Dan Ariely Famous Quotes
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One percent of people will always be honest and never steal," the locksmith said. "Another one percent will always be dishonest and always try to pick your lock and steal your television. And the rest will be honest as long as the conditions are right - but if they are tempted enough, they'll be dishonest too. Locks won't protect you from the thieves, who can get in your house if they really want to. They will only protect you from the mostly honest people who might be tempted to try your door if it had no lock".
When people think about a placebo such as the royal touch, they usually dismiss it as "just psychology." But, there is nothing "just" about the power of a placebo, and in reality it represents the amazing way our mind controls our body.
We are pawns in a game whose forces we largely fail to comprehend.
We all want explanations for why we behave as we do and for the ways the world around us functions. Even when our feeble explanations have little to do with reality. We're storytelling creatures by nature, and we tell ourselves story after story until we come up with an explanation that we like and that sounds reasonable enough to believe. And when the story portrays us in a more glowing and positive light, so much the better.
the pleasure that I get day in and day out comes from working jointly with amazing researchers/friends -
According to neuroscience research from 2012, it is intrinsically rewarding to talk about oneself. This is perhaps why Facebook, Twitter and blogging platforms like Tumblr have been such successful products.
Dear Dan, Why is the divorce rate so high?
D.A.: It is hard to imagine we can be happy with any decision we make even one year down the road, much less when we look back at our decisions five, ten, twenty, or even fifty years later. Frankly, I am amazed by how low the divorce rate is.
It is very difficult to make really big,
important, life-changing decisions because we are all susceptible
to a formidable array of decision biases. There are more of them
than we realize, and they come to visit us more often than we
like to admit.
Man is a pliant animal, a being who gets accustomed to anything. - FYODOR DOSTOYEVSKY
It is true that from a behavioral economics perspective we are fallible, easily confused, not that smart, and often irrational. We are more like Homer Simpson than Superman. So from this perspective it is rather depressing. But at the same time there is also a silver lining. There are free lunches!
As Oscar Wilde once wrote, "Morality, like art, means drawing a line somewhere." The question is: where is the line?
Money actually becomes even more difficult than other things because it's very hard to imagine what the benefits are to saving. So, imagine that you see a new bicycle, a new pair of shoes, or something today. You know exactly what you are giving up if you are not buying it, what are you gaining in the future if you are not getting it. So, you are giving up the bicycle today, what is it in the future? What will happen if you send another $1,000 to your retirement fund? What difference will it make? It is very, very hard to figure out.
Vacations are not just about the two weeks you are away from work; they're also about the time you spend anticipating and imagining your trip, as well as the time after the trip when you get to replay special moments from your vacation in your mind.
Honesty is a complex and tricky thing, and we don't want to be honest all the time.
Money is all about opportunity cost. Every time you spend on something, that's something you can't spend on something else.
I don't want to say that the poor are inherently cognitively diminished, but at the end of the day of making difficult, tough decisions, it's very hard to have the energy to think about things with the right mindset.
You may think that taking a break during an irritating or boring experience will be good for you, but a break actually decreases your ability to adapt, making the experience seem worse when you have to return to it. When cleaning your house or doing your taxes, the trick is to stick with it until you are done.
What kind of people would be able to rationalize better than other people? Better storytellers, right? Creative people, right? Because if you're creative, you find more ways to cheat and still yourself a story about why this is okay.
But, as the results presented in this book (and others) show, we are all far less rational in our decision making than standard economic theory assumes. Our irrational behaviors are neither random nor senseless-they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains. So wouldn't it make sense to modify standard economics and move away from naive psychology, which often fails the tests of reason, introspection, and-most important-empirical scrutiny?
Wouldn't economics make a lot more sense if it were based on how people actually behave, instead of how they should behave? As I said in the Introduction, that simple idea is the basis of behavioral economics, an emerging field focused on the (quite intrusive) idea that people do not always behave rationally and that they often make mistakes in their decisions.
The more cashless our society becomes, the more our moral compass slips.
Take a brilliant, creative social scientist, without any respect for conventional wisdom and you get Ellen Langer. She is a fantastic storyteller, and Counterclockwise is a fascinating story about the unexpected ways in which our minds and bodies are connected.
