DAN ARIELY

Updates

November 30, 2009 BY danariely

Some quick reflections on the ways money is useful and difficult to deal with — and some ways we can fight back.

November 15, 2009 BY danariely

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

November 5, 2009 BY danariely

Sad story out in the New York Times describing growing concerns about texting while driving. In Britain, a woman was sentenced to a 21-month sentence after it was found that she had been texting while driving, which resulted in the death of a 24-year old design student. In many ways, texting while driving illustrates a case in which tiny, individual irrational decisions can accumulate and cause widespread suffering, not only for the individuals who are texting, but their unsuspecting victims. Unlike cases of drunk driving, in which the driver’s decision making abilities are impaired, drivers who text are at their full wits to wait until they’ve pulled over to check their texts, and yet in the process they routinely underestimate the risk they impose to themselves and others.

Aside from being another example of a common irrational behavior (and who among us did not text or checked their email while driving), this leads me to wonder, what is the best way to solve this problem? While presently the issue is being hotly debated here in the US on a state-by-state basis, England has taken a tough national stance on texting while driving, which includes hefty minimum point penalties on the offending party’s license, and fines upward of 60P. If you watch the video in the linked article, you’ll also find a very graphic video depicting the carnage of a texting accident–shocking and informative public service announcements are yet another option. Alternatively, we can hope that cell phone companies are continuing to explore voice activation technologies that can read text messages aloud and also transcribe them from voice — thereby by-passing the problem altogether.

We have lots of irrational problems to deal with, and the realization that tiny, seemingly innocent little ones, like 10-second text messages, can cause so much damage should make us look around for more such problems.  perhaps ones that are not as obvious (think health care), but are potentially just as damaging.

Irrationally yours

Dan

November 1, 2009 BY danariely

Money is an integral part of modern life. We constantly make decisions about whether we’re willing to pay for different products and, if so, how much we are willing to pay. In fact, we make decisions about money so often that we consider money to be a natural part of our environment.

However, money is a relatively recent invention, and despite its incredible economic usefulness it does come with its own set of problems. In particular, it turns out that decisions about money are often non-intuitive and, in fact, quite difficult. Consider the following situation as an example: You are thirsty, tired, and annoyed and just want a cup of coffee. You see two coffee shops across the street from each another. One is a specialty coffee shop that sells handcrafted, designer coffee and the other is Dunkin’ Donuts which sells standard, decent coffee. The price difference between the two options is $1.75 for your cup-a-joe. Now, how do you decide if the benefit of the handcrafted coffee drink is worth the additional $1.75?

What you should do (if you wanted to be rational about it) is consider all of the things that you could buy with that $1.75, now as well as in the future, and decide to buy the expensive coffee only if the difference between the two coffees is more valuable than all of those other possibilities. But of course this computation would take hours, it is incredibly complex, and who even knows all the possible options to consider?

So what do we do when we need to make decisions but making them “correctly” is too time consuming and difficult? We adopt simplifying rules, which academics call heuristics, and these heuristics provide us with actionable outcomes that might not be ideal but they help us to reach a decision. In the case of coffee and other, similar decisions, one of the heuristics we often use is to look at our own past behaviors and if we find evidence of relevant past decisions, we simply repeat those. In the case of coffee, for example, you might search your memory for other instances in which you visited regular fancy coffee shops. Assess which one of those two behaviors is more frequent and then you tell yourself “If I’ve done Action X more than Action Y in the past, this must mean that I prefer Action X to action Y” and as a consequence, you make your decision.

The strategy of looking at our past behaviors and repeating them, might seem at first glance to be very reasonable. However, it also suffers from at least two potential problems. First, it can make a few mediocre decisions into a long-term habit. For example, after we have gone to a fancy coffee shop three times in a row, we might reason that this is a great decision for us and continue with the same strategy for a long time. The second downfall is that when the conditions in the market change, we are unlikely to revise our strategy. For example, if the price difference between the fancy & standard coffee shop used to be 25¢ and over the years has increased to $1.75, we might stay with our original decision even though the conditions that supported it are no longer applicable.

