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The Upside of Irrationality Summary

Quick Summary: The Upside of Irrationality is the second book by social scientist Dan Ariely, and it is a fitting follow-up to his first book, Predictably Irrational: if in his debut Ariely revealed the preprogrammed biases which instigate us to make unwise choices, here he shows the unexpected benefits (and, sometimes, downsides) of these decisions.

The Upside of Irrationality Summary

Who Should Read “The Upside of Irrationality”? And Why?

If you enjoyed reading Predictably Irrational – Ariely’s debut book – then The Upside of Irrationality is the book you’ve been waiting for.

Since we can say pretty much the same thing about Ariely’s other two books – The Honest Truth About Dishonesty and Irrationally Yours – it’s safe to say that this is an author it makes a lot of sense to follow.

In case you don’t know him, and you need a reason why we’ll give you one: Ariely is a sort of Malcolm Gladwell/Timothy Wilson mashup.

Consequently, The Upside of Irrationality is a perfect gift for psychology and behavioral economics students; but everyone interested in the irrational aspects of human behavior should read it.

The Upside of Irrationality Summary

“There is a great deal to be learned from rational economics,” writes Dan Ariel in the “Introduction” to his second book, “but some of its assumptions – that people always make the best decisions, that mistakes are less likely when the decisions involve a lot of money, and that the market is self-correcting – can clearly lead to disastrous consequences.”

Why?

Well, for the simple reason that, despite our biological designation in the hierarchy of species, we are actually not rational beings.

“How else do you explain,” Ariely poses a rhetorical question, “why millions of gym memberships go unused or why people risk their own and others’ lives to write a text message while they’re driving?”

About the latter: you wouldn’t expect transportation to work without proper regulation measures, now, would you? After all, despite seat belts, rearview mirrors, antilock brakes, properly designed roads, and a thousand other safety precautions – people still make all kinds of errors while driving.

“Now think about the implosion of Wall Street in 2008 and its attendant impact on the economy,” writes Ariely:

Given our human foibles, why on earth would we think we don’t need to take any external measures to try to prevent or deal with systematic errors of judgment in the man-made financial markets? Why not create safety measures to help keep someone who is managing billions of dollars, and leveraging this investment, from making incredibly expensive mistakes?

And this is where The Upside of Irrationality comes in handy; it is a book of experiments which uncover our irrational sides – and all the downsides and benefits from them in a real-world environment.

The book is divided into two parts, each of which contains five different aspects of our irrational behavior.

Part I: The Unexpected Ways We Defy Logic at Work

Chapter 1 – Paying More for Less: Why Big Bonuses Don’t Always Work

If you give an electric shock to a rat put in a maze, expectedly, the first thing that would come to that rat’s mind would be “good lord, they’re going to kill me here: I need to find an escape right now!”

However, if you up the intensity of the shock, the rat doesn’t perform better – i.e., doesn’t find the escape route faster – but, on the contrary, struggles much more; after a certain point, it is just too shocked to find the escape route altogether.

Now translate this into real-world human situations: do you perform better under stress or does stress, after a certain point, hinders your performance?

Of course it’s the latter!

Interestingly enough, the same holds true for money bonuses. The bigger they are, the more stress they cause and the more mistakes the person promised to get them is bound to make.

There are times when this isn’t true – when people are tasked with mechanical or manual jobs – but they don’t get big bonuses to start with; the ones who do get (CEOs and high-level managers) perform much worse with a big-bonus incentive hanging over their heads.

The solution?

Incentivize within the averages.

To summarize, using money to motivate people can be a double-edged sword. For tasks that require cognitive ability, low to moderate performance-based incentives can help. But when the incentive level is very high, it can command too much attention and thereby distract the person’s mind with thoughts about the reward. This can create stress and ultimately reduce the level of performance.

Chapter 2 – The Meaning of Labor: What Legos Can Teach Us about the Joy of Work

In 1776, in the seminal economic work, The Wealth of Nations, Adam Smith – through a pretty famous pin factory example – suggested that “division of labor is an incredibly effective way to achieve higher efficiency in the production process.”

That’s true.

However, it is also inhuman: as Karl Marx argued about a century later in Das Kapital, division of labor alienates the workers from their work, demotivating them and making them much less interested not only in their work but in their lives as well.

For all this hate of communism around, it turns out that psychological studies prove Marx right.

In the one Ariely interprets in his book, two groups of people were paid to build Lego constructions individually; all of them were told they could quit any time they like.