A few years ago, Dan and a research assistant went to a Toyota dealership and asked people what they would give up if they purchased a new car. None of the shoppers had spent any significant time considering that the thousands of dollars they were about to spend on a car could be spent on other things. ... Most people answered that if they bought a Toyota, then they would not be able to buy a Honda, or some other simple substitution. Few people answered that they wouldn't be able to go to Spain that summer or Hawaii the year after, or that they wouldn't go out to a nice restaurant twice a month for the next few years, or that they would be paying their college loans for five more years.
One of my colleagues in Duke, Ralph Keeney, noted that America's top killer isn't cancer or heart disease, nor is it smoking or obesity. It's our inability to make smart choices and overcome our own self-destructive behaviours. Ralph estimates that about half of us will make a lifestyle decision that will ultimately lead us to an early grave. And as if this were not bad enough, it seems that the rate at which we make these deadly decisions is increasing at an alarming pace.
I suspect that over the next few decades, real improvements in life expectancy and quality are less likely to be driven by medical technology than by improved decision making. Since focusing on long-term benefits is not our natural tendency, we need to more carefully examine the cases in which we repeatedly fail, and try to come up with some remedies for these situations. For an overweight movie loved, the key might be to enjoy watching a film while walking on the treadmill. The trick is to find the right behavioural antidote for each problem. By pairing something that we love with something that we dislike but that is good for us, we might be able to harness desire with outcome - and thus overcome some of the problems with self-control we face every day.
Zero has had a long history. The Babylonians invented the concept of zero; the ancient Greeks debated it in lofty terms (how could something be nothing?); the ancient Indian scholar Pingala paired Zero with the numeral 1 to get double digits; and both the Mayans and the Romans made Zero a part of their numeral systems. But Zero finally found its place around AD 498, when the Indian astronomer Aryabhatta sat up in bed one morning and exclaimed, "Sthanam sthanam dasa gunam" - which translates, roughly as, "place to place in ten times in value". With that, the idea of decimal based place value notion was born. Now Zero was on a roll: It spread to the Arab world, where it flourished; crossed the Iberian Peninsula to Europe (thanks to the Spanish Moors); got some tweaking from the Italians; and eventually sailed the Atlantic to the New World, where zero ultimately found plenty of employment (together with the digit 1) in a place called Silicon Valley.
[T]he distance Boston drivers generally maintain from the car in front of them is visible only with a good microscope.
In terms of the actual curriculum for management education, my own view is very simple-minded: The world is incredibly complex, it changes all the time, and we should not even hope that we could create a general model that accurately describes the world in all its possible states.
In running back and forth among the things that might be important, we forget to spend enough time on what really is important.
The question, then, is whether the only force that keeps us from carrying out misdeeds is the fear of being seen by others ...
Believing you are a bad person leads to a slippery slope.
Disasters are usually a good time to re-examine what we've done so far, what mistakes we've made, and what improvements should come next.
The companies that provide debt, what do you think their goal is? Is their goal for you to fully understand the cost of your debt? No. So they're basically creating these approaches to make you feel like it is incredibly cheap or just to think about the cost per day rather the cost per year or cost for a lifetime. So debt is very simple mistake.
Just as creativity enables us to envision novel solutions to tough problems, it can also enable us to develop original paths around rules, all the while allowing us to reinterpret information in a self-serving way. Putting our creative minds to work can help us come up with a narrative that lets us have our cake and eat it too, and create stories in which we're always the hero, never the villain. If the key to our dishonesty is our ability to think of ourselves as honest and moral people while at the same time benefitting from cheating, creativity can help us tell better stories - stories that allow us to be even more dishonest but still think of ourselves as wonderfully honest people.
We are all very good at rationalizing our actions so that they are in line with our selfish motives.
Money is a great way to get happiness. Right? Lots of wonderful things you can do with money. The question is, are we really optimizing on that? So, if you think about getting lattes and getting cable. Which one of those is actually giving you a greater happiness, and if you have to cut on one of those, which one would you cut? So, I think thinking in terms of concrete terms would help us a great deal.
The idea that you will make the right decision every time is very unlikely.
The most difficult thing is to recognize that sometimes we too are blinded by our own incentives. Because we don't see how our conflicts of interest work on us.
One thing is sure: if we don't teach our young people how to deal with sex when they are half out of their minds, we are not only fooling them; we're fooling ourselves as well. Whatever lessons we teach them, we need to help them understand that they will react differently when they are calm and cool from when their hormones are raging at fever pitch (and of course the same also applies to our own behavior).
what consumers are willing to pay can easily be manipulated, and this means that consumers don't in fact have a good handle on their own preferences
[..] we human beings are ready and willing to steal something that does not explicitly reference monetary value - that is, something that lacks the face of a dead president.
