Dan Ariely

As you may or may not know, I am a fairly avid squash player (not so good but I love the game). One of my favorite aspects of squash, aside from being a great source of exercise, is the strategic thinking required.

The other day while playing, I had a slight itch to change strategies. It wasn’t a conscious, logical process, and it was more like a kind of the desire to itch or pick a scab. Like picking a scab, my better judgment told me that making this switch would be a bad idea, but the urge was too great, and I switched my playing style. And it worked!

After the game I wondered, where does this itch come from? Is it part of our creative instinct for exploring and trying out new strategies?  Do we have a desire to try new things?

A few months ago, I had the idea to create an iPhone app that would give me (us) compliments. It turns out that as humans, not only are we sensitive to rude remarks from strangers, but we are also very excited when we get kind words, even if they are just random; they just make us feel much better, even if these strangers don’t know us very well.

At a boy! is a completely free app, and you can find it here.

HOW TO USE: when you open the app you get a compliment and if you want a new one simply tap the screen.  To get a new compliment, simply tap the screen. I do want to encourage you to use the thumbs up/down to let me know which compliments make you feel the best — this way we will be able to figure out what kinds of compliments work better and worse.

Most important, users of At a boy! can submit their own compliments for other users to read: just tap the pen icon and type one in.

Here, for example, is a compliment that a French-speaking user of our app submitted (if you can please submit compliments also in English):

Doesn’t that make you feel good to read? We’ve had a few dozen great compliments already submitted, and we could always use more!

By the way, did I tell you that you look very nice today and that you are very clever?

Irrationally yours

Dan

A few years ago, a marketing team from a major consumer goods company came to my lab eager to test some new pricing mechanisms using principles of behavioral economics. We decided to start by testing the allure of “free,” a subject my students and I had been studying. I was excited: The company would gain insights into its customers’ decision making, and we’d get useful data for our academic work. The team agreed to create multiple websites with different offers and pricing and then observe how each worked out in terms of appeal, orders, and revenue.

Several months later, right before we were due to go live, we had a meeting about the final details of the experiment—this time with a bigger entourage from marketing. One of the new members noted that because we were extending differing offers, some customers might buy a product that was not ideal for them, spend too much money, or get a worse deal overall than others. He was correct, of course. In any experiment, someone gets the short end of the stick. Take clinical medical trials, I said to the team. When testing chemotherapy treatments, some patients suffer more so that, down the road, others might suffer less. I hoped this put it in perspective. Fortunately, I said, price testing household products requires far less suffering than chemo trials.

But I could tell I was losing them. In a sense, I was impressed. It was a beautiful human sentiment they were conveying: We care about all customers and don’t want to treat any one of them unfairly. A debate ensued among the group: Are we willing to sacrifice some customers “just” to learn how the new pricing approaches work?

They hedged. They asked me what I thought the best approach was. I told them that I was willing to share my intuition but that intuition is a remarkably bad thing to rely on. Only an experiment gives you the evidence you need. In the end, it wasn’t enough to convince them, and they called off the project.

This is a typical case, I’ve found. I’ve often tried to help companies do experiments, and usually I fail spectacularly. I remember one company that was having trouble getting its bonuses right. I suggested they do some experiments, or at least a survey. The HR staff said no, it was a miserable time in the company. Everyone was unhappy, and management didn’t want to add to the trouble by messing with people’s bonuses merely for the sake of learning. But the employees are already unhappy, I thought, and the experiments would have provided evidence for how to make them less so in the years to come. How is that a bad idea?

Companies pay amazing amounts of money to get answers from consultants with overdeveloped confidence in their own intuition. Managers rely on focus groups—a dozen people riffing on something they know little about—to set strategies. And yet, companies won’t experiment to find evidence of the right way forward.

I think this irrational behavior stems from two sources. One is the nature of experiments themselves. As the people at the consumer goods firm pointed out, experiments require short-term losses for long-term gains. Companies (and people) are notoriously bad at making those trade-offs. Second, there’s the false sense of security that heeding experts provides. When we pay consultants, we get an answer from them and not a list of experiments to conduct. We tend to value answers over questions because answers allow us to take action, while questions mean that we need to keep thinking. Never mind that asking good questions and gathering evidence usually guides us to better answers.

Despite the fact that it goes against how business works, experimentation is making headway at some companies. Scott Cook, the founder of Intuit, tells me he’s trying to create a culture of experimentation in which failing is perfectly fine. Whatever happens, he tells his staff, you’re doing right because you’ve created evidence, which is better than anyone’s intuition. He says the organization is buzzing with experiments.

