Irrational Behaviour Part 2 Dan Ariely
3.7 Market and Social norm
We can't judge social work on money
people will help for free than to get $3 for change of tires
If we pay nothing willingness to help is more
if we pay less willingness to help is less
If we pay more willingness to help increases again
Gifts? even if they cost less, people are not offended
with cash they are offended even if it is efficient method
late parent at day care centre -> fine for being late -> they are now more late
now they tried to remove fine but this was hard as market was already set
eg: two insurance companies, one fully formal but other builts social relationships
if both levy a fine w/o giving you any scope to mend, you will be more angry at second.
therefor build relationships only if you can keep their norms
if not it is better to not build relationship
similarly, vague contracts such as marriage are much better than constitutional law
3.8 The price of free
the moment something involves zero -> we are overly excited
this can be used as incentive for various social work
zero also plays a major role in free shipping part
the model will attract more if product have zero price and shipping price is $20
managing bill with friends: at one time one should pay
3.9 Micro payment
eg: Apple music store, Google Play etc.
zero price hampers full ecosystem
People don't like making decisions therefore subscription is best.
keeping prices same makes the decison making process simpler
and send bill at the end combining all the purchases
Paytm account money is thought of as categorised for paytm payments
4.1 while we cheat and lie, we don't think ourselves as immoral
Wishful blindness - people turn blindeye as they are getting benefit w/o risk
Active blindness - create an ideology that do not let you look at bad
eg: false paper shreder
people solved only 4 problem but reported 6
false asumption: dishonesty, all moral decisions are based on cost-benefit analysis
but amount of cheating is independent of amount of benefit
it means people want to get more than they deserve but only in small amount
it also means that people can cheat by little bit w/o being caught
4.2 we look in the mirror and think we are good and honest
fudge factor: the range upto which we can act moral even after cheating
cheating reduced after saying them to remember 10 commandment
even self-declared atheist after swearing on bible reduced their cheating
therefor, fear of heaven or hell does not matter
just reminding people of their own morality
eg 2: starting survey with Honor code -> more honesty
but the effect of reminding is of very short duration
week long course on morality does not have any long term effect
but reminding just before taking decision have large effect
Signing first is better than signing at end
would you give $25 in donation to fight corruption at start of IT return form.
image of eyes on form to look like someone is watching
question: would you want a corruption free world for your future generation
How to get people to cheat more?
- increase distance from money
- provide examples of other people cheating -> social proof
- social proof should be from our community not our rival
- prepay
- is it easy to rationalize
taking money from work is not easy morally but taking pen, pencil and stationary is easy
it does not hurt our morality.
thus, cheating increases as the items are more and more different from money
cash>pencil,pen>taking salary w/o working
eg: coke in college fridge vs. 100 rs note in college fridge (both cctv monitored)
coke disappeared but note 100rs note
most people think major cheating is by big players but due to our moral modal majority
cheating is by little cheating by lots of people
therefore, cashless might invite more corruption
4.3 conflict of interest
we are biased due to conflict of interest
sunshine policy: what if everyone knows about your actions, would you still take that action
our own interest can blind us from seeing the interest of others
human creativity helps cheating
4.4 cheating over time across the cultures
when people go from cheating little to cheating a lot? after "what the hell" moment
how to make people stop? confessions, immediate oath etc.
5.1 Extrinsic vs intrinsic motivation
Pride, reputation, sense of purpose, meaning, camaraderie, helping the world, money
Mountain climbing is painful still people do it = sense of accomplishment
We are motivated to do things that we find meaningful,
building lego for some use vs. no use
5.2 Stopping a project [eg: after two years] demotivates people, better way is to allow people to present their work or public locally in their own capacity
Google allows employees to give their 20% of time on other projects
5.3 Acknowledgement
People work more where work is acknowledged
Ignoring people is almost same as you are dumping their work in shredder
5.4 IKEA effect: labor leads to love
Putting effort into something makes you love to a higher degree
Eg: Ready to make food vs. readymade food
We can make products that require more efforts and still have demand
Eg: people loved their own created origami, How much would you pay for them vs how much will you sell them for
Eg: your love for your poems or creation
Q. How much money would you take for your kids? Our love for kids is partially due to them and partially due to our efforts
flip side: Our love blinds us from the perspective of others
May be thats why android is loved more, coz of customization requires effort and effort creates love
other eg: efforts to get product, Iphone queue, RedMI product window, Fee of a course, tickets of crowded concert etc.
Other aspect: Relationship? love marriage or arrange, biological child vs. adopted child
5.5 IKEA effect on Idea
Idea you have created is more important to you.
Sometimes the idea they think they have created seem more important
Even if you make people to invest little bit of their own energy they will like that product more
Eg: Thomas edison's DC and his hate for Tesla's AC
"Not invented here" Bias: gives more effort and value to own ideas but fails to consider other's ideas
We should love what we do but not too much
5.6 Cognitive Disonance
Zappos hiring: first they train for 1-2 weeks and then pay $2000 for not to take the job;
1. those who decided to stay work hard as they have given up something important
2. You don't want people who don't like the job
Learning: playing hard to get is good thing
5.7 Monetory stress and performance
assumption 1: People want only rest and not work; pay is needed to make people work
Contrafreeloading: Even rats will prefer some portion of food which require efforts even when free food is available
Exception: Domestic Cat coz they are awesome
Effort increase performance upto a certain level after that performance goes down
Similarly, Increased incentives increase performance upto a certain level after that stress increases and we perform badly.
