Copyright: 2010
Publisher: Harper
ISBN: 0061995037
Dan Ariely is one of my new favorite authors. Probably because he delves into the field of behavioral economics which is my new favorite field... but still, I will give Ariely credit for writing absolutely fascinating books. The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home is an attempt to further the thoughts presented in Predictably Irrational. There is some overlap with the previous book but just enough to make this book able to stand on its own without needing to read the prior work. The first half of the book follows the pattern of the earlier book pretty closely: anecdotal evidence introduces a subject, experiements were detailed, results analyzed and conclusions drawn. The latter part of the book is a far more personal look into the world of behavioral economics from the author's view-point. Ariely looks at his own life experience, specifically with regard to his youthful injury by fire, in the light of behavioral economics. He covers everything from why he chose his field to how he chose his wife and how all of these decisions were impacted by his injury and subsequent recovery.
Notes
Higher incentives (quantity of money etc) don't always improve performance. This is something others have noted but Ariely points out that there are three characteristics that impact this effect:
- Nature of the task
- Personality of the individual
- Experience of the individual with that particular task
In addition to the research regarding higher incentives, Ariely notes that "meaning" in work is as important or likely more important than the compensation for the task. Sometimes giving work meaning is as simple as acknowledging the work that someone has done.
IKEA effect: we like things more when we make them. To get this effect you need to strike a balance between too much customization (makes things too complex) and not enough customization (no ownership effect.) Completion of the task is key.
NIH (Not Invented Here) syndrome affected even Thomas Edison. He was adamantly opposed to research and working with AC power because it wasn't his invention. In the end of course, AC won the day with regard to our daily electrical needs. NIH seems to particularly affect inventor types.
Revenge is biologically pleasurable. Ariely brings to light some very interesting research into the psychology of revenge. This is particularly interesting to me because of some research I have been doing with regard to forgiveness. Given that revenge is pleasurable, forgiveness is painful. Interestingly Ariely found that a simple apology can negate the offense.
Hedonic adaptation is the name of the phenomenon whereby humans adapt to both pleasure and pain. This is why as we eat a meal the pleasure of eating tapers off. It is also why people who have suffered tremendous injuries (like Ariely and other war veterans) have a higher threshold of pain.
Interestingly hedonic adaptation can be interrupted. Thus if you take a break from a pleasurable activity when you come back it will have broken the adaptation curve and will be as pleasurable as when you first started. Similarly, taking a break from a painful task means that upon resumption, the task is just as painful as when you started, even though the pain subsided a bit over time.
The identifiable victim effect, explains why we are more likely to help a person if we identify with them. Closeness and vividness are factors that help us to identify with a victim. So if we hear a cry for help or are friends with a person who needs help, we are more likely to help than if the cry for help is in a far off land or the person needing help is a complete stranger to us. The drop-in-the-bucket effect means we are less likely to help a situation if we feel that our efforts will only contribute a tiny bit compared to the need.
Towards the end of the book, Ariely deals with a concept called self-herding. This is where we make decisions based on prior decisions and their outcome. He did some research regarding how emotionally charged decisions can impact not only the short-term but also long-term decision making. This research dove-tailed with the research into the psychology of emotion and decision making as outline by Antonio Damasio in Looking for Spinoza.
Conclusion
Once again, I would recommend this book to anyone interested in the field of behavioral economics or decision theory. If the work you do can be helped by understanding why people do what the do, this book will shed some light on human behavior.