The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Homeby Dan Ariely
An insightful guide that reveals the irrationality of the human psyche. The book describes how we unknowingly make illogical decisions every day due to our cognitive biases, and what we can do to put this irrational behavior to good use.
Paying More for Less
“Using money to motivate people can be a double-edged sword.”
We often assume that the higher an employee’s financial incentive, the more motivated they are to learn and perform better. For example, CEOs are paid extremely high performance-based bonuses to entice them to work hard and generate profitable results. Coincidentally, we assume that those who receive lower bonuses are less motivated and thus don’t perform as well as their highly paid counterparts. However, research shows that this is not always the case.
A study was conducted to measure the effect of different incentive levels on performance. Participants were split into three groups and asked to perform a variety of cognitive and mechanical tasks. Those in the first group were offered a small bonus, the second a medium-sized bonus, and participants in the third group received very large bonuses to perform the same tasks. Surprisingly, the people in the first and second groups outperformed those in the third group in every single task. In other words, those who stood to earn the most money performed the worst!
Apparently, the large bonuses created extra stress for the participants in the third group and they choked under the pressure. They simply had too much to lose and were unable to think, learn and perform well. Participants in the first and second group didn’t feel that they had much to lose and thus could focus on their work.
Further experiments also showed that large bonuses lead to higher performance only in mechanical tasks. But if the task requires some cognitive skills, then higher bonuses reduce your performance. When your mind is too distracted by the expectation of a high reward, it’s unable to perform well in mental tasks. Therefore, it’s important to find ways to pay employees their bonuses without impairing their performance.
Actions to take
The Meaning of Labor
“Would you still work as hard if your job had no meaning outside of your salary?”
When you’re engaged in some work, you’re likely to minimize your effort while maximizing your reward. You want to conserve your time and energy as much as possible without compromising your source of income. This is clearly evident in the workplace where the average employee does just enough not to get fired while still expecting to receive a reasonable salary. Therefore, it’s rational to assume that people are primarily motivated by money. However, the truth is not that simple.
Sometimes, money isn’t enough of a motivation to get you to be extra creative or productive. The effort you put into a task is also affected in a huge way by the meaning you derive from your work. If you take an individual who loves their job and provide them with working conditions where their efforts are regularly recognized and acknowledged, they’ll be inspired to work harder in their job. This employee will feel that their work is contributing to the success of the organization. However, if the same person is placed in an environment where their work is continually treated as meaningless, the lack of recognition will easily destroy their productivity and passion. They may begin to doubt the relevance of their work to the organization.
This shows how easy it is for a manager to motivate or demotivate their employees. The difference between a high performing and an unproductive employee may not be the salary they receive. It may be something as subtle as the meaning they attach to their work and whether the fruits of their labor are being recognized.
Actions to take
Finding Fulfillment in Creativity and Sharing Great Ideas
“Once we build something, we do, in fact, view it with more loving eyes.”
Conventional wisdom says that effort and relaxation cannot go hand-in-hand. The assumption is that any time you use effort, you’re creating a sense of discomfort, stress, and frustration. Therefore, if you want to avoid discomfort and increase your enjoyment, you do your best to avoid expending unnecessary effort. This is why you prefer to buy a ready-made chair instead of making one from scratch.
But sometimes conventional wisdom can cost you the deep satisfaction that comes with making an effort. Have you ever whipped up a delicious meal from scratch using your grandma’s favorite recipe or put together a bookshelf on your own? You probably felt content and fulfilled looking at your new creation. This is because we tend to take great pride in the things we create and own, especially if it requires skill and effort to put together.
If the work you’re doing is a labor of love and you manage to complete it successfully, then you’ll find the endeavor to be extremely enjoyable and relaxing. You won’t consider the effort to be a waste of energy at all. You’ll also perceive your creation to be just as valuable (or even more valuable!) than a store-bought item, even if other people don’t see it that way.
This brings us to another assumption that we often make. We usually think that if someone is offering a great idea, then everyone should be happy to accept their advice. But this rarely happens because people tend to value their own ideas more than other people’s ideas. On top of that, people don’t like being told what to do.
Therefore, you’re more likely to embrace a mediocre idea that you or your friends come up with rather than a brilliant one from someone who isn’t part of your inner circle. This points back to the previous notion of overvaluing things you’ve created. When you create an idea or product and feel a sense of ownership to it, you tend to overvalue its usefulness. You become biased against other people’s ideas. This bias often causes people to reject a very good idea simply because they didn’t come up with it.
