Predictably Irrational— The Effect of Expectations

keeping doors open

We might not realize it, but in every case we give something up for those options…in a modern democracy people are beset not by a lack of opportunity, but by a dizzying abundance of it. (148)

What we need to do is to consciously start closing some of our doors…we have an irrational compulsion to keep doors open. (150)

the effect of expectations

When we believe beforehand that something will be good, therefore, it generally will be good— and when we think it will be bad, it will be bad.

Which type of input is more valuable— knowledge before the experience or an input of information after an experience has taken place?

That’s what marketing is all about— providing information that will heighten someone’s anticipated and real pleasure. But do they really? (166)

the power of price— why a 50-cent aspirin can do what a penny aspirin can’t

prices drive the placebo effect

Are we doomed to get lower benefits every time we get a discount? If we rely on our irrational instincts, we will. If we see a discounted item, we will instinctively assume that its quality is less than that of the full-price item— and then in fact we will make it so. What’s the remedy? If we stop and rationally consider the product versus the price, will we be able to break free of the unconscious urge to discount quality along with the price? The effect of discounts is largely an unconscious reaction to lower prices. (187)

the context of our character— why are we dishonest and what can we do about it?

Adam Smith: “Nature, when she formed man for society, endowed him with an original desire to please, and an aversion to offend his brethren. She taught him to feel pleasure in their favourable, and pain in their unfavourable regard.”

“The success of most people…almost always depends upon the favour and good opinion of their neighbors and equals; and without a tolerably regular conduct these can be very seldom be obtained. The good old proverb, therefore, that honesty is always the best policy, holds, in such situations, almost always perfectly true.”

Smith’s theory had a darker corollary: since people engage in a cost-benefit analysis to honesty, they can also engage in a cost-benefit analysis to be dishonest… individuals are only honest to the extent that it benefits them (including their desire to please others). (202)

Sigmund Freud: …as we grow up in society we internalize the social virtues— i.e. the superego. In general the superego is pleased when we comply with society’s ethics, and unhappy when we don’t. Such acts stimulate the reward centers of our brain and make us content. (203)

When we are removed from any benchmarks of ethical thought we tend to stray into dishonesty. But if we are reminded of morality at the moment we are tempted then we are much more lokely to be honest. (213)

the context of our character, part II— why dealing with cash makes us more honest

When we look at the world around us, much of the dishonesty we see involves cheating that is one step removed from cash. (218)

…non-monetary currencies can lead us astray. They let us bypass our conscience and freely explore the benefits of dishonesty. (227)

Upton Sinclair: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”…it is even more difficult to get a man to understand something when he is dealing with non-monetary currencies. (227)