After completing their structures, the people in the first group had them carefully examined by a researcher; the second group wasn’t as lucky: their Lego constructions were dismantled promptly upon completion.

The outcome?

Most of the people in the first group were quite happy to go on working; on the contrary, the majority of people from the second group lost all interest and were more likely to quit building altogether.

And really – do we value efficiency more than human dignity?

Chapter 3 – The IKEA Effect: Why We Overvalue What We Make

As the above two experiments already suggest, we feel much more pleasure when we are creatively engaged than when all we need to do is just manually complete a task.

This is called the IKEA effect because, well, the reasons are pretty obvious; however, the effects might not be at this moment.

To understand them better, feel free to ponder over this example.

Back in the 1940s, the home-baking world should have been revolutionized when companies discovered a way to create cake mixes which could magically turn into a cake in no time.

However, this didn’t happen: for some reason, women didn’t want to buy these cake mixes, even though, on the face of it, they saved them a lot of time.

And then Pillsbury realized why: they left out the dried egg from their mixes and marketed their products along the lines of “just add a fresh egg – and you’re done.”

This made all the difference: the simple effort of adding an egg to the mix was enough to make the housewives think that they’ve prepared the cake altogether.

Now, you can understand why brands are interested in offering you customized products.

Namely, you want to feel special, and you want to believe that you’ve made some contribution toward the completion of a product.

In other words, we don’t want maximized pleasure for minimum effort: we have to be involved in one way or another.

And this is true even for animals.

Don’t believe us?

Find out more about contrafreeloading.

Chapter 4 – The Not-Invented-Here Bias: Why “My” Ideas Are Better than “Yours”

In a famous Mark Twain essay, “Some National Stupidities,” the great American author describes his utter bewilderment at the fact that the Americans of his day didn’t use German stoves, despite the fact that the latter were ten times better.

Well, psychologists now know the exact reason why this is happening: for the simple reason that it was not ours.

“The attraction to one’s own ideas,” writes Ariely, “has not escaped the collective folk wisdom of the business world, and, like other important business processes, this one also has an unofficial term attached to it: the ‘Not-Invented-Here’ (NIH) bias. The principle is basically this: ‘If I (or we) didn’t invent it, then it’s not worth much.’”

Stunningly, this means that even if you have exactly the same idea as someone else, you’d prefer your wording. What does that say about when you have different ideas?

Of course, there’s a good side to this: strong bias against ideas which come from the outside initiates internal research and development and results in support and reinforcement of the local economy.

“Like many other aspects of our interesting and curious nature,” concludes Ariely, “our tendency to overvalue what we create is a mixed bag of good and bad. Our task is to figure out how we can get the most good and least bad out of ourselves.”

Chapter 5 – The Case for Revenge: What Makes Us Seek Justice?

Here’s a great game which fundamentally subverts the idea of homo economicus.

Just called the Trust Game, this one begins with you and a friend of yours receiving $10 each. You are the one making the first move, which can be either keeping the money for yourself or giving it to your friend.

The latter one, of course, comes with a twist.

If you choose to give the money to your friend, the experimenter will quadruple it and ask the other participant to make the next move: either give you half of it or keep it all for himself.

So, in other words, you can either get $10, $25 or none whatsoever; your friend can either get $10, $50 or $25.

It is quite rational for your friend to not give you back anything; consequently, it is more than rational for you not to give him the opportunity to decide for you.

$10 is not better than $25, but it is certainly better than $0 – and if we are rational people, that’s exactly what you’d get if you decide to give away your $10.

However, the Trust Game usually ends otherwise: with both people getting $25.

Why?

Because “people are more trusting and more reciprocating than rational economics would have us believe.”

And it gets even more irrational!

Namely, if player A doesn’t receive anything from his friend and is offered the option to for each dollar of his own money, $2 to be extracted from his friend, Player A would almost always spend $25 dollars so that his friend is left with nothing.

In other words, even though costly and completely irrational, revenge is just too sweet to be passed by.

And it is sweet because it (sometimes) spells justice.

Part II: The Unexpected Ways We Defy Logic at Home

Chapter 6 – On Adaptation: Why We Get Used to Things (but Not All Things, and Not Always)

“Man is a pliant animal,” wrote once Fyodor Dostoyevsky, “a being who gets accustomed to anything.”

Apparently, this is more than true: we get accustomed to just about everything, pain included.

There are two examples which prove this.

The more famous one includes a study of lottery winners. After the initial sense of euphoria, almost all of them revert to the state of happiness they had been before becoming millionaires.

