Behavioural Economics Book review Recommended Read

Book Review | The Upside of Irrationality

Book review of Dan Ariely's 'The Upside of Irrationality'.

That humans behave irrationally at times might sound platitudinous to a lot of people but for a minuscule fringe of behavioral researchers – of which Dan Ariely is an integral part – it’s a compelling reason to investigate into the lunacies underlying our behavior.

Dan Ariely like most researchers of his ilk believes in the cognitive limitations of the human mind (For more on Cognitive handicaps, read Herbert Simon’s concept of ‘bounded rationality‘). His book ‘The Upside of Irrationality’ unravels several baffling intricacies of human behavior. One marked difference between this book and its predecessor is that it also focuses on the upsides of our biases in addition to exposing the downsides.

Contrary to popular perception, ‘irrational’ shouldn’t always conjure negative connotations. Our irrationalities could lead to positive consequences, too. For example, your texting your wife or girlfriend while cruising down the highway is negatively irrational. Since in the worst case scenario, your actions could lead to fatalities. Whereas donating to an old-age home when your own job is on thin ice is positively irrational.

It’s such logic-defying acts of irrationality that Ariely has synthesized in ‘The Upside of Irrationality’. Following are some of my key takeaways from the book:

1. High Incentives do not always equate with High Performance.

Ariely reinforces the findings of Yerkes-Dodson law through his own field experiments. He concludes that there is no ideal way to link compensation with performance. On the contrary, ridiculously high incentives could be severely damaging and might derail the performance of those engaged in jobs involving cognitive skills.

For jobs requiring physical/mechanical skills, the relationship between incentives and output is more linear than inverse-U shaped. Ariely explains that high payment could motivate you to clock more man-hours than usual but in all likelihood, it won’t improve your creativity.

Smaller and more frequent bonuses are a good way to counter the ill-effects of high compensation – Dan Ariely

2. Labor begets Love, but...

Ever wondered why, despite your conviction, your captious boss fails to see any merit in your new product PPT? Why, despite you being fully convinced of your business idea, no investor sees value in it?

Ariely explains that this could be due to our tendency to feel obsessed with our own creations so much so that our affection for them blinds us to the reality. Oddly, when our self-overvalued creations don’t yield the expected results, our fondness for them also wanes. Thus, labor begets love, but only when it bears fruit. The flip side of this theory is Not-Invented-Here (NIH) syndrome: a willful obliviousness towards the work of others.

3. Happiness Quotient has a mean

In a world consumed with hedonistic delights and Happiness Quotient has a meaninstant gratifications, enduring pleasure is a fleeting proposition. The new iPhone that you bought last Christmas might have become an archaic item by now and while you are set to buy the new iPhone, the old one could already be attracting bids on eBay.

Good news amid this churning is that we cannot be indefinitely sad either. Sooner or later, in whichever scenario, things always come back to normal. And, the force underlying this ‘reversion to the mean‘ phenomenon is adaptation – our inherent ability to come to grips with the unanticipated ways of life.

We should possibly slow down the periods of pleasure and speed up the moments of agony since interruptions during both only amplify the experience – Dan Ariely

4. Identifiable Victim Effect

Joseph Stalin’s alleged remark to then US Ambassador Averill Untitled designHarriman,“One death is a tragedy, but a million deaths is a statistic”, is at the centre of the most intriguing chapter of this book.

It’s a rather twisted fact that humans are more inclined to help individuals than masses of people.

In 2006, a six-year-old kid accidentally fell into an unattended borewell in India and became part of huge media hype (Actually, Prince wasn’t the first borewell victim but his surely was the first LIVE civil rescue mission on Indian television). Such was the audience fixation that people skipped offices to not miss out on the developments and to become a witness to what was an agonizingly unfolding event.

Prince was finally rescued and instantly became a mini-celebrity. Only two months prior to this incident, 21 Indian boatmen had perished off the coast of Bahrain. Despite a large number of dead citizens and political ramifications of the incident, the news barely became a discussion item on TV, let alone reach the water-cooler.

Ariely cites three psychological factors behind this strangely lopsided human behavior: a) Proximity to the victim. No one knew who that kid was but Live coverage of his trauma made us relate to him on an emotional level. However, we never came to know who those 21 boatmen were, b) Vividness. Needless to say, Live images of a child stuck at the bottom of a 60 ft deep well, screaming for her mother could move anyone and c) Our belief in our ability to help a victim. Most viewers believed they could help Prince financially. But no one thought of helping the families of boatmen because the incident happened far away and involved many people.

5. Flipside of Emotions

Emotions often influence our decisions is an acknowledged fact. The news is that they also have the power to affect our long-term decisions.

Ariely cautions that the outcomes of our emotion-led reactions often set the template for our future decisions.

Your intemperate outburst at your driver because he failed to see the ‘no parking’ sign and was ticketed could go into your behavioral repertoire and set the precedent for future.

Restrain yourself from making decisions when you are either too happy, too angry or under duress. Your reaction in those moments could set a behavioral pattern for future – Dan Ariely

My Verdict

Required reading. A worthy successor to ‘Predictably Irrational’. ‘The Upside of Irrationality’ is engaging, insightful and entertaining.

Dan Ariely at the helm is an adroit enabler of otherwise hidden facts of human personality. He’s brilliantly persuasive, logically counter-intuitive and to top it all, he backs up his theories with field research. All in all, a splendid book with a host of upsides and virtually, zero downsides.

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