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Wealth Inequality in Motion.

Mar 09

I recently came across this video that some talented person made of a study I conducted on wealth inequality a few years back with Mike Norton. It does a great job covering the main findings regarding the differences between what Americans think the distribution of wealth is (somewhat even), what they would prefer (more even than socialist Sweden), and how wealth is actually distributed (the bottom 40% of Americans possessing less than 0.3% of total wealth, the top 20% possessing 84%). The graphs, and a longer explanation, are also available here.

The only thing I wish he emphasized a little more is how similar the results were for Democrats and Republicans, which I found very hopeful. Even with all the ideological polarization in Washington, the moment we ask the question of ideal wealth distribution in a general and less self-interested way, we seem to be a country that cares a lot about each other.

Ask Ariely: On Begging, Bad Waiters, and the Facebook Blues

Mar 02

Here’s my Q&A column from the WSJ this week — and if you have any questions for me, just email them to AskAriely@wsj.com.

______________________________________________________

Dear Dan,

I was recently approached by a panhandler who asked me for 75 cents, and I gave him the money. I was late for my train, so I didn’t have time to stop and try to understand why he chose 75 cents. But I wonder: Do you think the 75-cent request could be a “market tested” amount, one that yields a higher overall level of “donations” than asking outright for a buck or more.

Brad

The panhandler could be trying to make a unique request in order to separate himself from the competition. But my guess is that you were more willing to give him money because you inferred things from the specificity of his request.

When someone tells us to meet them at 8:03, we come to a different conclusion about how seriously they mean that exact time as compared with their telling us to meet them at 8 or 8-ish. In the same way, a request for exactly 75 cents may carry a set of inferences about how seriously the person needs the money. It may lead us to think there is a specific reason for the request, like getting enough for bus fare. Plus, even if he asks for 75 cents, it’s likely that people will give $1 and not wait for change.

You could argue that the same principle would apply if he asked for $1.25, but in this case the size of the request might deter some people, and if they don’t have exact change, giving $2 might be too much. This is just speculation, though. If you are willing to volunteer as an experimenter for a few days, we can gather some real data and get to the bottom of this.

What lessons can we draw from this strategy? First, think about the inferences that people make from the exact way that we request something. Second, asking for general help is unlikely to be as effective as asking for exactly what we need.

______________________________________________________

Dear Dan,

In a restaurant where waiters pool their tips, could they actually receive more tips overall by employing a “good waiter/bad waiter” routine, where one waiter is surly and unhelpful, then another waiter steps in who is friendly and goes above and beyond in serving the client? I suspect that the scheme might cause the customer to leave a larger tip for the second waiter, which will ultimately be pooled with the tips of the “bad” waiter.

David

I agree with your analysis. And for it to work, you don’t even need the waiters to share their tips—they could just alternate roles.

A friend who worked for a large consumer-products company was trying to change the company’s service motto from “we do things right for our customers” to “we mess up the first time, but then we fix it.” His idea (which upper management rejected, by they way) was that when people expect and receive good customer service, it draws no attention, and they just take it for granted (you can think of parallels to romantic relationships as well). But if we give customers a contrast between good and bad service (as at a restaurant), they may start to notice and appreciate good service more.

I suspect that some industries may have already picked up on this idea, and that airport restaurants are leading the charge by providing the training grounds for delivering bad service most effectively.

______________________________________________________

Dear Dan,

I graduated from college a few years ago, and since then my social life has been limited to Facebook. And it is far from satisfying.

James

Facebook has many wonderful aspects, but I agree that it is no substitute for human contact. If you ever feel that nobody really cares whether you’re alive, try missing a couple of student loan payments.

See the original article in the Wall Street Journal here.

A New App: Pocket Ariely

Feb 28

Soon you’ll be able to have me in your pocket wherever you go…

Coming soon Pocket Dan

Acting Irrationally

Feb 23

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Recently I had the opportunity to interview actor Peter Dinklage (of Game of Thrones fame) as part of the Rubin Museum Brainwave series, which pairs big names from pop culture with cognitive researchers to see what comes of it. My intention was to see if I could draw some connections between the craft of acting and the field of social science. (As it turned out, I was fairly unsuccessfully. For now.)

I asked Mr. Dinklage several questions to this effect, which he answered in more or less the same way: “No.”

