Jeff Monday has a unique talent of taking topics and explaining them in a simple graphical way.  here is his approach of describing relativity and immediate gratification

Thanks Jeff…

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.

Here is the cover of my new book. Look for it June 1, 2010!

Inspired by Valentine’s Day “Mine” is a short story by sportswriter Patrick Dorsey about the steps that lead, or don’t lead, to a new relationship.  Featured in this story are the Behavioral Economic principles of virtual ownership and the self-fulfilling prophesy.

Read the story here….

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I am not a serious athlete, but I do like playing squash from time to time.  What I mostly like about squash is that it is a game of strategy, where each player tries to build an advantage over multiple shots.  First you get your opponent to run to the right, then you get them to run to the front left … and as the game progresses, they (hopefully) get behind the ball, their shots become worse, until at some point it is possible to finish the point!  Of course when you are the one that runs from side to side and trying to get back into control – the game is much less fun.

Anyway, have not played for a while so yesterday when I played I was out of shape.  But what was interesting was that I realized that my thinking ability was also diminished.  Usually I try to plan my moves in advance, and think about where my opponent will move, what I will do next etc – but being out of shape made me think very myopically, and focus just on making the next shot.  This of course was a very bad strategy and to my delight of my opponent I lost badly.

Perhaps the larger point is that being exhausted (and maybe also being under stress, physical exhaustion, sleep deprived, etc) makes people focus on the short-term and ignore the long-term – and this way become more susceptible to making mistakes….

Finally, after a long time I got a new placebo — thanks to my mother.

What a relief…

Predictably Irrational was published two years ago today

Mazal Tov

It has been an amazing two years

Dan

Paul Samuelson, the influential and famous economist died not too long ago.

Here is a short video about one meeting I had with Samuelson

For more on Samuelson, see this Wikipedia