Abhinav Agarwal: Upside of Irrationality, by Dan Ariely

Sunday, July 18, 2010

Upside of Irrationality, by Dan Ariely

The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home, by Dan Ariely

A personal celebration, inquisition, investigation, and critique of the myth of the "rational person". Not a whole lot of new ground covered though. Well written, breezy style, easy-to-read, with lots of experiments the author conducted described in detail.

By itself the book is good. Recommended for sure. But if you have read other books in this area, behavioral economics, like Stumbling on Happiness (my review) or Nudge: Improving Decisions About Health, Wealth, and Happiness (my review), then at least some of the material will read familiar. Especially the parts about expectations and adaptation, which is covered at length and in a lot more depth in Stumbling on Happiness (my review).

The organization of the book is also a bit different. It is divided very clearly into two parts, and is also more personal than other such books.
The underlying premise of the book is that while we, humans, should be rational, and make decisions that are in our best interests, we often do not.

"From a rational perspective, we should only make decisions that are in our best interests."

But we don't. Surprise! The title is a bit misleading, but given the incredible success of Dan Ariely's first book, Predictably Irrational, it would have been irrational for him not to reuse part of the title for his second book!

The very first irrationality described, so to say, is the fact that more pay does not necessarily translate into better performance, or even better motivation. Thankfully, the financial crisis of 2008 proved that more money does not translate into better results. Quite the opposite in many cases.

"But beyond that point, motivational pressures can be so high that it actually distracts an individual from concentrating on and carrying out a task - an undesirable outcome for anyone." The irony of these findings is illustrated quite unsurprisingly, when the author presented his findings to a select group of MIT alumni, "They all nodded their heads in agreement with the theory that high bonuses might backfire - until I suggested that the same psychological effects might also apply to the people in the room. They were clearly offended by the suggestion." .... "... Upton Sinclair once noted, 'It is difficult to get a man to understand something when his salary depends upon his not understanding it.'" [page 38 of the ARC]

Another finding that is contrary to rational thinking is one of "contrafreeloading" - contrary to expectations, people do not want to always maximize their reward whilst expending a minimum amount of work. Borne out in several experiments, people do value the rewards if they perceive they have expended at least some effort into it.
As a corollary, "... sucking the meaning out of work is surprisingly easy. If you're a manager who really wants to demotivate your employees, destroy their work in front of their eyes. Or, if you want to be a little subtler about it, just ignore them and their efforts." [page 76 of the Advance Reviewer's Copy]. Ouch!!! How many times, at how many places have we seen it, experienced it, and possibly even inflicted this form of motivational destruction onto others?

It stands to reason therefore, that beauty lies not in the eyes of the beholder as much as it lies in the eyes of its creator. "The Ikea Effect" chapter covers this irrationality.

These results showed us that the creators had a substantial bias when evaluating their own hard work. [page 94] ... When the effort is unfruitful, affection for one's work plummets. (This is also why playing hard to get is often a successful strategy in the game of love. If you put an obstacle in the way of someone you like and they keep on working on it, you're bound to make the person value you even more. On the other hand, if you drive that person to extremes and persist in rejecting them, don't count on staying "just friends.") [page 105]

The Laws of Labor and Love, or the 'four principles of human endeavor', are:

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 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 greater effort, we don't feel so attached to it.

Or what about revenge? Surely there is nothing so irrational, and emotionally destructive as revenge, is there? Well, it turns out, Ariely posits "that the threat of revenge - even at great personal expense - can serve as an effective reinforcement mechanism that supports social cooperation and order. ... I do suspect that, overall, the threat of vengeance can have a certain efficacy."
Don't believe me? Or the author? What about PET? Positron Emission Tomography.

The results showed increased activity in the striatum, which is a part of the brain associated with the way we experience reward. In other words, according to the PET scan, it looked as though the decision to punish others was related to a feeling of pleasure. ... All this suggests that punishment, betrayal, even when it costs us something, has biological underpinnings. [page 126]
...
It seems that at the moment we feel the desire for revenge, we don't care whom we punish - we only want to see someone pay, regardless of whether they are the agent of the principal. [page 146]

And so on... This book is not likely to become a classic or an instant hit, but offers enough nuggets of insight that you may want to bookmark several pages and return to them every now and then to remind yourself that man is, after all, not a rational animal.

Dan Ariely Wikipedia page Dan Ariely's web site
HarperCollins's book page