By Dan Ariely, 2006 ★★★★☆ First read: August 2023 ** From the Introduction: “.. many of us hold about human nature the simple and compelling idea that we are caable of making the right choices for ourselves.” but it turns out that: “.. we are not only irrational, but predictably irrational - our irrationality happens the same way, again and again.” “The assumption that we are all rational implies that, in everyday life, we compute the value of all the options we face and then follow the best possible path of action.” We aren’t.And the book explains a few ways in which we aren’t. - We don’t have an absolute internal “value” meter - value is relative, we assess it comparing one thing with another thing - Most ppl don;t know what they want until they see it in context - Given three choices, most ppl will take the middle choice - Most ppl will take the second most expensive option, also called “the decoy” in marketing; the “decoy effect” applies very largely - We are always looking at the things around us -- visual illusions that show us how our mind works - Not only do we compare things, but we choose to compare the things that are easy to compare, that are available James Hong, founder of some company, on why he drives a Toyota Prius. “I don’t want to live the life of a Posche Boxster.” he told the New York Times. “Because when you get a Boxster you wish you had a 911, and you know what people who have a 91 wish? They wish they had a Ferrari.” Conclusion here-  Try to make the circles of comparison in your life smaller, not larger. Pg.27  Goslings, upon breaking out of their eggs, become attached to the first moving object they encounter. And they stick with that decision, once it’s made. This phenomenon is called imprinting When we encounter a product - the first price we see is “the anchor” The anchor - Group A - would you be willing to pay me 10 EUR to recite poems for 10 minutes? - Group B - would you be willing to listen to me for 10m if I pay you 10 EUR Then ask everyone to bid for a 10m recital - those primed to pay, bid to pay, those primed to be paid, bid to be paid. Mark Twain: “Work consists of whatever you are obliged to do, play consists of whatever you are not obliged to do.” What consumers are willing to pay can easily be manipulated (the idea of the market self-correcting, supply vs demand, is wrong) → Demand is not completely separate from supply.  Arbitrary coherence - our first (arbitrary) decisions resonate over a very long sequence of future decisions Ex: although initial prices are “arbitrary”, once they are established in our minds, they will shape not only present prices but also future prices (coherence)  The anchors remain with us long after the initial decision - first impressions matter. Herding → when we are attracted to other ppl - we assume it;s good cause other ppl use it and so increase the herd which attracts further ppl etc. pg.40 Self-herding → when we believe smth is good/bad based on our own previous behaviour Ex: metaphorically, when we become the first person in line at a restaurant, we begin to line up behind yourself in subsequent experiences. You enter again and again and every time you feel more strongly that you are acting on the basis of your preferences. It has become a habit. pg.55 FREE - The difference between 2 cents and 1 cent is 1 cent. The difference bw 1 cent and zero is huge Zero is very bad when comparing Market norms vs Social norms → pg.79, pg. 105, pg.111  - when market norms come into play,  Ppl are willing to work free and they are willing to work for a fair wage, but not for a small payment. - Valid also for learning → pg.93 don’t try to buy a love for learning or you might chase it away Emotions pg.120 - Avoiding temptation is easier than overcoming it - Just being aware that we are prone to making the wrong decisions when gripped by intense emotion may help us → This is what we need to spend years teaching our kids: not to trust themselves when high/drunk/horny/mad/hungry etc. - see also  Schedules of reinforcement pg.159 - When rewards cease, rats under fixed schedules stopped trying almost immediately while rats under variable schedules kept trying for a very long time. - We just keep pressing that lever, over and over again (gambling, email, social media etc) hoping for the reward, not knowing when it will come Ownership: The endowment effect pg.169 , The Ikea effect pg.175 - via Dan Kahneman - “When we own something, we value it more than other ppl (non-owners) do.” (see also Dan Gilbert’s example about the vintage car) - The emotional chasm is formed bw two groups of ppl where one group virtually owns smth 1. We fall in love with what we have 2. We focus on what we could lose, not on what we could gain - loss aversion 3. We assume other ppl see the transaction as we do, we find it difficult to see - Ownership pervades our lives & plays a huge role - even imagined or virtual ownership - Trials and variations of this concept are a huge trap - they induce a sense of virtual ownership which is as strong as the real one and we then find it very hard to cancel it bc we feel it as a loss - → we begin to incorporate our ownership of it into our view of the world and ourselves and quickly rationalise away the additional price - Ownership bias also applies to opinions and ideas - There is no known cure for the ills of ownership but as w/ all else, being aware help - Under the more general umbrella of the “positivity bias” or “the Lake Wobegone Effect” → tendency to be overly optimistic about anything that has to do with ourselves, the stuff we own included A variation on loss aversion - Keeping doors open is a trap - paradox of choice - We can not stand the idea of closing doors on our alternatives - It’s a fool’s game - we give up on profound, valuable things just to keep options open (iratonal excitement about opportunities) - send kids to a myriad activities, miss out on their chidlhoods, “just in case” - Why? Pg 190 experiment - What to do: consciously close doors - Pas op: choosing bw two things that are similarly attractive is the most difficult thing to do Expectations pg.203 - Expectations can influence nearly every aspect of our life - If we believe beforehand that smth will be good, it generally will be, and vice versa - Don’t underestimate the power of presentation, intro, context, ambiance etc - Marketing - provide info that heightens smn’s anticipated and real experience of smth - we see the setting of a posh place, we expect a posh coffee and that the coffee tastes good and it actually tastes good - When you prime someone  - you create expectation  - and a twist on expecting nothing → The danger of expecting nothing is that, in the end, it might be all we’ll get.  - Just holding fiola de algocalmin in mana helped me, cand eram mica → the expectation is what provides pain relief,  - Similarly to what Sapolsky said about the neurotransmitters (was it dopamine?) in reward systems I think - that the pathways get activated when the bell rings / the light turns on - in pavlovian conditioning - Placebo & pain →pg 241  - The perception of value can become real value Uniqueness is important to us - We value uniqueness - see also Dan Gilbert’s example about ordering a different meal at the restaurant just to be different, have a mind of our own - May sacrifice personal utility for reputational utility **