In light of our current financial situation, many people these days are looking for places to cut financial spending. Once we understand how we use habits as a way to simplify our financial decision-making, we can also look more effectively into ways to save money. If we assume that our past decisions have always been sensible and reasonable then we should not scrutinize our long-term habits. After all, if we’ve done something for five years, it must be a great decision. But if we understand that long-term, repeated behaviors might reflect our habitual decision-making in the face of complex financial decisions more than they reflect what is truly best for us, we might first examine our old habits and carefully consider whether they indeed make sense or not. We can examine our subscription to the ESPN Sports Package, our annual subscription to the opera, our yearly Disneyland vacation, or our monthly visit to the hairdresser. By examining these habits, and quitting them when it makes sense to do so, we might actually discover ways in which we could reduce our spending on a long-term basis.

Yes, money is complex, and it is incredibly difficult for us to carefully examine every purchasing decision we make. But the advantage of examining our habits is that it might lead us to create good ones that will benefit us for a long time.

October 30, 2009 BY danariely

I recently started working on my next book.

It is generally going to be more stories about my research and the plan is to have 3 parts

Part 1: Personal life, happiness, adaptation, dating, and online dating
Part 2: business life: motivation at work, the role of bonuses, mistrust, and revenge
Part 3: cheating: the effects of observing other people cheat, group based cheating, the effect of one dishonest act on others etc.

The current title is:

Living irrationally: the way we work, date and cheat.

If you have any other suggestions for a title, please email me at dan at predictablyirrational dot com

Many thanks

Dan

October 26, 2009 BY danariely

Luisa Monk, a high school student in the UK just created a pop-up version of my book.

have a look:

October 20, 2009 BY danariely

Dear Readers –

Over the last few months I have posted a few short fictional stories that some of the students in my class wrote (see this link).

Some were more popular and some were less, but many of you expressed interest in sharing your own fictional short stories or experiences of irrational behaviors

So –If you are interested in submitting a short story, I will post the best of these here, and if you are interested in sharing a kernel of an idea with me, I will take the best of these and try to make a short (fictional) story from it

Please send your stories and / or experiences to living.irrationally at gmail.com.  I look forward to your emails and learning more about the role of irrationality in our lives!

October 15, 2009 BY danariely

We have been doing some research on the effects of wearing fake…

Here is a short video on this

October 10, 2009 BY danariely

A Fictional historic view of the future: a look at policy from 2034 back to the last 25 years

This is what I think I would like t0 write in 25 years…

It is hard to remember how politicians used to go about legislating policies. Let’s take a quick trip down memory lane and examine public policy, as it was twenty-five years ago, before the experimental policy era—that is, an approach that values and nurtures social experimentation as a way to design policies – we live in now.

As you may recall, in 2008-2009 a global financial crisis was brought on by lack of transparency, conflicts of interest, terrible bank-lending policies, complex financial instruments, and lack of government regulations. Above all, a religious-like belief that humans and the market are perfectly rational was a major contributor to this historical catastrophe and the five-year economic recession that followed.

In retrospect it sounds ridiculous, but before the 2008 crisis, rational economics– now largely restricted to university courses taught by a few academics–was the only guiding light that politicians used while designing taxation strategies, policies, and institutions.  When the economic tragedy of 2008 hit, it illustrated beyond any doubt that relying on the assumption of perfect rationality is dangerous; and this realization, in turn, ushered in a new era for behavioral economics.

After the initial shock from the crisis, this painful and expensive lesson caused businesses and policy makers to recognize three main lessons: 1) human beings have many irrational tendencies, fallibilities, and quirks; 2) we often have bad intuitions and a limited understanding of our irrational tendencies and; 3) if we want to create effective policies we shouldn’t rely on our intuitions for finding recommendations nor on the assumption that people behave rationally; instead, we should ground our recommendations in how people actually behave.

With these three lessons in mind, the business and policy landscape changed dramatically over the next twenty-five years. As expected, businesses led the charge and questioned their basic assumptions about the relationship between salary and productivity, the value of meetings, and the problems with conflicts of interest. After a few years spent watching in awe as business productivity improved,  government policymakers followed suit by implementing experiments with the Education-Forward Initiative (formerly No Child Left Behind). These experiments showed that basing teachers’ salaries on student performances had minor short-term benefits and caused substantial long-term damage on teacher and student motivation; that creating interest in education was more important than grades; and that shifting the curriculum focus from calculus to statistics and probability had a wonderful impact on students.