Actions to take
Revenge and How It Affects Your Decisions
“Despite all the harm caused by revenge (and anyone who has ever gone through a bad breakup or divorce knows what I am talking about), it seems that the threat of revenge—even at great personal expense—can serve as an effective enforcement mechanism that supports social cooperation and order.”
We’ve all felt the urge to take revenge on someone who we feel has wronged us. Revenge is a primal desire that can cause you to risk your time, money and energy just to make someone else suffer. But from a rational perspective, if the cost of revenge is too high and you’re likely to suffer some loss as well, then you’re better off letting the issue go. Unfortunately, many people are willing to lose something just to feel the pleasure of punishing their adversary.
Yet, revenge is not just about gaining personal satisfaction. It also comes from a desire to maintain trust in society. People are generally trusting of each other, and you want to believe that the person you’re dealing with won’t stab you in the back. Therefore, when someone breaches your trust, the offender must be punished by any means necessary to ensure that they won’t repeat the mistake again.
Though this may maintain some social order, it also has negative side effects. For example, a passenger is annoyed by the way he’s treated by an airline. Before disembarking from the plane, he goes to the toilet and leaves an unholy mess all over the place as a way to punish the airline company. But who ends up suffering? It’s going to be passengers on the next flight, not the managers of the airline company. These passengers will get angry at the poor conditions on the plane and take out their frustration on the flight attendant, fellow passengers, and so on.
This shows just how big a role emotions play in people’s decision-making patterns. Research shows that decisions made while emotional can affect your behavior long after the emotion is forgotten. In other words, making decisions while emotional sets the tone for how you make future decisions. This can be a good thing if you’re in a positive mood because you’re likely to make future decisions you’ll be proud of. But it is definitely not a good thing if you’re stewing in angry, vengeful feelings. The annoyed passenger is likely to keep making similar bad decisions in the future, even when he isn’t angry.
As pleasurable as it may feel in the moment, one act of revenge can turn into a cycle of vengeful acts. You can find better ways of blowing off steam without harming others. You can also support others to release their frustrations before they perpetrate vengeance on others. The cycle of vengeance - and the pain it brings - can end with you.
Actions to take
“All creatures, including humans, can get used to almost anything over time.”
When everything is going well in your life, it feels like the good times will never end. Let’s say that you want to get a new car because you think it will make you happy. You feel great after splurging on a bright and shiny new sports car and can’t wait to show it off. But a few months later, you’re no longer as impressed by the car and it becomes just another possession. Before long, you’re out chasing the next shiny thing to make you happy all over again.
Coincidentally, when you’re experiencing a tragedy, you think that the suffering will never end and you’ll be miserable forever. Someone who’s lost a limb may think that they’ll never be able to live a normal life again. But after some time, they realize that they can make the best of the situation and move on with their life.
This shows just how much we overlook our ability to adapt to any situation. The truth is that over time, you’ll always go back to your default set point, regardless of the pain or pleasure you’re experiencing right now. The challenge we face is that we’re unable to predict our adaptation in advance. Therefore, we make decisions based on the pleasure or pain we feel at that moment.
If you’re like most people, you probably go out of your way to chase one pleasurable moment after another as a way to avoid dealing with any uncomfortable experiences. However, this is not a good idea because you’re failing to account for the adaptation process.
Your best option is to do the counterintuitive thing—disrupt your pleasurable moments and endure your painful ones. By splitting pleasurable moments into chunks and taking breaks between those moments, you slow down your adaptation and prolong your joy for as long as possible. Likewise, by tolerating discomfort for as long as possible, you adapt faster to the experience until you no longer feel the pain.
Actions to take
Hot Or Not?
“In our society, beauty, more than any other attribute, tends to define our place in the social hierarchy and our assortative mating potential.”
Our concept of beauty is often dictated by self-perception. If you are considered attractive, then you’ll instinctively look for mates that are as attractive as you are. If you don’t see yourself as attractive, then you’re likely to seek a mate who’s further down the social beauty ladder. This is referred to as “assortative mating.”
Assortative mating may work out well for people regarded as attractive, but what about those who society considers less attractive? They tend to prioritize innate qualities that go beyond the physical, such as a sense of humor, intellect and kindness. Over time, as the relationship grows and deeper love develops, they naturally adapt their perception of attractiveness. What they may have once considered imperfections, they now consider beauty.
