Monday, February 1, 2010

Predictably Irrational

Predictably Irrational
- The Hidden Forces that shape our decisions

“Dad, don’t you think you are drinking too much?” asked the son.
“Come with me” says dad and takes him to his bar.
“Here, you see son” says dad takes out two glasses. In one glass he pours plain water and in another glass some whiskey. “Look carefully son” he says, as he drops two small worms in each one of them.
Poof - worm in the water continues to swim well and the worm inside the whiskey glass dies right away.
“Now, as you can see, I drink just to kill worms and at my age there are lots of worms inside my stomach!”. Son leaves the bar convinced that, if he ever he gets worms in his stomach when he gets old he would drink like his dad and thus drinking whiskey is not a bad idea after all.

No matter how apocryphal this story is, for me, it demonstrates a quirky point. You can devise some clever experiment to make a point or its counter point and convince some one – at least temporarily.
Now, here comes Prof Dan Ariely, an ultra smart Israeli M.I.T professor who does series of experiments with equally smart professors from similar campuses at Harvard, INSEAD, ULCA and all.
These experiments on human behavior are not like Michelson-Morley experiment, where you can eventually converge. For a moment, I visualized myself as President of MIT or dean or whatever so that I can pose this question: “Dan, I am awestruck! But to disprove all these points what are all the experiments you would come up with. Figuring that out is your assignment for this semester” (I will let you know when Dan comes back).

Dan starts with a personal incident at the age of 18, when he met with a fateful fire accident incurring about 70% burns. So, for the next few years, he was on a series of medical procedures and dressed as he says “as a crooked version of spider man”. During that period he had the luxury to observe lots of stuff pertinent to human behavior that perhaps shaped his career. Later, he would go on to study at Telaviv University and then move to MIT to conduct more and more experiments. In the introduction itself he sets the context well to make a neat claim: “We are not only irrational – but predictably so”. In the 13 chapters that would follow he does corroborate this idea well with experimental results. The style of writing is very lucid and appealing. Let us take 4 of 13 for the commentary purposes. Chapters are nearly independent and hence can be read in any order also.

The Chapter-9, “Keeping doors open” is indeed an eye-opener. He gives the historical example of 210B.C Chinese commander, who burnt all the boats and broke all the pots to cook which left no option but to win or die – of course, they did win 9 consecutive battles. Point is that, when options are limited, focus is so high, objective is achieved. However, I am sure the same Dan would is well aware of the siege of Massada, where, for lack of options to escape in the middle of fortified desert, all the rebellious Jews ended up committing mass suicide after killing their own families.
Be it dating or elective papers or choice of vehicle, as per Dan, we would prefer the options open as all long as possible and he says, “It is a fool’s game which we are remarkably adept in playing”. Even Dan had problems in deciding between MIT and Stanford.

The Chapters-11 & 12, “The context of Character Part 1 & 2” are quite interesting and troubling too. He conducts a series of experiments in MIT and concludes that “humans are honest to the extent it suits them”. In an experiment he had four batches tested with a question paper. First batch fully is controlled. Second batch, only self checks and claim money. Third batch self check + shredding & claim money. Forth batch self check + shredding + pick up from the money jar. Needless to add, the average correct answers increased upwards, but it did not increase beyond certain point albeit there no chance of being caught. It appears even when we have no chance of getting caught, we don’t become wildly dishonest.
To summarize:

Condition # 1 Control (no chance to cheat) 32.6
Condition # 2 Self Check 36.2
Condition # 3 Self Check +Shredding 35.9
Condition # 4 Self Check + Shredding + Money Jar 36.1

“A measure of a man’s character is what he would do if he knew that, he would NOT be found out” says Macaulay. Dan has done a good deal of objective measurement – of course, results are troubling and his “take” on results are very convincing.

The Chapter-4, “The cost of social Norms” is insightful. We live in two worlds simultaneously. One is social and the other is business. In the social world, reciprocation need not be immediate, where as in business it has to be nearly real time and instantaneous. When the two worlds collide there is trouble.
He gives some dramatic examples. His “Day care” example: It imposed fine to the parents when they were late. Interestingly, parents construed it as they can chose to be late by paying fine (from social to market norm) hence late pick up increased. Palpably, that was not what the day care center intended to convey as the main message. So, they withdrew the penalty program. It did not help. Hence, once they collide and triumphed by market norms, social norms rarely returns.

After reading this book, for a moment, I felt it should have been titled “Design of experiments”.
Somehow, author has developed agreeable measurements for many of the hard to quantify stuff like honesty etc.

Distinguished French historian Emmanuel Le Roy Ladurie, once remarked there are two kinds of historians. One kind is parachutists and other is truffle hunters. Former kind observes history from afar, slowly floating down to earth while latter fascinated by the treasures of soil, keeps the nose close to the ground. It need not apply only to historians. This book indeed brought out many treasures-of-insight. Don’t miss this one.

Thanks for reading this far.



Mukund S said...