First, I asked whether the fact that he plays such a conspiratorial, dishonest (albeit relatively heroic) character has any impact on his daily life. “No,” he said, nicely. He explained that he finds it easier to play characters who are very different from himself.

Next I asked if he felt people related to him differently, again, given that his character was remarkably crafty and deceptive. Again, “no.” He gave people credit for being smart enough to differentiate between the person on screen and the one before them.

Finally, I explained an experiment I conducted long ago on people’s experience tasting beer. In this experiment, we had people sample a few beers, one, called the MIT brew, had balsamic vinegar in it. The people who had no knowledge of the vinegar actually liked the beer better; those who knew about the addition hated it. Basically, their preconceptions overwhelmed their experience and made it much worse.

There were two issues at play here: first, that beer is hard to evaluate in general, as there’s no clear scale for judging it. We can say we like or dislike it, sure, and we may even talk about its smooth or hoppy character, but those are simply aspects of the beer without definitive value. Second, expectation changes our experience of things. When there is difficulty in the evaluation of something, expectations can alter experience even more.

To this end, I asked him if he felt acting was ever like wine or beer—something difficult to judge objectively in the face of preconceptions. I explained that before I’d had a chance to watch the show (research!), I had been told that he was the best actor in the series. So, did he think my experience of the show might have been shaped by my expectations? One last “no,” and he went on to explain that acting could certainly be evaluated. At the same time he admitted that there were well-known and well-regarded actors who he thought were terrible (he didn’t provide names). I thought this made my point, but I didn’t say so.

So are there any lessons for acting in social science? I would say there are, but that perhaps actors themselves are too close to their work to appreciate the irrationality in it, and how the majority of people experience entertainment.

5th birthday

Feb 19

5 years ago today Predictably Irrational was published.

It has been an amazing five years — and I just wanted to say thanks to those of you who read and reacted to this research.

Irrationally yours

Dan

.

p.s This was my blog post from 5 years ago:

I am delighted to announce the birth of Predictably Irrational.

Predictably Irrational was born after a rather long but mostly painless labor, and so far seems healthy and in good spirit. Predictably Irrational is largely orange and blue, but they tell me that this is normal (or at least acceptable).

At birth it is about 300 pages, and 9 x 6 x 1.1 inches.

They tell me that the next few weeks will be a lot of work around the clock, and sleepless nights. But as the proud father, I am looking forward to this next step.

Dan

Ask Ariely: On Interviews, Luck, and the Canoe Test

Feb 16

Here’s my Q&A column from the WSJ this week — and if you have any questions for me, just email them to AskAriely@wsj.com.

______________________________________________________

Dear Dan,

I recently had a job interview on a rainy day, and it went very poorly. I made a point of getting to the interview site early, and I relaxed by buying a cup of tea and sitting down to read at a local coffee shop. The book I was reading at the time was a policy manifesto by two political theorists whose views I strongly disagree with.

Which is more likely to have contributed to my poor job-interview performance: the cold and miserable January weather or spending 20 minutes reading ideas I greatly dislike? Which is more important for job candidates before a big interview: consulting the weather forecast or spending time reading material that makes them happy?

—Jay

Sorry about the outcome of the interview, but the lesson from this episode might be worthwhile in the long term. I suspect that you had some implicit emotions based on the weather and the book, but the way you experienced these emotions was more general and diffuse. In your mind, your mood was connected to everything around you, which made you uncomfortable about everything you experienced—including, unfortunately, the interview. Assuming that you don’t have a perfect poker face, your feelings must have been apparent to the interviewer, and your overall appeal went down.

Though I suspect that both the weather and the book contributed to your negative mood, if I had to guess I’d vote for the book as having the larger impact. For your next interview, take a funny book with you, and with a thick marker write on your underwear “I am the best.” Both of these methods of preparation should put you in a good mood and improve your chances. Good luck.

______________________________________________________

Dear Dan,

Are there people who are just lucky? I think so—only I’m not one of them.

—Amy

I think some people are luckier, but it’s not the kind of luck that gets you more money at the roulette wheel. Luckier people tend to try more frequently, and by trying more often they also succeed more. Think about a basketball player who attempts to shoot three times in a game, compared with one who tries 30 times. Even if the first one has a better shooting percentage, in absolute numbers, you can’t compare the two.