Whether you agree that beauty is an important factor or not, the point is that we all find ways to find happiness, even if it means adjusting our perception of reality. Furthermore, it seems that there is a difference in the way men and women respond to attractiveness. Men tend to have fewer requirements for their dating partners than women, even though they do place more emphasis on attractiveness than the other way around. Men are also less worried about their looks than women, and therefore, don’t shy away from pursuing women who are way more attractive than them.
Actions to take
When a Market Fails
“The market for single people is one of the most egregious market failures in Western society.”
In practice, a market is supposed to be a centralized mechanism that helps you save time and energy while achieving your goals. For example, you can buy a steak, bread, aspirin and toys in a supermarket because it has a range of products under one roof. But when it comes to the dating market, there doesn’t seem to be a coordinated mechanism that makes it easy for an individual to find what they are looking for. Centuries ago, parents would use a matchmaker to find a mate for their son or daughter. But the traditional matchmaker doesn’t exist anymore, and young people have been left to fend for themselves when it comes to finding a suitable marriage partner.
Though online dating sites have created a marketplace where singles can find each other, these websites are not as effective as they should be. The problem is that they mostly focus on a user’s quantifiable attributes such as height, weight, age, or occupation. This is because it’s an easy way to fit an individual’s characteristics into a searchable database. Unfortunately, by treating people like searchable products, they ignore the fact that most people are interested in the romantic experience rather than ticking off a couple of boxes. In other words, online dating is like trying to understand the taste of a cookie by reading the list of ingredients.
Due to this inefficiency, users spend more time searching and screening candidates than they do going out on actual dates. This is why most singles prefer offline dating or watching a movie at home rather than online dating. The solution lies in taking the elements of real-world dating and bringing it to the digital space. This can be achieved through virtual dating. Instead of users interacting via texts and photos, they can enter a virtual space and share a real-world experience as they get to know one another. This allows users to see how a potential mate naturally thinks and behaves in real-life before meeting them in person.
Actions to take
On Empathy and Emotion
“Though we may possess incredible sensitivity to the suffering of one individual, we are generally (and disturbingly) apathetic to the suffering of many.”
How would you respond if you heard an appeal for donations to pay for the surgery of a five-year-old cancer patient? Most people would be quick to write checks to help the baby. But what if you heard that one million people were dying of hunger in some far-away country? Would you empathize and act to avert the bigger tragedy in the same way you did to save one life?
The confounding truth is that we’re more likely to do something to help one person than we are to save millions. Great calamities simply don’t move us as much as individual cases because the size of the tragedy paralyzes us. You feel that whatever you do simply won’t be enough to make much of an impact. Furthermore, we generally don’t feel empathy for faceless, unidentifiable masses of people. But once you have the name and picture of the suffering individual, you empathize more with them because the tragedy has been personalized. You’re able to identify and relate to the individual in need. This is known as the “identifiable victim effect.”
Some may argue that if we provided more detailed information about the scale of a tragedy, then all rational people would rush to take action. But the opposite is often true. Providing more statistical information makes people less compassionate. In fact, they end up caring even less about both individual and mass tragedies. It seems that rational and calculated thinking somehow suppresses our ability to feel compassion for others.
Actions to take
Question Your Biases
“Just as we use seat belts to protect ourselves from accidents and wear coats to keep the chill off our backs, we need to know our limitations when it comes to our ability to think and reason—particularly when making important decisions.”
Imagine that your arm is infected and causing you great pain. Your doctor recommends that the arm be amputated at the elbow and replaced by a prosthetic limb. The prosthesis will reduce the pain as well the number of operations you need. But you cannot fathom the thought of losing your beloved arm, despite the fact that it can never function normally again. Therefore, you reject the doctor’s advice and keep the arm. Years later, you’re struggling with a damaged arm with limited functionality and extreme pain that lasts hours. Do you think you made the rational choice or were you a victim of your cognitive biases?
When making serious decisions such as which medical procedure to accept, what to invest in or which school your children should attend, you usually assume that you’re being objective. But more often than not, your decisions are actually based on your cognitive biases. Cognitive biases are the result of two main psychological forces—loss aversion and status quo bias. Loss aversion means you overvalue what you have and cannot consider giving it up, even when it makes sense to do so.
Under the influence of status quo bias, you prefer to keep things the same and not take any action because you fear change. These psychological influences operate so subtly that you’re never aware of just how much they affect your decision-making. As a result, you only discover that you made an irrational decision when it’s already too late.
Actions to take
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