Book Review: Predictably Irrational by Dan Ariely

As the words of Shakespeare which is also mentioned in the introduction of this book, What a piece of work is a man! How noble in reason! How infinite in faculty! In form and moving how express and admirable! In action how like an angel! In apprehension how like a god! The beauty of the world, the paragon of animals, from the view of humans, we all consider ourselves as rational angels rather than irrational demons. However, from the observations of the author Ariely, we can see many evidences that show the irrationality of humans in economy and daily life, moreover, these phenomena are not unpredictable, but follow some laws. The author of the book, Dan Ariely, who had an accident in his eighteenth and thus had to spend a long time in hospital, which gave him the chance to view the behaviors of others as an outsider, started exploring the goals of different behaviors at an early time and kept on studying on it during his life. He wrote this book in order to help people realize their systematic mistakes of behaviors and try to avoid them.

In the first chapter, he starts with an advertisement of a magazine, which he saw in the Internet, and unfolds his discussion about relative bias by this simple thing, making it easy to understand. In the advertisement, the solder listed three types of subscriptions, which we can call a, b- and b. A is the online edition, which is the cheapest one; b- is the printed edition, which is more expensive; b involves both a and b and costs as much as b. Under this condition, most people will choose c since they can get the online edition for free! Moreover, choosing c is absolutely better than b. However, they may not choose the same one if there is not a comparable choice b-. Ariely did an experiment about this, from which he got the conclusion that, most people dont know what they want unless they see it in context. Then he demonstrated a large number of examples, ranging from size of televisions to satisfactory of ones salary. People will always compare one to another to get the value of a stuff, which sometimes leads to irrational behavior. Another type about this problem is that we may want to save money on

something which is not expensive, but we wont care about this amount of money if we have already spent a lot of money on another product. By doing this, we may waste money on something not important, and all these irrationalities stem from relativity. At the end he offers us an good example about James Hong, a successful person, of how to overcome the relative bias, which I think is really useful. Whereas, I think it is still hard to follow this method in real life cause it not only requires us to be aware of the theory but also have a good psychological quality to carry it out. Most of us know that a Toyota Prius actually has the same basic function as a Porsche Boxster, but we also know that a boxster is cooler than a prius! In this way, most people will not sell their boxster to buy a prius if they can earn enough money. However, this will drive them to buy a more fancy car and waste more money. The reason why I have talked so much about the first chapter is not that it is on the first place, but that from my perspective, most chapters are related to this one, which is a basic theory of this book. In chapter two, the author talks about anchoring, which means a cognitive bias that people will rely too heavily on the first information they got and unconsciously consider this one as a basic to value other things.(some from wiki) From my perspective, this is also something relevant to comparison. In the text, Ariely provides an example about black pearls and Savador Assael, the Pearl King. He is the first man who attempted to sell black pearls, but he failed in his first try, however, after he put them in the store of his friend Harry Winston, a famous jeweler, with an outrageous high price tag attached, black pearls were regarded as luxury. Whenever people saw black pearls, they will recall the first price they saw, and consider this price as the value of the black pearls. The same kind of phenomenon happens when people move from one city to another. People will stick to the previous consumption level even the level of the later city is totally different. I think this problem has something to do with the theory in the first chapter. Chapter three, which talks about how consumers get irrational when the traders provide some service for free. In Amazon, people will blindly buy a lot of commodities to meet the requirement of free shipment even they dont need so many things. People will compare free shipment with no-free shipment and take it for granted that buying a large number of commodities with free shipment is absolutely better than buying a few commodities with fees of shipment, which is irrational. I think this is also about relative bias. Whats more, the cost of ownership in chapter7 and the effect of expectations in chapter 9 as well as the power of price in chapter 10, all have a relationship with

comparison, which I think is the most important thing in chapter one and the book. On the other hand, there are still some other topics which have not a deep connection with relative bias. The rest chapters discuss more about social and moral topics. In chapter 4, there are some experiments which show that people will be more willing to do some work for free than being paid, indicating the importance of social norms in motivating people. The last three chapters, which are about the context of our character and honesty, also have something to do with social norms. But when it comes to chapter5, I think it is something more about physiology, which shows that physiological change can influence our decisions. In this book, Ariely provided us with a lot of interesting experiments with his colleagues in MIT and anecdotes and summarized a great many conclusions about irrational behaviors, which are related to both economy and real life. He explains the reason why he uses so many experiments in the book, For social scientists, experiments are like microscopes or strobe lights. I agree with him on this cause most of his experiments indeed excavate some hidden truths. Whats more, experiments and examples make it easy to understand the theories. However, I want to mention that a majority of his participants are university students, a group of people who have a typical behavior, which, in my opinion, limited the accuracy of the results. Besides, too many similar examples may leave an impression of prolixity on the readers. Nevertheless, despite these disadvantages, I am fascinated with the experiments in every chapter. Just as the contents of the book, we are all irrational sometimes, but fortunately, we can predict our irrational behaviors by reading this fantastic book. I do recommend some people who always buy a lot of things they dont need or always regret some of their decisions, to read this book, since its not difficulty for a layman to understand the vivid experiments and theories in the book, and most importantly, after reading, they can learn some methods to predict and avoid their irrational behaviors.