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Book Review: Predictably Irrational

Written by: Jay Hamilton-Roth

Article Overview: As a marketing strategist, I’m always looking for information to help understand human psychology. Predictably Irrational (by Dan Ariely) is full of wonderful insights on the surprising differences between logical thought and emotional consumer action.

Book Review: Predictably Irrational

As a marketing strategist, I’m always looking for information to help understand human psychology. Predictably Irrational (by Dan Ariely) is full of wonderful insights (based on original research) on the surprising differences between logical thought and emotional consumer action. It seems that the world does not operate according to standard economic theories.

Each chapter explores different forces that shape our behavior in ways we don’t truly understand (or underestimate) - what he calls “decision illusions”.

For example, Chapter 1 (The Truth About Relativity) explains that our choices are not based on absolute thinking, but on relative/local choices. For example, would you rather purchase an online subscription to the Economist magazine for $59/year or a print subscription for $125/year? What if there was a third choice: print+online for $125/year (the same price as print-only)? It turns out that high-priced items on menus and in catalogs serve as decoys: by having a high-priced item, you see the lower-priced items as a bargain and increase your spending to the next-highest priced item.

Chapter 2 (The Fallacy Of Suppy And Demand) describes a different phenomenon: we quickly anchor to a starting value of a product/service and color our perception through this anchor. That’s why in an ad you might see a price initially stated, but then the advertising copy goes on to increase the value and drop the price. It’s a deal that you don’t want to pass up. But the initial value of the offering was arbitrary, and you’ve anchored your mind around the relative price difference. To get out of this thinking, you need to evaluate the produce/service not only to its competition, but also its true value to you.

Chapter 3 (The Cost of Zero Cost) describes the psychological power of FREE. People will jump on free offers (even though a low-cost offer may be an amazing deal, FREE is an offer you can’t seemingly pass up). The author encourages policy strategists to use FREE to drive people’s actions (healthcare screenings, electric cars, etc.).

The book is an easy/fun read, and humbly shows you just how much we don’t really understand about our actions. If you want some additional FREE insights (including videos and research studies), go to Dan’s website.

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Article Tags: acti, chapter 3, decoys, economic theories, economist magazine, fallacy, free offers, free people, human psychology, illusions, initial value, marketing strategist, original research, phenomenon, psychological power, relative price, relativity, strategists, third choice, true value



Related Forum Posts
Re: Books for the Entrepreneur - I like "A Whole New Mind" by Daniel Pink, and "Predictably Irrational: The Hidden Forces that Shape our Decisions" by Dan Ariely.
Re: Top 50 Lists - Hi Evan, How about "Top 50": -Inventor Blogs To Watch -Franchising Blogs To Watch -Business Book Review Blogs -Women Entrepreneur Blogs -Young Entrepreneur Blogs
My reading log - Hi OmnivoreInk, Before starting my business, I read the following books as research: -"The Art of the Start" by Guy Kawasaki -"The AdSense Code" by Joel Comm -"Don't Think Pink" and "Mind Your X's and Y's" by Lisa Johnson And since then I've continued my "research" by reading (in this order): -"Technical Tennis" by Rod Cross -"For One More Day" by Mitch Albom -"The Twits" by Roald Dahl -"Little Black Book of Connections" by Jeffrey Gitomer -"The Secret" by Rhonda Byrne -"The Profitable Retailer" by Doug Fleener -"Blink" by Malcolm Gladwell -"Little Gold Book of YES! Attitude" by Jeffrey Gitomer -"The Chronicles of Narnia: Prince Caspian" by C.S. Lewis -"Little Green Book of Getting Your Way" by Jeffrey Gitomer -"Harry Potter and the Deathly Hallows" by J.K. Rowling And I'm currently reading and am in the process of finishing the following: -"There's No Such Thing as Public Speaking" by Jeanette and Roy Henderson -"The Tipping Point" by Malcolm Gladwell -"The Book of Tells" by Peter Collett -"Little Red Book of Sales Answers" by Jeffrey Gitomer -"Chocolates on the Pillow Aren't Enough: Reinventing The Customer Experience" by Jonathan M. Tisch -"The Artist's Way: A Spiritual Path to Higher Creativity" by Julia Cameron -"The Inner Game of Tennis" by Timothy Gallwey
Re: Significance of Review Sites - Exactly! Review sites are very helpful for providing better understanding to a product or service.
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.


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