Why Humans Are Predictably Irrational Decision Makers
It’s almost easy to assume that humans are reasonably rational creatures until you see a Black Friday video of stampeding people tussling over televisions. Even then, we can feel like it’s a bit of an us versus them situation. We’d never behave like that, surely!? Don’t get too smug just yet—the tendency to climb over your own grandmother to get to a bargain is kind of baked in to human behavior. Just think about the last time you walked past a buy-one-get-one-free display in the supermarket. Did you fill up your basket with products you didn’t really need or want simply because there was a special offer? If you did, don’t fret — most of us would have done the same thing. But what is it about human behavior that makes us so easy to trick into making irrational decisions?
In the video above, Page and Turner explain a couple of key ways we get tricked into “deals” that play on our innately irrational decision-making processes. Pick up a copy of the book these examples are taken from—Predictably Irrational by Dan Ariely—to learn more about why we do what we do, and how our natural tendencies are used to sell us more stuff. In this deeply fascinating book, Ariely examines some of the ways in which seemingly puzzling human behavior is actually extremely easy to predict. You can watch the video to get a taste, read this article for a little more background, and you can always read or listen to the key insights of Predictably Irrational on Blinkist!
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But for now, why are people so easy to coax into making irrational decisions, and what does this say about human behavior?
The Predictably Irrational Allure of Freebies
Free stuff is the best stuff, right? Well, that depends on your definition of “best.” The word “free” can make people do weird things at the best of times, and who hasn’t stocked up on free–and often, useless—things in a fit of feeling like you’re bagging a bargain? In fact, there are few things that ramp up our irrational decision-making like the word “free.” Why is that?
Well, the word free isn’t just a price tag, it’s a powerful emotional trigger. We tend to spend more online if we know there’ll be free shipping, or to buy two things we don’t need because the third is gratis. The power of the word free is not to be underestimated and every time you feel it move you towards buying something, it’s worth stopping and examining why exactly you’re buying it, and whether that one little f-word is influencing your perception of value.
Whenever we buy something, our brains register it as a risk, and the cost changes how much value we ascribe to it. However, anything that’s free is a risk-free investment and feels like a win-win situation. The only way you end up losing is by accumulating superfluous stuff you don’t need. People will even get permanent changes made to their bodies, like piercings or tattoos, if they can get it on the house.
It’s a version of that same impulse that makes us feel disgruntled when we pay a higher price for something than what we expected. You probably have figures in mind for how much you would pay for say, a nice bottle of wine, or a coat, or a pair of shoes. If the price listed doesn’t match what we think it should be, we end up feeling a bit screwed over. We benchmark these prices by other similar products we see on the market and so, if we first see something for a lower price than we’re eventually asked to pay for it, we feel ripped off, regardless of whether it’s actually a fair price or not.
Expectation Management and Irrational Decision-Making
These expectations don’t just influence our irrational feelings about value in terms of price. Our expectations also influence our tastes, our preferences, and even the efficacy of certain drugs. You might not actually be able to taste the difference between cola brands, but if you’re told one is a brand name like Coca Cola or Pepsi, you’ll probably prefer it. We’re also more likely to think something is tastier if it’s more expensive. If you buy a pricey bottle of wine, it will likely influence the ceremony you attach to drinking it and thus, your enjoyment of it, in a way that simply wouldn’t happen even if you tasted exactly the same wine from a cheaper bottle. Learn more about this phenomenon on this episode of our podcast, Simplify. If we take a more expensive painkiller, we’re more likely to feel its effects quickly than if we take a cheaper own-brand version of exactly the same drug. Our expectations around cost, value, and what we should feel completely changes our actual experience.
Nothing Compares 2 U—Except That
Teddy Roosevelt—of POTUS and bear fame—once wrote that “comparison is the thief of joy”, and when it comes to our sense of satisfaction with ourselves, the people around us, and the stuff we accumulate over the course of a lifetime, it’s an adage that is really very true. Imagine you’re a little kid and you get an ice-cream from the local parlor. You’re delighted with yourself but then your brother comes out holding a bigger ice-cream. Suddenly, yours pales in comparison and you feel a bit cheated. Exactly the same process applies when we’re grown adults and are supposed to know better. Unfortunately, we never really grow out of comparing our own lot to that of others, and to feeling better or worse as a result. This impulse deeply influences human behavior and the irrational decisions we make as a result of those feelings.
Our minds are not only fundamentally wired to look for comparisons, but also to look for the easiest, and often closest, comparison available to us. That’s why the most surefire way to get a date in a bar is to go out to that bar with a friend who looks similar to you, but is slightly less attractive. Yes, ladies and gents, you can thank neuroscience for the existence of wingmen!
Marketers often use the same ploy to make us buy more of a product that they’re trying to push by putting it on a shelf—or in an online store—next to a product that seems far inferior by comparison. Restaurants too, use this tactic, by deliberately overpricing the most expensive thing on the menu, to make you feel like you’re getting a good deal by ordering the next one on the list. Think also about how you feel about your salary. You could earn what you feel is enough money and be happy with your wages, but if you find out that your colleague is making more than you, you’ll instantly feel undervalued by comparison.
These are just a few ways in which society and salespeople use our predictably irrational brains and the fundamentals of human behavior to trick us into irrational decision-making. If you want to learn about more ways in which your internal wiring is being used to influence you, pick up a copy of Dan Ariely’s truly illuminating Predictably Irrational or check out the key insights to the book in the Blinkist library. You should also definitely check out his other titles, Dollars and Sense, Payoff, The (Honest) Truth about Dishonesty, and then to make yourself feel better, The Upside of Irrationality.