And so is that consumer goods company. A group there is studying consumer psychology and behavioral economics and is amassing evidence that’s impressive by any academic standard. Years after our false start, they’re recognizing the dangers of relying on intuition.

This first appeared at HBR

Question: what are God’s views on affirmative action, the death penalty and same-sex marriage? Answer: whatever you want them to be.

That’s according to a recent study by Nicholas Epley, Benjamin Converse, Alexa Delbosc, George Monteleone and John Cacioppo, found that we tend to ascribe our own views to God.

Past studies have shown that when we reason about other people, we form an opinion of their views based on two sources: egocentric info (i.e., what we ourselves believe) and outside clues (what the other person has said and done, and what others have said about them).

Here, the researchers wanted to find out how much we rely on egocentric info to construe other people’s views, including God’s. To that end, they had devout American participants provide their personal views on various issues (abortion, death penalty, Iraq war, etc.), as well as what they thought were the views of others (Katie Couric, George Bush, the average American, God, etc.).

When the researchers compared participants’ personal views with the participants’ estimates of others’ views, they found one significant pattern: there was a correlation between participants’ personal views and their estimates of God’s view. For example, participants who said they were for same-sex marriage tended to also say that God was for same-sex marriage. And participants who said they were against same-sex marriage tended to also say that God was against same-sex marriage.

But this wasn’t the case for the other figures – Couric, Bush, average American, and so forth. Participants who said they were for same-sex marriage were statistically neither more nor less likely to say that Couric was for same-sex marriage than those who held the opposite view. In other words, what I say Couric thinks has nothing to do with what I myself think. But what I say God thinks has lots to do with what I myself think.

But correlation doesn’t imply causation, so to shed light on the direction of causality, the researchers ran two follow-up experiments. This time, instead of just surveying participants for current views, they induced participants to change their personal views by randomly assigning them to give speeches for or against the issue (death penalty) in front of a camera. Because it was random assignment, some people ended up arguing for their personal view, while others argued against it (many past studies have shown that in this context, people tend to shift their own opinions in a direction consistent with the speech they delivered). So, what about the other views (God’s, Couric’s etc.) – would the participant revise those as well?

Yes and no. The only other view that changed was God’s. As participants’ own views changed, so did their estimates of God’s view. The participant who started out very much for the death penalty but took on a more moderate view after arguing against the death penalty on camera also ascribed a more moderate view to God. But his estimates of the others’ views remained unchanged.

Overall these results suggest that God is a blank slate onto which we project whatever we choose to. We join religious communities that argue for our viewpoint and we interpret religious readings to support our personal positions.

Irrationally Yours,

Dan

p.s and happy birthday to my little sister Tali

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)

DUKE (US)—Given a choice between spending a token to get their absolute favorite food or spending it to have a choice from a buffet of options, capuchin monkeys will opt for variety.

In fact, they’ll even eat a less-preferred food from that buffet when the favorite food is on it. They choose variety for variety’s sake.

The choices made by these captive-bred monkeys in an Italian research facility seem to show some innate desire to seek variety, says Dan Ariely, the James B. Duke Professor of psychology and behavioral economics at Duke University.

In a series of experiments Ariely conducted with colleagues at the Istituto di Scienze e Tecnologie della Cognizione in Rome, the eight monkeys first had to be taught that the abstract tokens, such as poker chips, plastic cylinders and metal nuts, represented different kinds of choice. With training, the tokens were associated with being able to buy one piece of the most-preferred food, or being able to buy one piece from an assortment of foods that included the most-preferred food.

Lead author Elsa Addessi has used this token method before with this troop of capuchins, who are on public display as well as being used in non-invasive cognitive experiments.

“Economically, the tokens should be equivalent, because they both give you the food you like,” Ariely says.

But once they had the hang of it, the monkeys as a group chose to use the variety tokens and not the “single-food-tokens.” Moreover, once they chose the variety tokens the monkeys also didn’t always take the most-preferred food when it was offered as part of the variety assortment. What this means is that they prefer variety for variety’s sake and are willing to eat food they like less to satisfy their desire for variety.

The work appears online in Behavioural Processes.

The implications of this simple experiment shed some light on consumer behavior, Ariely says. Earlier work on variety-seeking has found that people eat 43 percent more M&M candies when there are 10 colors in the bowl instead of just seven.

“People choose variety for variety’s sake,” Ariely says. “They often choose things they don’t even like as well just for the variety. We knew about this, so the interesting thing was to figure out how basic it is.”

The behavior of the capuchins, which are native to South America, “suggest that there’s some inherent basic strategy for variety,” Ariely explains. In the wild, variety seeking may help ensure a nutritionally varied diet.  It is also possible, the authors suggest, that variety-seeking contributed to the rise of bartering and then abstract money in human society.

