Dan Ariely has long been a hero of mine. Not just because he genuinely is a hero, having survived third degree burns over 70% of his body he went on to use that experience as a basis for research into how to treat patients so that unavoidable and painful treatments could be delivered better, improving multiple lives. But also because he founded the best named centre ever – The Centre for Advanced Hindsight.
Dan Ariely has a lifelong love of learning. He holds a PhD in Cognitive Psychology and also holds a second doctorate in Business Administration. He has taught at MIT and is Professor of Psychology and Behavioural Economics at Duke University. Although he has no formal training in economics he is one of the world’s leading behavioural economists. He has written 3 books of which 2 became New York Times Bestsellers: Predictably Irrational and The Upside of Irrationality.
In ‘Predictably Irrational’, Ariely explains that he has “been acutely aware that humans engage in actions and make decisions that are often divorced from rationality, and often very far from ideal.” We can all benefit from considering where our rationality fails us, and this is even more true in the world of marketing and consumer insight.
Ariely demonstrates very clearly that:
- Everything is relative – i.e. we all benchmark all the time, even when it doesn’t make sense to do so (e.g. estimating a price based on our birth date)
- Once we’ve made an association it tends to stick (arbitrary coherence). So, if we see something for the first time and it is expensive, we go on to believe that it is also valuable
- “Free!” is irresistible! We often gather up things that we don’t want or need simply because they are free (e.g. in the case of “free shipping”).
- Getting paid to do something makes us less happy to do it.
- When we are angry, frightened, hungry or sexually aroused, rational thinking goes out the window
- Self-control is a problem – most people, most of the time opt for immediate gratification.
- We overvalue the things that we own and losing them is experienced as psychologically painful.
- We try to keep as many options open at all times as possible – even when this means we are distracted from our main goal.
- We tend to get what we expect. If we generally tend to think something is going to be good, that is how we experience it.
- Related to the expectation bias and arbitrary coherence, the higher the price is for something, the more efficacious it will be.
If you’d like to find out more, I really recommend Dan Ariely’s TED talks – this one has been watched nearly 4 million times so probably worth a look!