The people that lend you money basically give you an answer based on the risk that they are willing to take. But just because a bank is willing to take a particular risk doesn't mean that that is the right amount for me to spend.
Not all debt is bad. From time to time we should get into debt when there's a good reason for that.
The Hedonic Treadmill By failing to anticipate the extent of our hedonic adaptation, as consumers we routinely escalate our purchases, hoping that new stuff will make us happier.
Recognizing our shortcomings is a crucial first step on the path to making better decisions, creating better societies, and fixing our institutions.
One fall day in Boston, a tall mechanical engineering student named Joe entered the student union at Harvard University. He was all ambition and acne
If companies really want their workers to produce, they should try to impart a sense of meaning - not just through vision statements but by allowing employees to feel a sense of completion and ensuring that a job well done is acknowledged. At the end of the day, such factors can exert a huge influence on satisfaction and productivity.
There's something about [cyclically] doing something over and over and over that seems to be particularly demotivating.
We're actually trying to develop an iPhone app, now that the Droid is out, we'll do it for that as well, if we ever learn how to program on this thing. But the idea is that to make money concrete. So, you can do this app, and it's not out there, but you can do the app. And you say, "I like vacation in the Bahamas, shoes, lattes, and books." And now, when you are tempted to buy something, that thing translates in terms of the things you are interested in.
In a blind taste, balsamic vinegar actually makes it taste better).
Although a feeling of awe at the capability of humans is clearly justified, there is a large difference between a deep sense of admiration and the assumption that our reasoning abilities are perfect.
The difference between two cents and one cent is small. But the difference between one cent and zero is huge!
We don't really want a huge house, but we want the house to be slightly bigger than our neighbors, and a car that is bigger than our neighbor's, and they're going on vacation that's slightly more expensive, and this escalation happens that things got out of hand.
Human beings are inherently social and trusting animals.
The basic idea behind self-signaling is that despite what we tend to think, we don't have a very clear notion of who we are. We generally believe that we have a privileged view of our own preferences and character, but in reality we don't know ourselves that well (and definitely not as well as we think we do). Instead, we observe ourselves in the same way we observe and judge the actions of other people - inferring who we are and what we like from our actions. For
Most transactions have an upside and a downside, but when something is FREE! we forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is. Why? I think it's because humans are intrinsically afraid of loss.
Use a clock in the upper righthand corner to indicate how much time the user has saved because of your product.
Money is a wonderful invention. It lets us save, it lets us specialize, right? I couldn't be a professor if there wasn't any money. Every day I would have to raise chicken and bread and broccoli and go ahead and spend all my time trading. So, money is a wonderful mechanism.
WHAT IS IT about FREE! that's so enticing? Why do we have an irrational urge to jump for a FREE! item, even when it's not what we really want?
Scaling down individually is very hard. Imagine that if you go to a place where everybody is dressed nicely, and you are the only one who doesn't dress nicely. Everybody goes on vacations to a great place and you go to the Jersey shore. It's very hard to do these things without an organized mechanism, but it looks to me like there might be some organized mechanisms.
So we live in two worlds: one characterized by social exchanges and the other characterized by market exchanges. And we apply different norms to these two kinds of relationships. Moreover, introducing market norms into social exchanges, as we have seen, violates the social norms into social exchanges, as we have seen, violates the social norms and hurts the relationships. Once this type of mistake has been committed, recovering a social relationship is difficult. Once you've offered to pay for the delightful Thanksgiving dinner, your mother-in-law will remember the incident for years to come. And if you've ever offered a potential romantic partner the chance to cut to the chase, split the cost of the courting process, and simply go to bed, the odds are that you will have wrecked the romance forever.
For all of us, it's very hard to think about money, and because of that, we need help. In the same way that for all of us, it is hard to eat well, and we need some help. The poor have a particular challenge, which is that their life is actually much more complex - and they're much more complex cognitively.
In the U.S., I think there is an ideology of not telling kids what to do. Nobody to tell you who to marry, not tell you what job to pick. You're your own person. You have the freedom to choose, including the freedom to fail in magnificent ways. And I think that's the big difference. In other countries there is basically a social norm about saving that is passed from generation to generation. In the U.S. there isn't.