Another experiment shows the other side of the coin: even people who lose their legs or end up paralyzed after a car accident, somehow manage to adapt to the new limitations.

At this point, it may seem to you that this is something impossible, but, in fact, it is often the most probable scenario: “numerous studies have shown that we adapt more quickly and to a larger degree than we imagine.”

This type of adaptation is called hedonic adaptation, and it is the reason why you stop feeling happy about your new shoes only a few days after buying them; it is also the reason why you buy new things constantly: you just fail to recognize your adaptation to the ones you’ve just bought.

A good way to hack this preprogrammed adaptive bias?

Hedonic disruptions.

It’s exactly what it means: whenever you’re feeling happy, find a way to interrupt that happiness so that you don’t adapt to it.

In other words, calling the one you love constantly will inevitably level out the love.

Adaptation is also the reason why you feel bored in long-term relationships. So, do something new, something radical to disrupt the pattern.

Chapter 7 – Hot or Not? Adaptation, Assortative Mating, and the Beauty Market

“You don’t need to be an astute observer of human nature,” writes Ariely, “to realize that, in the world of birds, bees, and humans, like attracts like.”

In other words, “to a large degree, beautiful people date other beautiful people, and ‘aesthetically challenged’ individuals date others like them.”

This birds-of-a-feather phenomenon is usually referred to by scientists as “assortative mating.”

Now, it is easy to understand why the 10s date other 10s; what’s more difficult to explain is why do the “aesthetically challenged” 5s or 6s settle for other 5s or 6s? Why aren’t they interested in the 10s since, no matter how we define beauty, it would be rational for them to prefer the more beautiful ones?

A great way to understand what happens in the world of aesthetic social hierarchy is if you think of Aesop’s fable “The Fox and the Grapes.” After the fox is unable to reach the enticing grapes, it walks away mumbling “I’m sure they were sour anyway.”

Well, this “sour grapes” strategy is what regulates the beauty market.

In other words, 5s or 6s start attributing more value to non-aesthetic and non-physical qualities, such as kindness or a sense of humor.

In addition – and this is the more interesting part – they start finding seemingly aesthetically pleasing traits undesirable.

So, next time you see someone rolling his eyes over a picture of Megan Fox or Brad Pitt, be aware that the guy or the girl are not lying: they have merely adapted to a world where they’d never get a Fox or a Pitt.

Chapter 8 – When a Market Fails: An Example from Online Dating

Online dating is a thing for at least two decades now; however, the stats conclusively prove that it doesn’t actually work: very few people meet their romantic partners online.

But why shouldn’t it work?

According to a study by Ariely, dating website users spent more than 5 hours a week scanning profiles, almost 7 hours emailing potential partners and about 2 hours a week meeting people face to face.

Surely, that has to lead somewhere, right?

Well, guess again.

The problem with online dating is pretty fundamental for the market ever to work.

Namely, we don’t choose partners rationally. And dating sites are rational.

However, checklists, yes/no questions, hair color, and favorite movies don’t mean a thing if when you meet the guy/girl, something doesn’t click.

And that something is still elusive enough for a dating site to ever work.

Chapter 9 – On Empathy and Emotion: Why We Respond to One Person Who Needs Help but Not Too Many

Though Ariely quotes him explicitly, Joseph Stalin never said this: “One man’s death is a tragedy, but a million deaths is a statistic.”

On the other hand, Mother Teresa did say this: “If I look at the mass, I will never act. If I look at one, I will.”

Interestingly enough, though used to illustrate two very different outlooks on life, both things are thoroughly correct.

Psychological studies – and many, many experiments and real-world situations – prove over and over again that we’re incapable of comprehending large tragedies and are much more likely to empathize with a single person than a group of people (though the latter one is quite evidently worse).

Why?

Because of something we call the Identifiable Victim Effect, aka you’ll probably donate much more to a 3-year-old starved girl from Mali whose face you can see then to a cause such as “feed 11 million Ethiopians.”

Many charities know this and that explains all of those commercials: whether it is Save the Children or Children International, “the key to our wallets is to arouse our empathy” and “examples of individual suffering are one of the best ways to ignite our emotions (individual examples → emotions → wallets).

This is, of course, irrational.

But does that mean that being utterly rational – i.e., a Mr. Spock – would solve things and make you a better person?

Probably not – because then you wouldn’t care about anyone besides the people you can benefit from: it is irrational to care about someone who lives far away.

It is the mixture of these things – rationality and irrationality – which makes us human.

And, apparently, humane.

