Predictable Irrationality

A friend recommended the book "Predictable Irrationality" by Dan Ariely. I checked it out of the library and found it a fun read. It reminded me of the books by Malcolm Gladwell, which I also enjoyed.

Unfortunately, I find myself disagreeing with Dan Ariely in several instances. For example, when he writes about saving money, he views money in simple terms of addition and subtraction. He says that a savings of $7 is the same whether it is off of $14 or $700, and that a rational choice would be to take the same amount of effort to save that $7 regardless of the base price of the item. However, I don't see it in that same linear fashion. In one case, saving $7 is half of the base price. In the other case, that $7 is one hundredth of base price. I think that it is reasonable, in general, to put more effort into a 50% savings versus a 1% savings.

Another instance where I disagree is when he writes about the power of "FREE!" He says that people choose free things out of proportion to the actual discount in price. He cites an experiment comparing chocolate samples priced at $0.30 and $0.01, and those same samples priced a penny less. He states that since the difference in price remained the same, people were irrational when they overwhelmingly favored the free choice. However, again, I see things differently. The issue isn't the relative difference in price; the difference is the value/money of the individual choices. As long as you have to pay something for each sample, the choices are consistant. However, as soon as you drop the price to free, the value/money ratio becomes an issue of dividing by zero, and thus is undefined.

Yet another instance is when he writes about the satisfaction that people have when ordering beer in a social settings. He writes that people are less satisfied with their beer choices when their order is influenced by social pressures. Thus, he states that people should ignore social pressures when choosing from the menu at restaurants. However, he bases this conclusion solely on how much people liked the beer; not how people felt about the entire experience. By allowing their choices to be influenced by others' choices, people have chosen to trade some enjoyment of the beer with enjoyment of being unique (or other hard-to-quantify quality).

If you have waded through this tangled mess of thoughts, I hope that you have learned by now that this blog is a place for me to dump my thoughts as-is without having to pretty them up for general consumption.