As Sherlock Holmes noted, “It is a capital mistake to theorize before one has data.”
BY NOW I hope it’s clear that if we place human beings on a spectrum between the hyperrational Mr. Spock and the fallible Homer Simpson, we are closer to Homer than we realize. At the same time, I hope you also recognize the upside of irrationality—that some of the ways in which we are irrational are also what makes us wonderfully human (our ability to find meaning in work, our ability to fall in love with our creations and ideas, our willingness to trust others, our ability to adapt to new circumstances, our ability to care about others, and so on). Looking at irrationality from this perspective suggests that rather than strive for perfect rationality, we need to appreciate those imperfections that benefit us, recognize the ones we would like to overcome, and design the world around us in a way that takes advantage of our incredible abilities while overcoming some of our limitations. Just as we use seat belts to protect ourselves from accidents and wear coats to keep the chill off our backs, we need to know our limitations when it comes to our ability to think and reason—particularly when making important decisions as individuals, business executives, and public officials. One of the best ways to discover our mistakes and the different ways to overcome them is by running experiments, gathering and scrutinizing data, comparing the effect of the experimental and control conditions, and seeing what’s there. As Franklin Delano Roosevelt once said, “The country needs and, unless I mistake its temper, the country demands, bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.”24
I HOPE THAT you have enjoyed this book. I also fervently hope that you will doubt your intuition and run your own experiments in an effort to make better decisions. Ask questions. Explore. Turn over rocks. Question your behavior, that of your company, employees, and other businesses, and that of agencies, politicians, and governments. By doing so, we may all discover ways to overcome some of our limitations, and that’s the great hope of social science.
THE END
P.S. Not really. These are only the first steps of exploring our irrational side, and the journey ahead is long and exciting.
Irrationally yours,
Dan
Thanks
One of the most wonderful things about academic life is that we get to pick our collaborators for each project. This is one area where I pride myself on making the best choices anyone can make. Over the years I’ve had the great fortune to work with some amazing researchers/friends. I am deeply grateful to these wonderful people for their enthusiasm and fortitude, their creativity, and also their friendship and generosity. The research I include in this book is largely a product of their efforts (see the following biographies of my outstanding collaborators), while any mistakes and omissions are mine.
In addition to my direct gratitude to my collaborators, I also thank the broader pool of psychology, economics, business school researchers, and social scientists at large. I am privileged to be able to conduct my own investigations as a part of this general agenda. The world of social science is an exciting place. New ideas are constantly generated, data collected, and theories revised (some more than others). These efforts are the result of the hard work of many brilliant individuals who are passionate about advancing our understanding of human nature. I learn new things from my fellow researchers every day and am also frequently reminded of how much I don’t know (for a partial list of references and additional readings, see the end of this book).
In the process of writing this book I was forced to realize how far I am from being able to write well, and my deepest thanks go to Erin Allingham, who helped me write, Bronwyn Fryer, who helped me see more clearly, and Claire Wachtel, who helped me keep the whole thing in perspective and with a sense of humor that is rare in editors. And thank you to the HarperCollins team: Katherine Beitner, Katharine Baker, Michael Siebert, Elliott Beard, and Lynn Anderson kept the experience collaborative, engaging, and fun. I also received helpful comments and suggestions from Aline Grüneisen, Ania Jakubek, Jose Silva, Jared Wolfe, Kali Clark, Rebecca Waber, and Jason Bissey. Sophia Cui and my friends at McKinney gave me invaluable creative direction, and the team at Levine Greenberg Literary Agency were there to help in every possible way. Very special thanks also go to the person who makes my hectic life possible: Megan Hogerty.
Finally, a general sentiment of appreciation to my lovely wife, Sumi. I used to think that I was very easy to live with, but with every passing year I realize more and more how difficult it must be to live with me and, in contrast, how wonderful it is to live with you. Sumi, I will change the broken lightbulbs tonight when I get home. Actually, I will probably be late, so I will do it tomorrow. Well, you know what? I will definitely do it this weekend. I promise.
