Loy Machedo's Book Review - The Upside of Irrationality by Dan Ariely
There have a couple of books on Behavioral Economics that I have read over the last 2 years. A few of my favorites being:
1. Thinking, Fast and Slow by Daniel Kahneman,
2. Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (P.S.) by Steven D. Levitt and Stephen J. Dubner,
3. SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance by Steven D. Levitt and Stephen J. Dubner
4. The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg,
5. Influence: Science and Practice by Robert B. Cialdini,
6. How We Decide by Jonah Lehrer,
7. The Undercover Economist by Tim Harford
8. Buyology: Truth and Lies About Why We Buy by Martin Lindstrom and Paco Underhill
9. Why We Buy: The Science of Shopping--Updated and Revised for the Internet, the Global Consumer, and Beyond by Paco Underhill
10. Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein (didn't like this one though)
But I have to admit, Predictably Irrational by Dan Ariely was the 1st. And what's more, it was the 1st book review I had ever written. So yeah, it does bring back memories and this makes Dan's book an honor to be read and reviewed again.
In this book, Dan Ariely, I feel, starts off where he left off previously. But what gives this book the magnetic charm is the personalized narrative of the authors life, the openness of his feelings, the horrible memories of his recovery period (having suffered 3rd degree burns), the silly humor and yes, the slight hint of sarcasm the author has towards his fellow bankers, economists and intellects.
However, as opposed to Predictably Irrational it doesn't provide any new insights. As other reviewers have already mentioned, some of the experiments in this book are rather questionable. Just to cite one example, Ariely argues that high bonuses are not effective because when high stakes are involved people get nervous, and therefore, their performance drops. He "proves" that by offering three different winning prices (a small, medium and large bonuses) to random people to play various games. In this experiment, the performance of the player dropped as the amount of the bonuses was higher. Therefore, Ariely argues, big bonuses are not the best way to provide incentives to workers. (This only applies to cognitive tasks, and not to, for instance, laying brick, where the bigger the bonuses the harder people work). So can this hypothesis be sufficient to make a global theory?
Ariely then peppers the second half of the book - which focuses on personal issues of irrationality - with stories of his experiences following a horrendous accident he suffered as a teenager.
Here are brief summaries of the chapters.
1. Paying more for less:
Why big bonuses do not always work - the bonus structure that raises the performance of physical work often freezes out knowledge workers.
2. The Meaning of Labor:
What Legos can teach us about the joy of work - how work defines us and the value we place on that definition. There are deep reasons why everyone's baby is the most beautiful in the world.
3. The IKEA effect:
Why we overvalue what we make - the behavioral realities of `sunk effort' and how to make products and services more sticky by stealing from Betty Crocker.
4. The Not-Invented-Hear bias:
Why my ideas are better than yours - an examination of author bias and the behaviors behind executive, expert and management hubris in the workplace.
5. The Case for Revenge:
What makes us seek justice - it is more than a dish best served cold. In fact revenge is a very powerful force in business.
6. On Adaptation:
Why we get used to things, but not all things and not always - provides a fascinating study of the behavioral economics of change that helps you understand why traditional change management does not work.
7. Hot or Not?
Adaptation, assertive mating and the beauty market - if you always thought it was a jungle out there, you were right and this chapter talks about the realities of how you seek and form lasting social relationships.
8. When a market fails:
An example from online dating - a fascinating look at how the most sophisticated technology and psychographics cannot resolve a fundamentally flawed market structure.
9. One Empathy and Emotion:
Why we respond to one person who needs help, but not to many - explains the rational and reality behind how to mobilize people and their resources and why the American Cancer Society is so effective.
10. Long Term and Short Term Emotions:
Why we shouldn't act on our negative feelings - the reasons and science behind why it really is best to sleep on it.
11. Lessons form our Irrationalities:
Why we need to test everything - provides a framework and way of thinking to get your rationality back.
Why you may love this book:
1. The book has kept the structure and formula that made Predictably Irrational successful. If you liked that book, then you will like this one.
2. The book is backed by real research and the author is not afraid to show you how they tested these ideas, the results and their assumed implications.
3. The writing style is personal and candid. Many a times you will feel as if Ariely is explaining the ideas of this book to you over a conversation without it getting stale or too academic.
Why you may not like this book:
1. The book can drag in places - as you will go through the same structure for chapter after chapter.
2. The experiments, while interesting, involve college students (MIT and Harvard mostly) working for relatively trivial sums of money. This raises an issue of applicability in a bigger business setting.
3. Once you read a few books in this genre of Behavioral Economics and the come back to Predictably Irrational, you will find most of the research repetitive
Honorable Mention
I loved the chapter on his Audi experience (loved the revenge strategy he adopted), the chapter on online dating, and most importantly, the honesty that poured out each page. It made me feel as if I was with him at a bar exchanging interesting bits of information.
Moment of Truth
The book is very easy to read. It is written in a conversational style. I feel Dan has the rare gift to take a complex subject and present it in easy to understand concepts - effective in terms of understanding and retention. My only bone of contention being it got a little boring at times and yes most of the experiments were kind of long drawn.
Overall Ratings
6.5 out of 10
Loy Machedo
loymachedo.com