Predictably Irrational

This book by Dr. Dan Ariely discusses the many ways we humans behave.

Here are some lessons I took away:

[Relativity]

Humans focus on things in a relative manner - rarely do we make choices in absolute terms. We have to see things in context to know what we want. Everything is relative.
He argues that when confronted with choices, we will prefer to choose between two more similar comparisons (relativity). If A vs B and an A- choice is introduced, we will tend to choose A.
To control for our problems of relativity, think about controlling the "circles" around you - adjust the context. Change focus for narrow to broad.

[Well Defined Preferences - Supply and Demand]

We anchor to initial prices.
Be aware of your vulnerabilities. Question your repeated behaviors.
Pay close attention to any decision that will be the first in a stream of decisions.
The supply and demand relationship is based not on preferences but on memory.
We only [think] we know what we want.

[Zero]

Zero feels good.
When there is a choice between zero and another item, the existence of FREE pushes us to make a bad decision.
Humans are afraid of loss. When something is free, we lose sight of the downside.
This also applies to time. "Time spent on one activity is time taken away from another."
To incentivize behaviors, use FREE! Don't just decrease cost, there is a big difference between \$1 and FREE.

[Social Norms vs Market Norms]

We live in two worlds at the same time: One where Social Norms prevail and one where Market Norms do. When these are kept separate, life goes well. When they collide, trouble happens.
People work more for a cause than for cash. Social norms > Market Norms. Social relationships build loyalty and this motivates people to extend themselves
No one is offended by a small gift - these keep us in the Social world, and out of the Market world. Encourage social rewards and reputation for motivation. Money can be the most expensive motivator.
Once moved into a Market Norm, it is difficult to move back to the Social. "Social relationships are not easy to reestablish."
As a company, you cannot have it both ways. Keep a "simple value proposition: State what you give and what you expect in return."
If you want to demonstrate affection or strengthen a relationship, give a gift. While financially inefficient, they are an important social lubricant.

[Free can make us selfish]

When we offer a financial payment in situations governed by Social Norms, this reduces other's motivation to engage and help out.
"In economic exchanges, we are perfectly selfish and unfair. We think following our wallets is the right thing to do."
We are caring social animals, but with money involved, this is blunted.
Theory of demand works - unless FREE is involved.
Not mentioning price pushes Social Norms, and thus also more caring for others.
Be careful not to introduce Market Norms in situations where that might undermine benefits of the Social Norms.

[Passion]

[Procrastination]

"Giving up our long-term goals for immediate gratification is procrastination."
Tightly restricting freedom is the best cure for procrastination - Use Deadlines!
If the desired behavior has an immediate negative outcome, the behavior will be tough to promote, even if the long-term benefit is highly desired.
Pair something you love with something you dislike but is good in order to harness desire with the outcome.

[Ownership is Overprices]

Endowment Effect - owning something makes you value it more than other people do
Try to view all transactions as a nonowner - place distance between the object and yourself

[Options Distract Us]

We work hard to keep our options open. Even if we are unaware, we give up something for us to have those options.
Consciously start closing some doors. We have doors we ought to shut.
Take into consideration the consequences of not deciding.
Open doors take energy and commitment from other doors that should be left open.

[Expectation Effects]

The Mind gets what it expects.
If you tell people beforehand something might be bad, they will likely agree with you, not because they validated it with their experience, but because of the set expectations.
By changing expectations, you can influence experience. This is Marketing - heightening another's anticipated or real pleasure.
"Expectations also shape stereotypes."
Our investment in our beliefs is strong. The likelihood of agreement about "the facts" gets smaller as the personal investment in the problem grows.
Try to have each side present their perspective without affiliation, the facts revealed but not who took action. This can help find the truth.
"Better is he who expects nothing, for he shall never be disappointed." -Alexander Pope
Positive expectations help us enjoy the world around us more by improving our perception.

[Price]

Expectations are powered by [belief] and [conditioning].
This concept is how placebo works
Those who stop and reflect on price and quality are less likely to assume discounted items are less effective.

[Distrust]

Trust is as important to the economy as money. Trust allows for borrowing, lending, and credit.
Think about trust as a public good.

[Character]

Many honest people will cheat if they have an opportunity. Once tempted to cheat, they are not as influenced of the risk of being caught as one might think.
We should recognize when we get into situations where personal financial benefits are opposed to our moral standards and avoid these at the onset.
Observation indicates much of dishonesty is one step removed from cash. (Nonmonetary items)
Once cash is a step away, we will cheat by a surprising large factor.

[Ordering in Restaurants]

People are willing to sacrifice pleasure from a consumption experience in order to project a certain image to others.
When at a restaurant, plan your order before the waiter approaches ... and stick with it.

My distractions