At the same time, Ariely is somewhat puzzled that humans can get stuck in a rut and not seek more variety. “Ask yourself: How many new things have you tried lately? Have you tried every cereal in the cereal aisle?” It may be that you’re enjoying a daily bowl of a cereal that you would rate as an 8, when just a few feet away on the shelf there is a cereal you’d rate as a 9, but you’ve never tried it.

Businesses can push variety on customers with assortment packs, Ariely suggests, and vicarious experiences like the Food Network can encourage exploration as well.

“How do we get ourselves to explore? Even monkeys do it—so maybe we should also try more variety.”

The research was supported by the Istituto di Scienze e Tecnologie della Cognizione and Duke.

A few months ago I attended a conference held by the American Council for an Energy-Efficient Economy. One of the interesting things they noted this year was about their lunch offering.

You might be surprised to know that meat production, between raising, processing, packaging, and preserving meat uses a lot of energy. In fact, Michael Pollan, author of The Omivore’s Dilemma once asserted that “A vegan in a Hummer has a lighter carbon footprint than a beef eater in a Prius” (it turns out that this was a bit of an exaggeration).

If you’ll note in the picture below, it seems that in this meeting (2009) the council was able to convince attendees to switch to a vegetarian lunch.

The trick, as I’ve blogged about before, was making the vegetarian option the default option! For the past two years, the council did not have any default and the vast majority of the attendants picked the meat option. This year they set up the vegetarian option as the default, and this yielded a more environmentally friendly results, with a mere 20 percent insisting on having their steaks (see the column for 2009).

The other good news is that the vegetarian option was also (in this case) more tasty and healthy.

The New York Times Magazine publishes once a year the “years in ideas.”

This is the third year in a row that they are picking one of my papers, which is very nice of them.

It is also particularity nice of them that this year they picked two papers I am a part of.

One of the papers they picked this year is: The Counterfeit Self

Her is their report:
Wearing imitation designer clothing or accessories can fool others — but no matter how convincing the knockoff, you never, of course, fool yourself. It’s a small but undeniable act of duplicity. Which led a trio of researchers to suspect that wearing counterfeits might quietly take a psychological toll on the wearer.

To test their hunch, the psychologists Francesca Gino, Michael Norton and Dan Ariely asked two groups of young women to wear sunglasses taken from a box labeled either “authentic” or “counterfeit.” (In truth, all the eyewear was authentic, donated by a brand-name designer interested in curtailing counterfeiting.) Then the researchers put the participants in situations in which it was both easy and tempting to cheat.

In one situation, which was ostensibly part of a product evaluation, the women wore the shades while answering a set of very simple math problems — under heavy time pressure.

Afterward, given ample time to check their work, they reported how many problems they were able to answer correctly. They had been told they’d be paid for each answer they reported getting right, thus creating an incentive to inflate their scores. Unbeknown to the participants, the researchers knew each person’s actual score. Math performance was the same for the two groups — but whereas 30 percent of those in the “authentic” condition inflated their scores, a whopping 71 percent of the counterfeit-wearing participants did so.
Why did this happen? As Gino puts it, “When one feels like a fake, he or she is likely to behave like a fake.” It was notable that the participants were oblivious to this and other similar effects the researchers discovered: the psychological costs of cheap knockoffs are hidden. The study is currently in press at the journal Psychological Science.

Could other types of fakery also lead to ethical lapses? “It’s a fascinating research question,” says Gino, who studies organizational behavior at the University of North Carolina. “There are lots of situations on the job where we’re not true to ourselves, and we might not realize there might be unintended consequences.”

The second paper they picked this year is: The Drunken Ultimatum

Her is their report:

The so-called ultimatum game contains a world of psychological and economic mysteries. In a laboratory setting, one person is given an allotment of money (say, $100) and instructed to offer a second person a portion. If the second player says yes to the offer, both keep the cash. If the second player says no, both walk away with nothing.

The rational move in any single game is for the second person to take whatever is offered. (It’s more than he came in with.) But in fact, most people reject offers of less than 30 percent of the total, punishing offers they perceive as unfair. Why?

The academic debate boils down to two competing explanations. On one hand, players might be strategically suppressing their self-interest, turning down cash now in the hope that if there are future games, the “proposer” will make better offers. On the other hand, players might simply be lashing out in anger.

The researchers Carey Morewedge and Tamar Krishnamurti, of Carnegie Mellon University, and Dan Ariely, of Duke, recently tested the competing explanations — by exploring how drunken people played the game.

