December 21, 2019

There are two main messages author Dan Ariely wants us to take away from this book about ourselves. Contrary to popular standard economic assumptions, we are not always rational thinkers. In fact, there are many emotional and societal forces that exert a lot of power over our behaviors, even though we may not be aware of them. We make all types of mistakes over and over again, because that's how we are wired to behave. And those mistakes are not always going to fix themselves or be fixed naturally by market forces. We often believe that the control of our decisions is in our own hands, but that is simply our flawed perception, and not reality. The key second takeaway though is that this is all okay. We are not helpless. Instead, it is up to us 'to be more vigilant, force ourselves to think differently about these decisions, or use technology to overcome our inherent shortcomings'. It is also up to businesses and policy makers to design products and policies in such a way that benefits everyone.

I thoroughly enjoyed this book, because the messages are delivered in a very actionable way. Not only does Ariely share enlightening stories and experiments to really drive his points home, he also includes tips and advice on how we can change the way we behave, now that we are more aware. Below are summarized insights from the different chapters. Check out his book and webpage for his actionable advice and to learn more about designing or getting involved with experiments:

• We don't have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly. This can lead to a cycle of relativity, where the more we have, the more we want.
• We often make an initial decision based on what's available in the environment and then attach ourselves to that initial decision. Initial decisions help shape future behavior, both for ourselves and others.
• When something is free, we forget the downside of a transaction. We are intrinsically afraid of loss, but there is no visible possibility of loss when we choose a free item.
• Social norms are friendly requests where instant paybacks are not required. Market norms are sharp-edged exchanges with comparable benefits and prompt payments. Where social and market norms collide, trouble sets in. Even just thinking about money makes us behave more selfish and less like the social animals we are intrinsically. In the long run, social norms will make the difference.
• We often substantially underestimate the degree to which passion can change our preferences and the actions we are capable of. We should educate ourselves on how to deal with high emotions and bridge the gap between our hot and cold states.
• We often fall in love with what we own and be overly optimistic about anything that has to do with ourselves.
• We often do anything possible to keep options open and ignore the cost of doing so.
• In the absence of perfect information, we often look for social cues to help us. Expectations set up in advance then affects our judgment.
• We instinctively assume discounted items are lower quality than a full-priced item.
• We've become more distrustful, even though the total value to society is maximal when we all cooperate and trust is high. However, we tend to think about short-term benefits and our own immediate needs. And if one person lies or scams, the distrust is infectious and everybody loses.
• When given the opportunity to cheat, many honest people will cheat, but only a little bit. Once tempted to cheat, they are not as influenced by the risk of being caught. If we are reminded of morality at the moment we are tempted, then we are more likely to remain honest. Cheating is a lot easier when it's a step removed from money.
• We sometimes sacrifice our own pleasure for reputational utility.