Interesting read, indeed. I guess this implies I make a purchase on my Kindle. I can also personally relate to the Macaulay comment as you had that in a mail thread in '05 (hope you remember!). Finally, just thought of pointing out what seems like an anomaly: I thought your article attributed to increasing averages, as we went through conditions 1 through 4. Maybe I misunderstood it, but I see Condition 2 through 4 decreasing by way of average - is there a typo in there?

Madhu Parthasarathy said...

Hi Mukund:

1. Yes, I do clearly recall.
2. I did go back and checked the book. No anomaly. But,I should have said "increased with respect to the first group" which is tested under correct conditions.
Mea culpa.Other 3 groups had some or more freedom to cheat. Main point is that, when freedom is near 100%, still, we don't become fully dishonest. By the same token when given, we do "a little bit of cheating".

Kiran said...

Hello Madhu san,

This is the best one! Enjoyed reading your post.

Warm Regards

jupieee said...

When I saw the name Dan Ariely, I was racking my brains as to where I had heard about him in the recent past. A quick search on Wiki provided me the answer: Dan Ariely -> Duke Univ -> one of my college seniors -> recommended DA 4-5 months back...Good to finally read something more about him/his work through this post. Some interesting snippets there but I'm terribly sceptical of behavioral studies...its lame, I know, but maybe I've been reading all the wrong kind of literature. Will keep this book in my To-read list..

Most of the recent non-fiction reading I've done have originated from some idea/thought I got from some random, weird source...for ex:, I was watching this really silly movie 21 which talks about how to 'count' your way to success in blackjack but what interested me more in the movie was a discussion on 'The Monty Hall problem'....and then I ended up reading so much more about it and enjoyed it..Again, something similar happened when I was reading an article about the Manhattan Project and then one thing led to another and I ended up reading that awesome book 'Surely you're joking, Mr Feynman'.. Anyway I'm rambling...

Twas nice reading this post, Madhu-san.. Thats 2 now done for me, 8 more to taking it slow n easy since you anyway seem to be posting at a snail's pace (hint hint)

ps: Btw, this is Ramki...cudnt comment anon and you're probably not too familiar with my gmail moniker :-)

பகலவன் கிருஷ்ணமூர்த்தி said...


A good write up that I enjoyed very much. "It appears even when we have no chance of getting caught, we don’t become wildly dishonest" is interesting indeed. Likewise, Macauley's words on man's character are thoughtful. (Though I wonder why a man's character has to be attributed only to "not-so-good" aspects. May be I am mistaken :-))

Also, if the irrationality is consistently predictable, would it not lead and convert it to be rational as well, over a period of time?

Thanks for sharing the review. Good info, really.


Praveen said...

Excellent article. This book goes as one to be read for sure. Why not humans become totally dishonest when there is no fear of being caught??? Is it because this characteristic is burnt in our ROMs in the mind & soul from birth?

- Praveen Athanki

Mohanakrishnan said...

I liked the concept of conflict between economic and social worlds.
But I have read the example than Dan has used there (the school one). I think freakonomics

Rama said...

Thanks Madhu-san for an excellent precis of the book. I first saw him talking on a podcast and was impressed with the concept. I did manage to read the book and initially was skeptical of the experiments.

I did manage to conduct (in my own small way) 3 of those experiments on a pretty large sample size - 200, 40 and 100. And in each of them, the results mirrored what Dan talks about in the book.

The ones that I tried was the decoy experiment, the arbitrary coherence and the Free! experiments. I did try to apply it in certain business contexts and I think was reasonably successful.

Above all, the book was an easy read - just the type that I like :)

Thirukumaran said...

Hi Madhu,

Nice review! I am of the view that behavioral pattern changes with the mood of the persons. Is inconsistency same as irrationality from behavioral scientists point of view? Very few psychometric tests/experiments are designed to capture real intentions and results are inversely proportional to sample size :-).

Coming to Historians, it depends on people who wield power when it is being written at least in most cases. What was 'classified' as Sepoy Mutiny by British is 'First War of Independence' to us.

We seem to choose what we perceive convenient to us and try to justify that. Perception of course is a n-dimensional variable!


Anonymous said...

Hi Madhu,
Nice review as usual and reading your post was good enough motivation for me to finish reading the book.
What amazes me is the fact that with apparently simple sounding experiments, Dan is able to get some interesting insights. In fact, all of his experiments would not have cost them anything to conduct, but still teaches us a lot about human behavior. Probably we should try to see if there is any learning in conducting/designing experiments as you have also mentioned.
I was particularly interested in his experiment with honesty where he says that having the candidate think about moral values (either by asking them to reflect on the 10 commandments or to sign a moral/honour code) seems to elicit a much more honest behavior.
After reading his experiments about the decoys forcing us to choose something that we really don't need or probably not the best value was also nice. I am sure I would have fallen to this trap in many of my purchases. Wonder if this is a systematic method employed by the sales folk..
Thanks for your post which led me to read the book. As Rama has said, it was an extremely easy read and the ROI is very high.
Best Regards,
N.R. Ramesh.

Madhu Parthasarathy said...

Hello All:

Have a look at his 17min TED video also. Worth it.


Nimmy said...

I had this book on my "Books to be Bought" list but there was no sense of urgency in owning it....until now. :-)