Loving,
Dan
List of Collaborators
Eduardo Andrade
Eduardo and I met at a summer program at the Center for Advanced Study at Stanford University. It was a magical summer both academically and socially. Eduardo had an office next to mine, and we got to go for walks in the hills and chat. Eduardo’s main research focus is emotions, and by the end of the summer we had a few ideas related to decision making and emotions that we started working on. Eduardo is Brazilian, and his ability to cook meat and make drinks would make his country proud. Eduardo is currently a professor at the University of California, Berkeley.
Racheli Barkan
Racheli (Rachel more officially) and I became friends many years ago, when we were both graduate students. Over the years we talked about starting various research projects together, but we only really got started when she came to spend a year at Duke. As it turns out, coffee is an important ingredient for translating ideas into actions, and we had lots of fun during her visit and made a lot of progress on a wide range of projects. Racheli is incredibly knowledgeable, smart, and insightful, and I only wish we had more time together. Racheli is currently a professor at Ben-Gurion University in Israel.
Zoë Chance
Zoë is a force of creativity and kindness. Talking to her is a bit like being in an amusement park—you know it is going to be exciting and interesting, but it is hard to anticipate what direction her comments will take. Together with her love of life and mankind, she is the ideal blend of researcher and friend. Zoë is currently a PhD student at Harvard.
Hanan Frenk
When I was an undergraduate, I took Hanan’s brain physiology class. It was one of my first classes, and it changed my life. Beyond the material in the class, it was Hanan’s attitude toward research and openness to questions that inspired me to become a researcher myself. I still remember many of his perspectives on research and life, and I continue to live by most of them. For me, Hanan is the ideal teacher. Hanan is currently a professor at Tel Aviv University in Israel.
Jeana Frost
Jeana was one of my first graduate students at the Media Lab at MIT. She is creative and eclectic, with a wide range of interests and skills that she seems to pull from thin air. We started many projects together on information systems, online dating, and decision aids, and during this process I learned how designers think, experiment, and discover. Jeana is currently an Internet entrepreneur at large.
Ayelet Gneezy
I met Ayelet many years ago at a picnic organized by mutual friends. I had a very positive first impression of her, and my appreciation of her only increased with time. Ayelet is a wonderful person and a great friend, so it is a bit odd that the topics we decided to collaborate on were mistrust and revenge. Whatever initially drove us to explore these topics ended up being very useful both academically and personally. Ayelet is currently a professor at the University of California, San Diego. (If you happen upon another Gneezy on my list of collaborators, this is not because it is a popular last name.)
Uri Gneezy
Uri is one of the most sarcastic and creative people I have ever met. Both of thes
e skills enable him to turn out important and useful research effortlessly and rapidly. A few years ago, I took Uri to Burning Man, and while we were there he completely fit into the atmosphere. On the way back he lost a bet and, as a consequence, was supposed to give a gift to a random person every day for a month. Sadly, once back in civilization he was unable to do so. Uri is currently a professor at the University of California, San Diego.
Emir Kamenica
I met Emir through Dražen and soon came to appreciate his range of skills and depth of economic thinking. Talking to Emir always gave me the feeling of what discussions between European philosophers in the eighteenth century must have been like—there is no hurry, and the debate is largely for its own sake. A sort of purity in discussion. I suspect that now that he is no longer a graduate student, life has changed for him a bit, but I still cherish those discussions. Emir is currently a professor at the University of Chicago.
Leonard Lee
Leonard joined the PhD program at MIT to work on topics related to e-commerce. Since we both worked long hours, we started taking breaks together late at night, and this gave us a chance to work jointly on a few research projects. The collaboration with Leonard has been great. He has endless energy and enthusiasm, and the number of experiments he can carry out during an average week is about what other people do in a semester. In addition, he is one of the nicest people I have ever met and always a delight to chat and work with. Leonard is currently a professor at Columbia University.
