the chapter on ‘The Cost of Zero Cost’
by asking whether we would buy something we do not need (let’s say coffee beans
for a tea drinker) if it were discounted from 50 cents to 2 cents (from Rs. 30 to
Rs. 1). The answer for most people would be either ‘No’ or ‘Maybe’. Now, what
if the same thing is discounted to zero and given away for free. The default
answer for just about everyone would be a resounding ‘Yes’. He starts the
chapter by asking why we cannot stop ourselves from accumulating things simply
because we get it for free. By doing this, he gets us thinking along the lines
of why we behave the way we do even before he introduces us to the experiments
he has conducted in the area. He ends each chapter with his thoughts on the
implications of the irrational behaviour and its applications in areas from day-to-day
decision making to government policies.
What this book is not about is a simple step-by-step
solution to irrational behaviour. The book does not claim to be
all-encompassing in terms of human irrationality either. It aims to make us
more aware of human behaviour so that the next time we plan a diet or look at
the ads for an appliance we plan to purchase or plan our negotiation strategy,
we take these irrationalities into account. It is an interesting read for
everyone, and especially for MBA grads with exposure to both economics and
organizational behaviour.