Between 2019 and 2025, experimental policy, which became a more established field, examined the simplification of the income tax (with huge social and tax benefits) and studied incentives that encouraged people to get routine medical exams (with tremendous long-term benefits). Currently up for debate are the benefits and disadvantages of socialized health care. In 2009, this might have become an ideological debate about right and wrong. But given our realization of how little we truly understand ourselves and the systems we design, combined with an appreciation for the benefits of detailed experimental investigations and empiricism, we are trying to solve this important issue by setting up multiple different experimental programs.  In some of these the levels of co-pay are low, in some medium and in some high.  In some of these programs the focus is in specialists, while in others the focus on the family doctor, and some focus on treating patients while other focus on preventative care and education. Rhode Island, being a small state, currently runs many of these experiments and in the next few years we will have a much better idea of the costs and benefits, both short-term and long-term, associated with all of these approaches.  Based on these we will pick the best policy to adapt. At the end, thanks to experimental policy, the decision will be based on solid empirical testing and data, not on a misconception of rationality.

In light of these improvements, maybe the financial meltdown of 2008-2009 was really a blessing in disguise; It got us to think more carefully across the assumptions we were making across the board and helped us get rid of the assumption of perfect rationality and replace it with empirical data.

October 5, 2009 BY danariely

Many awkward situations inevitably arise from the college roommate situation, most of which do not have a clear-cut solution. For instance, should you try to get your roommate to take out the garbage for a change? Should you tell your roommate to stop playing M.I.A.’s “Paper Planes” from his or her laptop 9 times a day? Should you tell your roommate it’s not cool to have to get kicked out of the room for 15 minutes every time your roommate brings someone back to have sex with? This last quandary brings up the notorious practice of “sexiling,” in which college students “exile” roommates from their room for a period of time so that they could have sex. This has become a relatively common practice on campuses because one alternative would simply be to have sex while your roommate is in the room, which brings up its own obvious issues. The other alternative, of course, is not to have sex at all. But, c’mon, is that really an option to many horny college students?

But Tufts University has now officially banned “sexiling,” stating that “any sexual activity in the room should not interfere with a roommate’s privacy, study habits, or sleep.” Besides the obvious question of whether or not this is even enforceable (“Excuse me…campus police? My roommate is currently having sex while I’m here trying to sleep!”), it raises a number of interesting psychological issues that suggest not only its inevitable failure as a policy, but also its indirect effect on the roommate dynamic.

First of all, even if students simply giggle at this new policy and passively accept it by not directly fighting against it right now, this does not mean that the practice will stop at all. Dan’s “laptop” study showed that people do not realize what desires they will succumb to when they are in a “hot” state (eg, horny) while they are in a “colder” state. So when it comes to sex at Tufts (or any college for that matter), students may be currently thinking something along the lines of “OK, I guess this rule makes sense. I wouldn’t want to have sex while my roommate is sitting there studying Orgo anyway.” However, when the moment of passion comes, that same person might not be able to resist the urge to have sex- whether that means kicking the roommate out of the room or having sex while the roommate is studying or trying to sleep. We simply do not know the decisions that we will make in certain states when we are not currently in that state.

My second point is that this new anti-“sexiling” rule could- perhaps ironically- damage the roommate-roommate relationship. Roommates generally have explicit or implicit social contracts with each other, filled with all sorts of social norms. For instance, roommates may understand that if one is “forced” to leave the room so that the other could have sex, the other will inevitably hit him or her back with a favor later on. Basically, these social contracts between roommates help in the cultivation of a relationship between the two and the imposition of rules from the college administration may undermine this relationship. Now, instead of, say, Roommate #1 being grateful that Roommate #2 was nice enough to wait until Roommate #1 went to the gym before having sex, Roommate #1 may think that Roommate #2 just didn’t want to get slapped with a punishment from Tufts.

And finally, it is a shame when institutions set stupid rules, but it is particularly sad when a university does not study a topic, and test it out before trying something like this.