On top of that, if you notice the successes of other people and don’t pay much attention to their failures, you will basically see the absolute number of successes and not notice the percentage of successes.

So, what’s the advice? First, life is a numbers game—so try more frequently. Second, it’s good to look at the number of things that other people attempt—not just their successes.

______________________________________________________

Dear Dan,

In one of the chapters of “The Upside of Irrationality” you suggest a canoe ride as a good indicator of the success of a future relationship, since it often gives one person plenty of opportunity to blame the other for things that go wrong. Here is the question: Would it matter that one of the participants knows it’s a test?

P.S. Before my ex-wife and I got married, we did go on a canoe ride, and it was the worst experience ever. Just to add to your statistics…

—Oren

Like most tests in life, the canoe trial works best when the people in question don’t know they are taking part in a test. Tests make us feel that watchful eyes are on us, so we try to put on our best behavior. If your loved one knows about it, the test is not valid.

Now that I think about it, maybe the real trick is to try to persuade your partner that she is often in a test and being watched. I have always suspected that once people have the Nielsen ratings machines installed in their homes they start watching more PBS and fewer reality shows.

Maybe if you persuaded your significant other that you have some “Ariely Romantic Ratings Machine” installed in your house, your domestic life will improve. Perhaps you should start a company to provide such a service?

See the original article in the Wall Street Journal here.

The Pain of Paying

Feb 05

For Duke’s Fuqua Faculty Conversation series, I talk about one of the most interesting aspects of the psychology of money: The pain of paying. (See the original post here).

Ask Ariely: On bag lunches, career choices, and shopping for a loved one

Feb 02

Here’s my Q&A column from the WSJ this week — and if you have any questions for me, just email them to AskAriely@wsj.com.

______________________________________________________

Dear Dan,

I’ve struggled with a few major “I wish I could change this” type behaviors for years. Back when I worked in downtown Manhattan, colleagues would religiously bring their own lunch, thermos of coffee, or whatever, and save money on eating out. I often mused that I could probably fund my retirement or at least a few good vacations with all the money I spent on decent but forgettable food.

Well, recently I started a new job at a big company where the only real food option is its own cafeteria—which serves awful food at market prices.

Lo and behold: This cafeteria so insults and annoys me that I’ve been able to fix my long-standing bad habit. Every night before bed, I simply fill up some Tupperware with dinner leftovers. Or I grab a yogurt, make a PB&J—whatever it takes. What lesson can I take from this?

P.S. I’ve been following your podcast, Arming the Donkeys, for years, but I have to tell you the sound could sometimes be better.

—Jennifer

This is a classic case where having all the right information was simply not enough to drive your desired behavior. We know, for example, that telling people about the caloric content of fast food has almost no effect on eating, and that knowing the dangers of texting at the wheel hasn’t exactly moved the needle on safe driving.

We also know that emotions are often much more effective in getting people to behave differently. In your case, disgust and indignation—which can be extremely powerful and motivating.

The good news is that once your emotions instigated this change, you found it easy to change your behavior, and with time this change may even become a habit. At that point, even if you stop being angry at the cafeteria (or you switch jobs), the habit and joy of bringing your own lunch will persist.

P.S. With regard to my podcast, I’ve been thinking about getting a higher quality recorder for a while. Knowing that you’re motivated by anger and revenge, I will get right on it. Thank you.

______________________________________________________

Dear Dan,

As a recent college grad, I often find myself coming up with off-the-wall, out-of-the-box, borderline idiotic ideas of what to do with the rest of my life. One day I’ll be thinking of how much I enjoy my job; the next I’ll be considering dropping everything and running off to another country, starting my own business, launching a singing career or pursing higher education in something unrelated to my field, like behavioral economics. I’ll often stew on these ideas before setting them aside, only to revisit them every few months. How can I tell when my ideas are actually legitimate notions or nothing but half-baked schemes?

—Josh G.

First, I am impressed that you’re considering so many different types of jobs. (And I may be biased, but I agree that a career in behavioral economics would be pretty interesting.) In general it amazes me how few possible career paths people consider before picking one to stick to indefinitely.

As for your question: It’s useful to think about two aspects of your job choices: What will make you happy (which is the only aspect people usually consider) and what jobs will be able to teach you something important. If I were you, I would make a list of possible jobs and rate each one on both measures. Next, figure out what your goal is right now (as a recent college grad, you may want to focus more on what you can learn) and then pick the job from the list that best satisfies this goal. Finally, commit to that job for at least a year without looking back.