George Loewenstein
George is one of my first, favorite, and longest-time collaborators. He is also my role model. In my mind George is the most creative and broadest researcher in behavioral economics. He has an incredible ability to observe the world around him and find nuances of behavior that are important for our understanding of human nature as well as for policy. George is currently, and appropriately, the Herbert A. Simon Professor of Economics and Psychology at Carnegie Mellon University.
Nina Mazar
Nina came to MIT for a few days to get feedback on her research and ended up staying for five years. During that time we had oodles of fun working together, and I came to rely on her greatly. Nina is oblivious to obstacles, and her willingness to take on large challenges led us to carry out some particularly difficult experiments in rural India. For many years I hoped that she would never decide to leave; but, alas, at some point the time came: she is currently a professor at the University of Toronto. In an alternative reality, Nina is a high-fashion designer in Milan, Italy.
Daniel Mochon
Daniel is a rare combination of intelligence, creativity, and the ability to get things done. Over the last few years we have worked on a few different projects, and his insight and ability continue to amaze me. One thing I regret is that I moved just as he was finishing his course work at MIT, and I wish we’d had more opportunities to talk and collaborate. Daniel is currently a postdoc at Yale University.
Mike Norton
Mike has an interesting mix of brilliance, self-deprecation, and a sarcastic sense of humor. He has a unique perspective on life, and he finds almost any topic interesting. I often think about research projects as journeys, and with Mike I get to go on adventures that would have been impossible with anyone else. Mike is also a fantastic singer, and if you get the chance, ask him for his version of Elvis’s “Only Fools Rush In.” Mike is currently a professor at Harvard.
Dražen Prelec
Dražen is one of the smartest people I have ever met and one of the main reasons I joined MIT. I think of Dražen as academic royalty: he knows what he is doing, he is sure of himself, and everything he touches turns to gold. I was hoping that by osmosis, I would get some of his style and depth, but having my office next to his was not sufficient for this. Dražen is currently a professor at MIT.
Stephen Spiller
Stephen started his academic career as a student of John Lynch. John was my PhD adviser as well. So in essence Stephen and I are academic relatives, and I feel as if he is my younger (but much taller) brother. He is smart and creative, and it has been a privilege to watch him advance in his academic adventures. Stephen is currently a doctoral student at Duke University, and if his advisers had any say in the matter, we would never let him leave.
Notes
1. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Chicago: University of Chicago Press, 1977), 44–45.
2. George Loewenstein, “Because It Is There: The Challenge of Mountaineering . . . for Utility Theory,” Kyklos 52, no. 3 (1999): 315–343.
3. Laura Shapiro, Something from the Oven: Reinventing Dinner in 1950s America (New York: Viking, 2004).
4. www.foodnetwork.com/recipes/sandra-lee/sensuous-chocolate-truffles-recipe/index.html.
5. Mark Twain, Europe and Elsewhere (New York: Harper & Brothers Publishers, 1923).
6. http://tierneylab.blogs.nytimes.com.
7. Richard Munson, From Edison to Enron: The Business of Power and What It Means for the Future of Electricity (Westport, Conn.: Praeger Publishers, 2005), 23.
8. James Surowiecki, “All Together Now,” The New Yorker, April 11, 2005.
9. www.openleft.com/showDiary.do?diaryId=8374, September 21, 2008.
10. The complete presentation is available at www.danariely.com/files/hotel.html.
11. Albert Wu, I-Chan Huang, Samantha Stokes, and Peter Pronovost, “Disclosing Medical Errors to Patients: It’s Not What You Say, It’s What They Hear,” Journal of General Internal Medicine 24, no. 9 (2009): 1012–1017.
12. Kathleen Mazor, George Reed, Robert Yood, Melissa Fischer, Joann Baril, and Jerry Gurwitz, “Disclosure of Medical Errors: What Factors Influence How Patients Respond?” Journal of General Internal Medicine 21, no. 7 (2006): 704–710.