The effort that we put into something does not just change the object. It changes us and the way we evaluate that object. Greater labor leads to greater love. Our overvaluation of the things we make runs so deep that we assume that others share our biased perspective. When we cannot complete something into which we have put great effort, we don't feel so attached to it.
You're being paid a lot of money to maintain a distorted view of reality, but you don't notice the tricks that your big bonus plays on your perception of reality.
If we do nothing while we are feeling an emotion, there is no short- or long-term harm that can come to us. However, if we react to the emotion by making a DECISION, we may not only regret the immediate outcome, but we may also create a long-lasting pattern of DECISIONS that will continue to misguide us for a long time.
We are all far less rational in our decision-making than standard economic theory assumes. Our irrational behaviors are neither random nor senseless: they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.
When we save, everybody in the household is just suffering. By having the coin in a visible way, when you scratch, you can say the person that is in charge of the making money for the family is doing the right thing.
Wardrobing is buying an item of clothing, wearing it for a while, and then returning it in such a state that the store has to accept it but can no longer resell it. By engaging in wardrobing, consumers are not directly stealing money from the company; instead, it is a dance of buying and returning, with many unclear transactions involved. But there is at least one clear consequence - the clothing industry estimates that its annual losses from wardrobing are about $16 billion (about the same amount as the estimated annual loss from home burglaries and automobile theft combined).
There are basically two ways to help people get sufficient money to fund their entire retirement. The first is to get people to save more money, and to start saving at a younger age. The second approach is to get people to die at a younger age. The easier approach, by far, is getting people to die younger. And how might we achieve this? By allowing citizens to smoke. By subsidizing sugary and fatty foods. By limiting access to preventive health care etc. When we think about retirement savings in these terms, it seems that we're already doing the most we can on this front.
In a world where everyone is behaving honestly, any dishonesty constitutes a big infraction. But, in a world where many people are behaving dishonestly, and the news is filled with stories of their infractions, even big infractions can feel small to the perpetrator.
as in the first experiment, the individuals who were more creative also had higher levels of dishonesty. Intelligence, however, wasn't correlated to any degree with dishonesty.
honesty and dishonesty are based on a mixture of two very different types of motivation. On the one hand, we want to benefit from cheating (this is the rational economic motivation), while on the other, we want to be able to view ourselves as wonderful human beings (this is the psychological motivation).
Most of the time, according to the results of the study, Roy is smart, decent, reasonable, kind, and trustworthy. His frontal lobes are fully functioning, and he is in control of his behavior. But when he's in a state of sexual arousal and the reptilian brain takes over, he becomes unrecognizable to himself.
If we can learn to embrace the Homer Simpson within us, with all our flaws and inabilities, and take these into account when we design our schools, health plans, stock markets, and everything else in our environment, I am certain that we can create a much better world. This is the real promise of behavioral economics.
Even the most brilliant and rational person, in the heat of passion, seems to be absolutely and completely divorced from the person he thought he was.
The danger of expecting nothing is that, in the end, it might be all we'll get.
In essence, individuals more concerned with portraying their own uniqueness were more likely to select an alcoholic beverage not yet ordered at their table in an effort to demonstrate that they were in fact one of a kind. What these results show is that people are sometimes willing to sacrifice the pleasure they get from a particular consumption experience in order to project a certain image to others. When people order food and drinks, they seem to have two goals: to order what they will enjoy most and to portray themselves in a positive light in the eyes of their friends.
Ownership is not limited to material things. It can also apply to points of view. Once we take ownership of an idea - whether it's about politics or sports - what do we do? We love it perhaps more than we should. We prize it more than it is worth. And most frequently, we have trouble letting go of it because we can't stand the idea of its loss. What are we left with then? An ideology - rigid and unyielding.
We should also pay particular attention to the first decision we make in what is going to be a long stream of decisions (about clothing, food, etc.). When we face such a decision, it might seem to us that this is just one decision without large consequences; but in fact the power of the first decision can have such a long-lasting effect that it will percolate into our future decisions for years to come. Given this effect, the first decision is crucial, and we should give it an appropriate amount of attention.
When parents have college savings accounts for their kids, their kids show higher social and cognitive performance.