What you shouldn’t do is stay in one job and think about how different your life would be if you took another. This is a bit like dating one person but constantly checking Match.com to see what other options you might have. It takes away from the enjoyment of your current relationship or job and your commitment to it. So, whatever you do, sticking to your chosen path of action is key.

And if you do end up switching jobs, please don’t tell your parents that you did it on account of my advice.

______________________________________________________

Dear Dan,

As we get closer to Valentine’s Day, I am wondering, why do women like jewelry and flowers? Wouldn’t it be better if they liked the kind of things that men liked to shop for?

—Jon

One way to view this discrepancy is that women like these things exactly because men hate shopping for them. If you purchased something for your loved one that you enjoyed shopping for, this would be nice, but having to overcome your aversion to shopping for these items is a much stronger signal of your love and care. So this year, when you are shopping for jewelry or flowers for your soul mate, remind her what a pain it was for you.

And Happy Valentine’s Day.

See the original article in the Wall Street Journal here.

Economics and the maximization of profit (and lies).

Jan 26

When a friend sent me this paper the other day, I admit that I took a long hard look at myself and my economist friends. According to this study, economists, it seems, are worse than most when it comes to truth telling. This discovery was made by researchers Raúl López-Pérez and Eli Spiegelman, who wanted to examine whether certain characteristics (for instance religiosity or gender) made people averse to lying. They measured the preference for honesty by canceling out other motivations, such as altruism or fear of getting caught.

The way they accomplished this was with a very simple experiment where a pair of participants acted as sender and receiver of information. The sender would sit alone in front of a screen that showed either a blue or green circle. He or she would then communicate the circle’s color to the receiver, who could not see the color or the sender. Senders received 15 Euros every time they indicated a green circle, and only 14 when they communicated that the circle was blue. Receivers earned an even 10 euros regardless of the color, and so were unaffected by either the truthfulness or dishonesty of the senders.

So senders had four strategies:

1) Tell the truth when shown a green circle and get the maximum payment;

2) Lie when shown a green circle, choosing a lower payment;

3) Tell the truth when shown a blue circle and receive the lower payment;

4) Lie when shown a blue circle and gain an extra euro.

All was well and good if senders saw a green circle, telling the truth earned them the maximum amount of cash (as you can imagine, option 2) was fairly unpopular). What if they saw blue though? Well, they had two options: tell the truth and lose a euro, or lie and get paid more. The experimenters reasoned that a lie-averse sender would always communicate the circle’s color accurately while senders motivated by maximizing profit would indicate green regardless.

Participants, who were from a wide array of socio-economic and religious backgrounds, also came from a range of majors. Researchers grouped majors together into business and economics, humanities, and other (science, engineering, psych).  The results showed little difference in honesty as a factor of socio-demographic characteristics or gender. A student’s major, however, was a different story. As it turned out, those in the humanities, who were the most honest of all, told the perfect truth a little over half the time. The broad group of “other” was a bit less honest with around 40% straight shooters. And how about the business and economics group? They scraped the bottom with a 23% rate of honesty.

Keep in mind that this was one study of one group of people; however, it does indicate that the study of economics makes people less likely to tell the truth for its own sake. And this holds water, economically speaking: 1 euro has clear and measurable value, it can be exchanged for a number of things. The benefit of telling the truth in this situation does not carry any financial value (which is not to say lying in finance is not costly—clearly it is). But rationalization, which we all take part in, may be easier for those who think in terms of opportunity cost and percent profit.

This is not terribly surprising to me in the context of the greater history of economics, which has been characterized by the study of selfishness. The concept of the invisible hand (inherent in the notion of self-correcting markets) holds that people should act selfishly (maximizing their own profits) and that the market will combine all of their actions with an efficient outcome. While it’s true that markets can sometimes accommodate a range of behaviors without failing, if we continue to teach students the benefits and logicality of rational self-interest, what can we really expect?

Restraining Order: The Art of Self-Control

Jan 25

Tomorrow night is the opening of my lab’s art show on self-control, and we interviewed a few of our artists to get their take on the project and self-control in general.

Restraining Order: The Art of Self-Control from Advanced Hindsight on Vimeo.

See more on the Artistically Irrational project here.

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