As described in a working paper now under peer review, Morewedge and Krishnamurti took a “data truck” to a strip of bars on the South Side of Pittsburgh (where participants were “often at a level of intoxication that is greater than is ethical to induce”) and also did controlled testing, in labs, of people randomly selected to get drunk.
The scholars were interested in drunkenness because intoxication, as other social-science experiments have shown, doesn’t fuzz up judgment so much as cause the drinker to overly focus on the most prominent cue in his environment. If the long-term-strategy hypothesis were true, drunken players would be more inclined to accept any amount of cash. (Money on the table generates more-visceral responses than long-term goals do.) If the anger/revenge theory were true, however, drunken players would become less likely to accept low offers: raw anger would trump money-lust.

In both setups, drunken players were less likely than their sober peers to accept offers of less than 50 percent of the total. The finding suggests, the authors said, that the principal impulse driving subjects was a wish for revenge.

Lets see if this trend continues….

Sex, Shaving, and Bad Underwear
Or how to trick yourself into exerting self-control

Recently, I gave a lecture on the problem of self-control. You know the one: At time X you decide that you’re done acting a certain way (No more smoking! No more spending! No more unprotected sex!), but then when temptation strikes, you go back on your word.

As I mention in Predictably Irrational, this predicament has to do with our inherent Jekyll-Hyde nature: We just aren’t the same person all the time. In our cold, dispassionate state, we stick to our long-term goals (I will lose ten pounds); but when we become emotionally aroused, our short-term wants take the helm (Oh but I am hungry, so I’ll have that slice of cake). And what’s worse, we consistently fail to realize just how differently we’ll act and feel once aroused.

Fortunately, there’s a way around the problem: pre-commitments, or the preemptive actions we can take to keep ourselves in check. Worried you’ll spend too much money at the bar? No problem, bring just the cash you’re willing to part with. Afraid you’ll skip out on your next gym visit? All right, then make plans to meet a friend there. And so on. Pre-commitments can take many a form, and some get pretty creative.

For example, I surveyed my audience at the lecture hall for their pro-self-control tactics, and I received two noble suggestions. One woman reported that when she goes out on a date with someone she shouldn’t bed, she makes a point to wear her granniest pair of granny underwear. Similarly, another woman said that when faced with that kind of date, she just doesn’t shave.

Both are great ideas, I think, and are likely to work — well they’re certainly better than only relying on the strength of your self-control — but there is a risk. Let’s say the woman with the ugly underwear finds herself uncontrollably attracted to her date and decides that, you know what, ugly underwear be damned, there will be sex tonight! Chances are she will wake up in the morning wishing she had worn her silk lingerie after all.

Irrationally yours

Dan

p.s if you have any personal self control stories that you are willing to share — please send them my way

Change Begets Change
This is how you put a positive spin on the recession.

In a new study, Moore School of Business marketing professor Stacy Wood suggests that it’s in times of upheaval that we’re particularly inclined to leave our comfort zone and try new things.

On first thought, this sounds counter-intuitive. You would think that upon losing our job or girlfriend, we’d be more intent on crawling under the sheets with a favorite book or movie and lying low for a while – not deciding that now’s the time to quit smoking or take up sky-diving.

And yet, these are the very kinds of challenges that we’re likely to take on following a big life change, according to Wood. In her study, she ran five related experiments comparing participants’ consumer choices with the degree of stability in their lives at the time.

In the initial experiment, for instance, she had undergrads take their pick between a pack of tried-and-true Lay’s potato chips and a bag of unfamiliar and odd-flavored British crisps (Camembert and plum, anyone?). Afterwards, she handed out a questionnaire that checked for the number of changes occurring in the participants’ lives. And the result? The students who chose the unusual chips were also more likely to be experiencing lots of change at the moment.

Wood later switched up the order of the questionnaire and consumer choice task in a follow-up experiment, and in another she also expanded the choice test to include a wide range of items – and still, the results were the same. When she asked participants to think about either two big life changes or eight, those who thought of more chose the strange chips more often.

It seems that when we are confronted with one disruption to our daily routine, we become more open to other change. Or, to put it differently, when things break, we enter the right mind-frame for breaking our old habits as well. According to Wood’s rationale, this is because once something pivotal in our routine gets switched around, we’re no longer so attached to all the other habits that formed our daily script.

When it comes to our recessionary times, then, it appears that now is a good time for us to embrace all kinds of change. A tighter budget or shorter hours at work might be that catalyst you need to reevaluate your daily shot of Starbucks espresso or your aversion toward exercise. To paraphrase President Obama, (and for somewhat different reasons) now’s the time to believe in change.