Predictably Irrational by Dan Ariely

Predictably Irrational

Predictably Irrational by Dan Ariely is a book that explores the hidden forces that shape our decisions and how they are far less rational than we think.

The book refutes the common assumption that we behave in fundamentally rational ways and instead argues that our behaviors are systematic and predictable.

The main themes of the book are that humans do not think in absolute terms but rather in relativity, zero cost is costly, and the fallacy of demand and supply.

Ariely explains that when we have very similar products next to each other, we usually assume price differentiates the quality of those goods. He also explains that when something is free, we only see the upside and not the downside. Finally, he explains that prices of products can be manipulated through arbitrary anchors.

Ariely also explains that humans are loss-aversed and that this is why we often make bad decisions when we see the word “free”. He argues that in order to break out of the cycle and make more rational decisions, we should question ourselves the validity of our choice from previous decision making.

The book is a great introduction to behavioral economics because it is easy to understand yet helpful to learn the factors that guide our seemingly irrational behavior. It helps readers become aware of the marketing strategies that companies use to attract potential consumers and some inferior decisions we make due to our irrationality.

What I Liked

I loved this book – even if some of his experiments have turned out to be a bit misleading. The core thesis has been proven – that our brains have built-in “shortcuts” that are generally useful but lead us to act in irrational ways in situations that require strict rationality (i.e., in product sales, we will act “irrationally” on price to enforce social fairness).

I liked his main takeaway that our irrationality is not a bad thing or something to change – simply something to be aware of when we are in situations that require true rationality (like moving for a job or buying a large purchase or investing).

What I Did Not Like

Not a whole lot – the book is very readable and useful.

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