Dan Ariely

There are a few topics that Mother Teresa and Joseph Stalin agreed on, other than the cause for human apathy. So I suspect that both would be surprised – as I am — about the reaction to the BP oil spill.

If six months ago someone were to describe to me a tremendous oil spill and ask me to predict our collective reaction to it, I would have said that we would be highly interested in this disaster for a week or two and, after that short time, our interest would dwindle to “mildly interested.” After all, we (the public) appear only vaguely interested in a whole slew of environmental issues. The destruction of the Amazon rainforest, for example, has been going on for decades. Since 1970 we’ve managed to destroy about 600,000 square miles (www.mongabay.com/brazil.html), but we’re so used to these kinds of statistics that no one seems to care much.

So, why is it that we care so much about the BP oil spill than what happens on a daily basis in the Amazon? Here’s what we know about human caring and compassion.  First and foremost, it is based on our emotions rather than our reasoning. Joseph Stalin said, “One death is a tragedy, a million is a statistic.”  Mother Teresa said, “If I look at the masses I will never act, but if I look at the one I will.”  In oil spill terms: We see pelicans and turtles mired and dying in oil, and we want to cry. We hear about families who have had their homes ruined and their livelihoods horribly affected or even destroyed, and we sympathize with their helplessness and want to do something to help them recover.  Our compassion isn’t necessarily proportional to the magnitude of the catastrophe. It depends on how much of our emotion is invoked.

Perhaps I’m mistaken about human apathy, but it is also possible that there are particular features of the BP oil spill that influence how much we care, and that if these features were different, we would care substantially less, even if the magnitude of the disaster were the same.

Here are a few characteristics that might differentiate the BP oil spill from the destruction of the Amazon. First, it is a singular event with a precise beginning. Second, while the tragedy was ongoing (and we are not yet sure if it has ended or not) it seemed to become more desperate by the day. Third, we have a single organization that we can villainize. In contrast, in the Amazon, there are many organizations and individuals at fault, both in the countries where deforestation is occurring and abroad. And fourth, the Gulf is so much closer to home (at least for Americans).

The BP oil spill is, of course, a hugely devastating tragedy. At this stage, we don’t fully understand the magnitude of its consequences, which will likely last for decades. At the same time, it might be worthwhile to take this moment in history as an opportunity – when are caring about this tragedy is still high – to reflect on our larger relationship with the oceans, and the apathy with which we generally greet the less dramatic, but perhaps equally devastating, environmental consequences of overfishing and “everyday pollution.”

I suspect that, because our abuse of the oceans is commonly the result of many small steps by many people, we fail to become enraged with either the process or the outcomes. But we should be. And we should do our best to take better care of our oceans, and not only when the pollution is caused by a single large, easily villainized organization.

Maybe this is another case in which we want to make sure that we don’t waste a really good crisis (for a related missed opportunity see financial crisis). Maybe it is time to look more broadly at our interactions with the oceans and make it a better long-term relationship, and maybe we need to do this while we still care, and before our interest in the oceans dissipates.

…

The heat of the moment is a powerful, dangerous thing. We all know this. If we’re happy, we may be overly generous. Maybe we leave a big tip, or buy a boat. If we’re irritated, we may snap. Maybe we rifle off that nasty e-mail to the boss, or punch someone. And for that fleeting second, we feel great. But the regret—and the consequences of that decision—may last years, a whole career, or even a lifetime.

At least the regret will serve us well, right? Lesson learned—maybe.

Maybe not. My friend Eduardo Andrade and I wondered if emotions could influence how people make decisions even after the heat or anxiety or exhilaration wears off. We suspected they could. As research going back to Festinger’s cognitive dissonance theory suggests, the problem with emotional decisions is that our actions loom larger than the conditions under which the decisions were made. When we confront a situation, our mind looks for a precedent among past actions without regard to whether a decision was made in emotional or unemotional circumstances. Which means we end up repeating our mistakes, even after we’ve cooled off.

I said that Eduardo and I wondered if past emotions influence future actions, but, really, we worried about it. If we were right, and recklessly poor emotional decisions guide later “rational” moments, well, then, we’re not terribly sophisticated decision makers, are we?

