The Hidden Forces That Shape Our Decisions
Paperback, 384 pages
Published Aug. 15, 2010 by Harper Perennial.
Why do smart people make irrational decisions every day? The answers will surprise you. This book is a look at why we all make illogical decisions. Why can a 50-cent aspirin do what a penny aspirin can't? If an item is "free" it must be a bargain, right? Why is everything relative, even when it shouldn't be? How do our expectations influence our actual opinions and decisions? In this book, the author, a behavioral economist cuts to the heart of our strange behaviour, demonstrating how irrationality often supplants rational thought and that the reason for this is embedded in the very structure of our minds. This book blends everyday experiences with a series of illuminating and often surprising experiments, that will change the understanding of human behaviour. And, by recognizing these patterns, the author shows that we can make better decisions in business, in matters of collective welfare, and in …
Why do smart people make irrational decisions every day? The answers will surprise you. This book is a look at why we all make illogical decisions. Why can a 50-cent aspirin do what a penny aspirin can't? If an item is "free" it must be a bargain, right? Why is everything relative, even when it shouldn't be? How do our expectations influence our actual opinions and decisions? In this book, the author, a behavioral economist cuts to the heart of our strange behaviour, demonstrating how irrationality often supplants rational thought and that the reason for this is embedded in the very structure of our minds. This book blends everyday experiences with a series of illuminating and often surprising experiments, that will change the understanding of human behaviour. And, by recognizing these patterns, the author shows that we can make better decisions in business, in matters of collective welfare, and in our everyday lives from drinking coffee to losing weight, buying a car to choosing a romantic partner.
Love this! Very, very interesting, well read and written. Could definitely imagine reading more like this
An important book to listen for anyone. People need to be aware of these things more.
1) "If companies want to benefit from the advantages of social norms, they need to do a better job of cultivating those norms. Medical benefits, and in particular comprehensive medical coverage, are among the best ways a company can express its side of the social exchange. But what are many companies doing? They are demanding high deductibles in their insurance plans, and at the same time are reducing the scope of benefits. Simply put, they are undermining the social contract between the company and the employees and replacing it with market norms. As companies tilt the board, and employees slide from social norms to the realm of market norms, can we blame them for jumping ship when a better offer appears?"
2) "Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well."
3) …
1) "If companies want to benefit from the advantages of social norms, they need to do a better job of cultivating those norms. Medical benefits, and in particular comprehensive medical coverage, are among the best ways a company can express its side of the social exchange. But what are many companies doing? They are demanding high deductibles in their insurance plans, and at the same time are reducing the scope of benefits. Simply put, they are undermining the social contract between the company and the employees and replacing it with market norms. As companies tilt the board, and employees slide from social norms to the realm of market norms, can we blame them for jumping ship when a better offer appears?"
2) "Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well."
3) "As I mentioned, the cans of Coke quickly disappeared; within 72 hours every one of them was gone. But what a different story with the money! The plates of dollar bills remained untouched for 72 hours, until I removed them from the refrigerators.
So what's going on here?
When we look at the world around us, much of the dishonesty we see involves cheating that is one step removed from cash. companies cheat with their accounting practices; executives cheat by using backdated stock options; lobbyists cheat by underwriting parties for politicians; drug companies cheat by sending doctors and their wives off on posh vacations. To be sure, these people don't cheat with cold cash (except occasionally). And that's my point: cheating is a lot easier when it's a step removed from money."
Traditional economic models are based on the assumption that consumers behave rationally, ie, act in their own self-interest. The author is a behavioral economist, and the book looks at many different situations and examples of ways in which consumers do not, in fact, act rationally. There are many unconscious factors and biases that influence our decisions, and the author steps through examples of them chapter by chapter, explaining what they are, how they cause us to act irrationally, and how to avoid falling into that trap. Very interesting reading with lots of applications both to personal life and business. Certainly recommended to anyone with any interest in why humans behave the way we do.
This is a great book looking at some of the predicable ways we make irrational decisions. Maybe knowing about them can make us think through decisions again, and not be surprised at the results when we don't.
