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Predictably Irrational
The Hidden Forces That Shape Our Decisions
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Synopsis
Predictably Irrational (2010) explains the fundamentally irrational ways we behave every day. Why do we decide to diet and then give it up as soon as we see a tasty dessert? Why would your mother be offended if you tried to pay her for a Sunday meal she lovingly prepared? Why is pain medication more effective when the patient thinks it is more expensive? The reasons and remedies for these and other irrationalities are explored and explained with studies and anecdotes.
Key idea 1 of 9
When we’re offered something for free, our rational thinking goes out the window.
Few things get people to behave as irrationally as the word “free.” For example, people happily lug home useless free key chains from conferences, or buy two products they don’t need just because the third one is free.
Free is not just a price, but a powerful, almost irresistible emotional trigger.
Consider a study with chocolates: people were offered a choice between tasty Lindt truffles for 15 cents apiece or considerably less-tasty Hershey’s Kisses for one cent apiece. Most people (73 percent) chose the tasty Lindt truffles.
But what do you think happened when the prices were tweaked to 14 cents per truffle and zero cents (free) per Hershey’s Kiss? The difference in prices was identical (14 cents), but now one product invoked the power of “free.”
The result: 69 percent of people now chose Hershey’s Kisses, even though they still could have gotten the tastier truffles at a very attractive price. That’s the power of free.
Why this irrationality? Basically, whenever we pay for an item, we take a risk: if the item is not worth the price, we lose money. And humans really hate losing things. Hence, when an item has no potential downside (it’s free), we perceive it as far more valuable than it really is. This is known as the zero price effect.
The gravity of “free” is so powerful that companies often take advantage of it. For example, Amazon successfully entices people to order “just one more book” by offering free shipping for orders above a certain threshold.
Policy makers should also understand and leverage the power of free to enact change. For example, if the government wants people to have their cholesterol levels checked regularly, they shouldn’t just decrease the cost but rather make it entirely free!
Key ideas in this title
- When we’re offered something for free, our rational thinking goes out the window.
- The first price number we hear affects what we are willing to pay later.
- We overvalue what we own.
- Our experiences are shaped by our expectations.
- People’s responses to your requests depend on whether they fall under social or market norms.
- People are prone to dishonesty, but not wildly so.
- Dr. Jekyll sets our rational long-term goals, but we must fight Mr. Hyde’s irrationality to reach them.
- People are obsessed with keeping their options open, even when it hurts them in the long run.
- Final summary