Chapter 10 – The Long-Term Effects of Short-Term Emotions: Why We Shouldn’t Act on Our Negative Feelings

You’ve heard this lesson a few thousand times before, worded anywhere between “it’s not healthy to repress emotions” and “let it go when you feel like it.”

The problem?

Well, science says that this is basically the worst thing you can do.

Why?

Because short-term emotions program long-term decisions, i.e., they tend to transform themselves into a habit.

And why is that?

For the simple reason that we are programmed to act in accordance with our past actions.

This is called self-herding, and it is the reason why some people start cursing a lot after having cursed once in quite a casual situation. In other words, if you do something once, the next time you’re found in a similar situation, your brain will try to instigate you to repeat that answer – because it doesn’t know better.

And this is why Ariely suggests that you should try canoeing, start living together or plan your wedding with your romantic partner way before you actually marry.

Joint behavior in environments that don’t have well-defined social protocols may reveal things that go far deeper than superficial attraction and behavioral precedents which are bound to repeat in the future.

“It is worthwhile,” writes Ariely, “to keep an eye open for deteriorating patterns of behavior. When we observe early-warning signs, we should take swift action to correct an undesirable course before the unfortunate patterns of dealing with each other fully develop.”

Chapter 11 – Lessons from Our Irrationalities: Why We Need to Test Everything

Ariely signs off with a great chapter, one that could be rightly deemed a data-based apology of experimentation.

Or, to turn that around, a head-on attack on intuition.

As these experiments show, Ariely warns, trusting your intuition is not exactly the best thing you can do in many, many situations.

So he fervently hopes that you will doubt your intuition and run your own experiments in an effort to make better decisions.

“Ask questions,” he writes. “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.”

Key Lessons from “The Upside of Irrationality”

1.      Rational Economics Has Human Nature Figured Out All Wrong
2.      You Overvalue Your Creations – and Wouldn’t Trade This Feeling Even for a Hefty Bonus
3.      You Are Just Too Adaptive to Be Happy

Rational Economics Has Human Nature Figured Out All Wrong

Many economists today believe that the market regulates things better than external regulators can; the reason being: we are rational enough to make decisions which go our way.

Unfortunately, this couldn’t be further from the truth: we are just as irrational as rational, and often we do things that defy logic, even if they are detrimental to us.

Just think of the sheer number of people drinking and driving or driving and texting – and you’ll understand full well.

You Overvalue Your Creations – and Wouldn’t Trade This Feeling Even for a Hefty Bonus

Apparently, after a certain amount, money can’t buy happiness or inspire you to act smarter and make better decisions.

In fact, large amounts of money usually cause just too much stress and people who are promised them are likely to make many more mistakes than people who are promised, say, just a regular bonus.

There’s only one exception: manual work.

The reason?

We enjoy creating things, and this enjoyment is such that we prefer it over money; and when money causes stress, we don’t like it one bit; it makes us hate what we love without it.

In manual work, there’s no enjoyment, so the only motivation is money.

You Are Just Too Adaptive to Be Happy

Even if you win the lottery, there’s a high chance that after a while you’ll be no happier than you are at the moment.

Interestingly enough, the same holds true even if you suffer debilitating injury and remain paralyzed.

Apparently, people learn to adapt to everything, regardless of the amount of pain or happiness attached to it?

Consequently, your best shot at happiness is somewhat counterintuitive: disrupt it regularly, so it doesn’t become a habit.

In other words, it is better to spend a week not calling your boyfriend/girlfriend than calling him/her every day – no matter how much you want to.

In this latter case, you’d probably just adapt to that level of happiness and stop feeling it altogether.

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The Upside of Irrationality Quotes

I do believe that an improved understanding of the multiple irrational forces that influence us could be a useful first step toward making better decisions. Click To Tweet It is difficult to get a man to understand something when his salary depends upon his not understanding it. (Via Upton Sinclair) Click To Tweet The translation of joy into willingness to work seems to depend to a large degree on how much meaning we can attribute to our own labor. Click To Tweet In general, we are often overly focused on endings when we evaluate overall experiences. From this perspective, a cake at the end of a meal is of particular importance. Click To Tweet Even the monkey, in his mother’s eyes, is an antelope. (An old Arabic saying) Click To Tweet

Final Notes

Throughout the years, we’ve come to expect a certain level of quality from Dan Ariely’s books, and The Upside of Irrationality does not disappoint one bit.

On the contrary, in fact: this is certainly one of the books we’d suggest to anyone interested in learning how to make better choices. Revelatory and eye-opening, comprehensive and really easy to follow, The Upside of Irrationality is popular science at its best.

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