Book summary of Predictably Irrational: The Hidden Forces That Shape Our Decisions

By nature, we appraise things by comparing them to others.
1. Most of our comparisons are made locally -- we lazily compare things with whatever is around.
2. Bring a slightly less attractive friend to a bar to seem more desirable by comparison.
3. Marketers use decoy products to make other items seem cheaper by comparison. For example, restaurants overprice the most expensive dish to upsell the second most expensive.
4. When given three options, people typically choose the middle one. Companies put their most profitable item as the middle price, using a cheap option as a decoy to make it look better and a premium option to make it look like a bargain.
5. Constantly comparing ourselves to others makes us envious and dissatisfied, and leads to displeasure with what we have.
6. “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.”
The allure of free is a powerful emotional trigger that influences decision-making. Free items bypass rational thinking and trigger irrational behavior.
The zero price effect explains that when an item is perceived as having no potential downside (being free), it is valued more than its actual worth. This is because we irrationally fear losses more than we value gains.
1. In one study, 75% participants chose Lindt truffles for 15 cents over Hershey's Kisses for 1 cent, but 69% chose Hershey's Kisses for free over Lindt truffles for 14 cents, despite the same price difference.
Companies like Amazon leverage the power of free to influence consumer behavior, like offering free shipping for orders above a certain threshold.
Policymakers can use the power of free to drive positive behavior, like making health check-ups entirely free to encourage regular check-ups.
We suffer from arbitrary coherence -- the first price we encounter becomes an anchor that affects what we'll pay later.
1. Asking people to write their social security digits before an auction affects what they'll bid -- high digits lead to higher bids.
2. Starbucks was able to create its own pricing anchor by designing stores to feel like continental cafes, with fancy French presses, pastries, and higher-quality beans, and used exotic Italian names for cup sizes. This made the experience feel drastically different from competitors like Dunkin Donuts, so customers accepted Starbucks' new pricing anchor.
We overvalue things we own through attachment and focusing on what we'll lose.
1. Ownership fosters emotional attachment, as we associate positive experiences and potential future experiences with the owned item.
2. Duke students valued basketball tickets drastically differently based on their ownership. Owners wouldn't sell for less than $2,400, non-owners wouldn't pay over $170.
3. This overvaluation phenomenon extends to opinions, where investing time and effort in advocating an opinion leads to stubbornness and reluctance to change.
4. “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.”
Expectations shape our judgements and experiences.
1. In blind taste tests, people preferred Pepsi, but with visible brands, Coke was favored, highlighting the impact of expectations.
2. The placebo effect shows benefits from medicine emerge even with inert pills.
3. The price of medicine influences its perceived effectiveness, with more expensive pills providing greater perceived relief.
4. One study showed that people started to walk slower after exposure to words associated with the elderly (e.g., ancient, bingo, Florida).
There are two types of norms we implicitly apply when interacting with people. Social norms and market norms. Social norms govern friendly favors where repayment isn't expected. Market norms are cold transactions of work for pay.
1. Applying the wrong norms elicits bad responses. Paying your mother for dinner evokes market norms and will offend them.
2. Market norms often make people more cold and selfish. One experiment showed that lawyers would rather work for free than work for less than their typical rate, as working for free triggers social norms, and working for less triggers market norms.
3. Mentioning money triggers market norms. Studies show reverting to social norms after is difficult.
4. “People are willing to work for free, and they are willing to work for a reasonable wage; but offer them just a small payment and they will walk away.”
In general, people are a bit dishonest, but not to an extreme extent.
1. Studies reveal that in scenarios with small monetary prizes as rewards for taking quizzes, individuals tend to cheat by slightly exaggerating their performance when given the opportunity to grade themselves. However, the likelihood of cheating does not significantly increase even when the chances of being caught are reduced.
2. Priming people to think about honesty reduces dishonesty. When participants recalled the Ten Commandments before a quiz, cheating plummeted.
We rationalize dishonesty more easily with items than cash. "It's ok to take this stationary because it's part of my compensation."
Our rational side sets long-term goals, but our irrational side derails them through impulsiveness, immediate gratification, and procrastination.
1. Tying short-term gratification to unpleasant tasks associated with long-term goals can serve as a motivational strategy. For example, the author watched movies while receiving hepatitis medications.
2. One study showed that students with self-imposed, evenly-spaced deadlines throughout the course performed significantly better than those with a single end-of-course deadline, suggesting that acknowledging weaknesses and committing to structured deadlines can effectively combat procrastination and improve outcomes.
“Giving up on our long-term goals for immediate gratification, my friends, is procrastination.”
People have a tendency to keep options open, even if it's detrimental.
1. In a gameshow study, people irrationally paid real money just to keep their options open, even though it meant less prize money.
2. Indecision has consequences -- pursuing two paths may lead to mediocrity in both.
3. The successes of Chinese commander Xiang Yu, who burned his own ships to eliminate the option of retreat, highlights the counterintuitive nature of deliberately closing options.
4. Closing options helps to prioritize what is truly important.
“If I were to distill one main lesson from the research described in this book, it is that we are pawns in a game whose forces we largely fail to comprehend. We usually think of ourselves as sitting in the driver's seat, with ultimate control over the decisions we make 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.”

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