A while back a good friend brought me a book called “Predictably Irrational” by Dan Ariely who is considered to be one of the leading behavioral economists and is currently teaching at MIT Sloan School of Management. He describes a few behavioral phenomena that are quite common in probably all our lives and exposes not only as being irrational but predictably irrational.
To give a small example: We all attribute a certain value to 5 dollars. We all know what we can do with 5 dollars if we save them on a purchase and we have an estimate how long it takes us to earn 5 dollars. Those things are constant which means that if we think rationally it does not matter whether we save 5 dollars on one purchase or another because this changes neither the benefit gained nor the work saved to earn them once more. One way or another we will have 5 dollars in our wallet. Nevertheless if asked if we would drive 10 minutes to save 5 dollars on a 8 dollar meal we would of course take the time and attempt to save the money. However if asked to drive 10 minutes to save 5 dollars on a 250 dollar suit we probably wouldn’t bother. This is totaly irrational because in both cases we gain 5 dollars for an investment of 10 minutes of our life. Even more surprising is that if confronted with this fact we would all agree that although it’s both about the same 5 dollars, saving them on an eight dollar meal is a very good deal definitely worth the effort.
This is only one of the situations that happen to all of us (or at least me) all the time. I think this book can have the very positive effect to tell us about the irrational nature of our decisions and by literally forcing us to review them help to change our decision making processes. This especially applies to the chapters discussing “The cost of Free” and “The High price of ownership” which at least taught me a valuable lesson. Definitely a book I can recommend although there might be some undesired side effects like temporary destroying the effectiveness of placebos you use, but that is a risk definitely worth taking.
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