Quite the hook
As a teenager, an accident left author Dan Ariely with third degrees burns over 70% of his body. He used the still-painful aftermath to propel his studies of topics such as who people choose to date (inspired by his own scarred face and body), and how people differ in their response to pain (that he continues to suffer.) Ariely may publish in scholarly journals, but in this book he follows his own advice to engage readers on an emotional level. Using a conversational tone, this drew me in and I read every word.

This is a strong recommendation from me, because I often skim sections of books.

We are irrational and that’s human nature
Human beings are irrational and make poor decisions, like texting while driving. “Given the mismatch between… technological development and human evolution, the same instincts and abilities that once helped us now often stand in our way.”

Stock markets, insurance, education designed without regard to human nature lead individuals astray and “sometimes fail magnificently.” His field of behavioral economics figures out the “hidden forces that shape our decisions.”

He hopes readers will consider what they might do differently once they understand their own nature better, but this isn’t easy. Ariely uses the example of his own badly damaged hand as an example. Doctors advised him to have it amputated, but he refused. Twenty years later it is less useful than a prosthetic and still causes him considerable pain.

He says, keeping the hand was probably a mistake, and analyzes the biases behind his decision – loss aversion, status quo, irreversibility, and others. He also discusses what psychological factors stop him from amputating the hand today – fear of hospitals, hedonic adaptation, and rationalizing the choice. “Despite the fact that I understand… some of my decision biases, I still experience them.”

Humans are difficult to study in the wild, or even in a lab
Ariely presents his research is a very accessible form, not heavy with jargon, and there is a bibliography if you want to learn more. He acknowledges that many of his experiments are flawed and he discusses how to overcome the problems – subjects are not selected randomly but volunteer, and many are college students who don’t represent the whole population. Experimental designs are sometimes changed to accommodate the subjects.

Some studies are familiar, for example, when a person who feels their partner – assigned to split a $10 incentive between them – keeps too much, refuses the insultingly low offer, and neither gets to keep any of the $10. (Human nature will punish a cheater, and other studies show that when we seek revenge, we don’t care who we punish.) But others are new to me.

I chuckled at one test run in India (where it’s cheaper to offer financially impressive rewards) that evaluated the effects of stress on performing mental tasks. Stress was created by handing the volunteer money equivalent to many days salary and asking for its return if they failed the tasks. But subjects sometimes ran away with the money, so the protocol was changed.

How American businessmen reacted when he applied the lessons from India (offering large financial incentives actually decreases performance after a certain point) to their own salary plans is also amusing. “If we keep following our gut and common wisdom… we will continue to make mistakes.” Continue reading →