13. www.vanderbilt.edu/News/register/Mar11_02/story8.html.
14. www.businessweek.com/magazine/content/07_04/b4018001.htm.
15. http://jamesfallows.theatlantic.com/archives/2006/09/the_boiledfrog_myth_stop_the_l.php#more.
16. Andrew Potok, Ordinary Daylight: Portrait of an Artist Going Blind (New York: Bantam, 2003).
17. T. C. Schelling, “The Life You Save May Be Your Own,” in Problems in Public Expenditure Analysis, ed. Samuel Chase (Washington, D.C.: Brookings Institution, 1968).
18. See Paul Slovic, “ ‘If I Look at the Mass I Will Never Act’: Psychic Numbing and Genocide,” Judgment and Decision Making 2, no. 2 (2007): 79–95.
19. James Estes, “Catastrophes and Conservation: Lessons from Sea Otters and the Exxon Valdez,” Science 254, no. 5038 (1991): 1596.
20. Samuel S. Epstein, “American Cancer Society: The World’s Wealthiest ‘Nonprofit’ Institution,” International Journal of Health Services 29, no. 3 (1999): 565–578.
21. Catherine Spence, “Mismatching Money and Need,” in Keith Epstein, “Crisis Mentality: Why Sudden Emergencies Attract More Funds than Do Chronic Conditions, and How Nonprofits Can Change That,” Stanford Social Innovation Review, spring 2006: 48–57.
22. Babylonian Talmud, Sanhedrin 4:8 (37a).
23. A. G. Sanfey, J. K. Rilling, J. A. Aronson, L. E. Nystrom, and J. D. Cohen, “The Neural Basis of Economic Decision-Making in the Ultimatum Game,” Science 300 (2003): 1755–1758.
24. Franklin D. Roosevelt, Oglethorpe University commencement address, May 22, 1932.
Bibliography and Additional Readings
Below is a list of the papers and books on which the chapters were based, plus suggestions for additional readings on each topic.
Introduction:
Lessons from Procrastination and Medical Side Effects
Additional readings
George Akerlof, “Procrastination and Obedience,” The American Economic Review 81, no. 2 (May 1991): 1–19.
Dan Ariely and Klaus Wertenbroch, “Procrastination, Deadlines, and Performance: Self-Control by Precommitment,” Psychological Science 13, no. 3 (2002): 219–224.
Stephen Hoch and George Loewenstein, “Time
-Inconsistent Preferences and Consumer Self-Control,” Journal of Consumer Research 17, no. 4 (1991): 492–507.
David Laibson, “Golden Eggs and Hyperbolic Discounting,” The Quarterly Journal of Economics 112, no. 2 (1997): 443–477.
George Loewenstein, “Out of Control: Visceral Influences on Behavior,” Organizational Behavior and Human Decision Processes 65, no. 3 (1996): 272–292.
Ted O’Donoghue and Matthew Rabin, “Doing It Now or Later,” American Economic Review 89, no. 1 (1999): 103–124.
Thomas Schelling, “Self-Command: A New Discipline,” in Choice over Time, ed. George Loewenstein and John Elster (New York: Russell Sage Foundation, 1992).
Chapter 1:
Paying More for Less:
Why Big Bonuses Don’t Always Work
Based on
Dan Ariely, Uri Gneezy, George Loewenstein, and Nina Mazar, “Large Stakes and Big Mistakes,” The Review of Economic Studies 76, vol. 2 (2009): 451–469.
Racheli Barkan, Yosef Solomonov, Michael Bar-Eli, and Dan Ariely, “Clutch Players at the NBA,” manuscript, Duke University, 2010.
Mihály Csíkszentmihályi, Flow: The Psychology of Optimal Experience (New York: Harper and Row, 1990).
Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision under Risk,” Econometrica 47, no. 2 (1979): 263–291.