To test the idea, we needed to observe some emotional decisions. So we annoyed some people, by showing them a five-minute clip from the movie Life as a House, in which an arrogant boss fires an architect who proceeds to smash the firm’s models. We made other subjects happy, by showing them—what else?—a clip from the TV show Friends. (Eduardo’s previous research had established the emotional effects of these clips).

Right after that, we had them play a classic economics game known as the ultimatum game, in which a “sender” (in this case, Eduardo and I) has $20 and offers a “receiver” (the movie watcher) a portion of the money. Some offers are fair (an even split) and some are unfair (you get $5, we get $15). The receiver can either accept or reject the offer. If he rejects it, both sides get nothing.

Traditional economics predicts that people—as rational beings—will accept any offer of money rather than reject an offer and get zero. But behavioral economics shows that people often prefer to lose money in order to punish a person making an unfair offer.

Our findings (published in Organizational Behavior and Human Decision Processes) followed suit, and, interestingly, the effect was amplified among our irritated subjects. Life as a House watchers rejected far more offers than Friends watchers, even though the content of the movie had nothing to do with the offer. Just as a fight at home may sour your mood, increasing the chances that you’ll send a snippy e-mail, being subjected to an annoying movie leads people to reject unfair offers more frequently even though the offer wasn’t the cause of their mood.

Next came the important part. We waited. And when the emotions evoked by the movie were no longer a factor, we had the participants play the game again. Our fears were confirmed. Those who had been annoyed the first time they played the game rejected far more offers this time as well. They were tapping the memory of the decisions they had made earlier, when they were responding under the influence of feeling annoyed. In other words, the tendency to reject offers remained heightened among our Life as a House group—compared with control groups—even when they were no longer irritated.

So now I’m thinking of the manager whose personal portfolio loses 10% of its value in a week (entirely plausible these days). He’s frustrated, angry, nervous—and all the while, he’s making decisions about the day-to-day operations of his group. If he’s forced to attend to those issues right after he looks at his portfolio, he’s liable to make poor decisions, colored by his inner turmoil. Worse, though, those poor decisions become part of the blueprint for his future decisions—part of what his brain considers “the way to act.”

That makes those strategies for making decisions in the heat of the moment even more important: Take a deep breath. Count backward from 10 (or 10,000). Wait until you’ve cooled off. Sleep on it.

If you don’t, you may regret it. Many times over.

(this post first appeared in Harvard Business Review)

Would you pay $76 for a shot glass? What about $52 for an oven mitt? And $50 for a jar of marbles?

You may shake your head and say no way, but in a recent series of eBay auctions, the consumers did just that: they shelled out considerable cash for objects that to all appearances should never have fetched more than a couple bucks.

So what made the difference? Each item came with a unique tale.

The auctions were part of the Significant Objects Project, an experiment designed to test the hypothesis that “narrative transforms the insignificant into the significant.” Or, put differently, the goal was to determine whether you could take an object worth very little and make it worth much more by giving it a story, by endowing it with meaning.

To that end, the project’s originators – NY Times columnist Rob Walker and author Josh Glenn – bought up 100 unremarkable garage sale knickknacks for no more than a few dollars each, and then had volunteer writers whip up fictional back stories for them. This, they thought, would up the trinkets’ objective value.

They were right. Whereas the objects had cost Walker and Glenn a total of $128.74 to buy, the same trinkets netted a whopping $3,612.51 on eBay when paired with stories. This Russian figurine, for example, came with the original price tag of $3 but sold for $193.50. And this kitschy toy horse made the leap from $1 to $104.50. (See also:$76 shot glass, $52 oven mitt, $50 jar of marbles)

The results may seem surprising, but this is actually something we see all the time. It’s the basic idea behind the endowment effect, the theory that once we own something, its value increases in our eyes. (In one study, Kahneman, Knetsch and Thaler (1990) randomly divvyed up participants into mug owners and buyers, and found that whereas owners requested around $7 for their mugs, the buyers would only pay an average of $3.)

But ownership isn’t the only way to endow an object or service with meaning. You can also create value by investing time and effort into something (hence why we cherish those scraggly scarves we knit ourselves) or by knowing that someone else has (gifts fall under this category).

And then there’s the power of stories: spend a fantastic weekend somewhere, and no matter what you bring back – whether it’s an upper-case souvenir or a shell off the beach – you’ll value it immensely, simply because of its associations. This explains the findings of the Significant Objects Project, and also how other things like branding works

Irrationally yours

Dan