If I gave you now, $10 as a gift, how happy would you be? Would you be happy, is the marginal $10, the best use of $10 you can use? Of course not. If I have you a CD, you know exactly what you are getting and you will have a value for it. So, money has lots of problems with it.
Sadly, most of us often prefer immediately gratifying short-term experiences over our long-term objectives.* We routinely behave as if sometime in the future, we will have more time, more money, and feel less tired or stressed.
THE FINAL LESSON is this: both in canoes and in life, it behooves us to give ourselves time to cool off before we DECIDE to take any action. If we don't, our DECISION might just crash into the future. And finally, should you ever think about scheduling a makeup session on top of mine, remember how I DECIDED to respond last time. I am not saying I would do it again, but when emotions take over, who knows?
When it comes to the mental world, when we design things like health care and retirement and stock markets, we somehow forget the idea that we are limited. I think that if we understood our cognitive limitations in the same way that we understand our physical limitations ... we could design a better world.
Some special conpanies see trust as the pulic good.
How can we unshackle ourselves from this irrational impulse to chase worthless options? In 1941 the philosopher Erich Fromm wrote a book called Escape from Freedom. In a modern democracy, he said, people are beset not by a lack of opportunity, but by a dizzying abundance of it. In our modern society this is emphatically so. We are continually reminded that we can do anything and be anything we want to be. The problem is in living up to this dream. We must develop ourselves in every way possible; must taste every aspect of life; must make sure that of the 1,000 things to see before dying, we have not stopped at number 999. But then comes a problem-are we spreading ourselves too thin? The temptation Fromm was describing, I believe, is what we saw as we watched our participants racing from one door to another.
Often as I creep along in a traffic jam, someone inevitably tries to enter my lane from the side. Now here is the issue: If I let the car in, I feel good about it. But when I see others in front of me let someone in, I feel cheated, because I've been waiting longer than the car entering the lane, and I am upset with the driver who acted kindly at my expense.
It was shocking to realize how many low-income Americans don't have savings accounts.
Marketing is all about providing information that will heighten someone's anticipated and real pleasure.
It is helpful to think of people as having two fundamental motivations: the desire to see ourselves as honest, good people, and the desire to gain the benefits that come from cheating - on our taxes or on the football field.
Do you know why we still have a headache after taking a one-cent aspirin, but why that same headache vanishes when the aspirin costs 50 cents? Do
Every year, employees' theft and fraud at the workplace are estimated at about $600 billion.
If we all make systematic mistakes in our decisions, then why not develop new strategies, tools, and methods to help us make better decisions and improve our overall well-being? That's exactly the meaning of free lunches- the idea that there are tools, methods, and policies that can help all of us make better decisions and as a consequence achieve what we desire-pg. 241
Brands communicate in two directions: they help us tell other people something about ourselves, but they also help us form ideas about who we are.
When we think about labor, we usually think about motivation and payment as the same thing, but the reality is that we should probably add all kinds of things to it - meaning, creation, challenges, ownership, identity, pride.
Money is very difficult to think about. So, we think about money as the opportunity cost of money. So, we at some point went to a Toyota dealership and we asked people, what will you not be able to do in the future if you bought this Toyota? Now, you would expect people to have an answer. But people were kind of shocked by the question. They never thought about it before. So, the most we got was people said, "Well, if I can't buy this Toyota, if I buy this Toyota, I can't buy a Honda." What is this thing? What is this value of price? Very hard to think about it.
The basic idea of arbitrary coherence is this: although initial prices (such as the price of Assael's pearls) are "arbitrary," once those prices are established in our minds they will shape not only present prices but also future prices (this makes them "coherent").
I once heard an air force commander tell his pilots that every second, they are making a decision to change course or to stay their course, and that they should always think about their actions as active choices. The problem is that very few of us think about our decisions this way. We think that moving, getting married, changing jobs, etc., as decisions, but we don't think about staying in the same place, staying single, keeping the same job etc., as decisions. Or at least we don't think of them as decisions to the same degree.
We should teach the students, as well as executives, how to conduct experiments, how to examine data, and how to use these tools to make better decisions.
We may not always know exactly why we do what we do, choose what we choose, or feel what we feel. But the obscurity of our real motivations doesn't stop us from creating perfectly logical-sounding reasons for our actions, decisions, and feelings.
Most blogs have very low readership - perhaps only the blogger's mother or best friend reads them - but even writing for one person, compared to writing for nobody, seems to be enough to compel millions of people to blog.