This phenomenon is more in mental tasks but not mechanical tasks
It is related to loss aversion - people hate loosing more than winning
Regular bonuses to employee can change the situation into loss aversion case as they now think it is their permanent salary
learning: Don't give too much incentives or penalty for mental tasks, they will reduce performance, Loss aversion is strict no-no.
Eg: Surgeon, Stock analyst etc. you don't want them to think about money when they should be using brain in tasks
5.8 Social stress and performance
Performance reduces in public situations as compared to private situations where reputation is at risk
Playing golf next to tiger woods would stress you more thus reduce your performance
5.9 Belief, labor and Motivation
Money is only one aspect of motivation and it may, sometimes, backfire.
Large amount of incentive can increase motivation but decrease performance due to stress
We do not operate by simple rules of reward
Efficiency vs. Meaning
Specialization improves efficiency thus everywork should be revolutionalized
Meaning: find meaning in work
Dan Ariely
6.1 Self-control
Present foucs Bias: the tendency to give more weight to our current state
what would you rather have half packet chocolate after 1y or full packet of chocolate aster 1y+1week
Problem: In future, we are fantastic people but in present we are very bad
Reward substitution: replace long term gains with short term gain, this will help in bearing short term pain
To reduce efforts/pain of present associate efforts with some award such as movie watching or coding or learning.
Eg: personal finance planning, Global warming,
Why climate change have low motivation: far in future, affect other first, we do not see it changing, we don't see any person suffering, our effort are drop in a bucket
Solution: pay money, attach with reputation (tesla electric car), make it easy, make people look cool, show their progress
Gamers understand value of reward system, similarly gym going people know value of performance indicators
Ideas: have a leaderboard, provide ego boost,
6.2 Reward Substitution
Taking bitter pills everyday
-> internet enabled pill boxes
-> Give years worth of money in advance and take money for each day on which pill is not taken
-> Donate each days money to some kid and if pill is not taken, make them take that money back
-> 10 times the award with 10% chance of winning it
-> 100 times the award with 1% chance of winning it
-> Best: penalty/regret-> give lottery ticket, bring out their winning no. and tell those who did not follow that we regret to inform you
People with silver smiles the least
happiness is not determined by where we are but what we are comparing us to.
methods: lotteries, randomization, counterfeits, regret, reward substitution,
6.3 self control contracts
you know you will be tempted
you should bind your futureself to not behave badly
make other people track your progress
make it hard to break the promise
promise someone else instead of yourself
remove your alternative of short term reward
eg: remove snooze button from alarm
keep alarm clock very far away from bed
clock that runs away from you
snooze button that donates from your account (to your hated enemy)
www.stikk.com
6.4 Importance of self control
Marshmallow test of kids: kids who resisted temptation did better in college
As the day progresses it becomes hard and hard to resist temptation
therefore, self control task better be done in morning
religion helps in controlling our temptations by limiting our free will
technological advance make us succumb to temptation more and more
Ulysses contract: freely made decision that is designed and intended to bind oneself in the future
we must find balance b/w freedom and control
7.1 Emotions/Two systems
Brain: Limbic system - emotions, Cognitive system-reason
Limbic system is found in animals as well, cognitive system is what saparates us from animals
Emotions help in planning/remebering things in future
Emotions most of the times are short lived
Affective forcasting: People think they will be sad/happy for long time after specific result but it is often shortlived
it happens in dating: rejection or acceptance of proposal
Effect of arousal on: sexual preferences, willingness to take risk(no condom), willingness to engage immorally
People can't predict their behaviour in aroused/drunk condition when they are not aroused/drunk
7.2 Intra-empathy mismatch
You tend to show more sympathy to drought affected people if you are thirsty
Suggestion: Don't host charity party with lavish dinners instead make people feel what you want donation to
7.3 Identifiable victim problem
Trolley problem: most people say - they will turn the handle but not push the fat man in front of train
learning: will not do direct sin but will do indirect sin
Why less funding to maleria but more to Hurricane caterina?
- Some of them look like individual causes instead of natural
- whether preventable or not
"One man's death is tragedy and death of millions is statistics" - Stalin
"If I look at the masses I will never act but if I look at individual I will" - Teresa
Donation - Identify and Image of one girl
Similarly - Picture of one boy on beach
You would jump into a pond to save one child but will not help if the event is far away from you where you can not here their sound
Millions of killing by ISIS
Statistical information (large data/more victims) reduces your empathy
Thus, rationality reduces our empathy and being irrational is good
Eg 2: Your money will go to 1 of 10 needy -> donation reduces vs. Randomly selected kid is shown to them -> more donation
Reason why countries do not do much about genocides,
Why "this individual is going to die" attracts more empathy
Why cognitive approach/ call to help fails here?
Don't say look how big this problem is but focus on one or two specific examples
Eg: Delhi case vs. everyday news
7.4 Emotional Decison making in Identifiable victim
Baby Jessica: fell into borewell -> more tv coverage, more donation
People are unable to multiply suffering of one person by 100 millions that suffer in world
News, in globalized scenario, may contribute to reduction of empathy
Images strike more powerfully than numbers
Spam Emails use similar tactic
- Identifiable
- some Grammar mistake to attract gullible people
7.5 Risk Assessment
What are your odds the you would die from falling airplane part, shark attcke?
the belief comes from ease to imagine the scenario
Driving vs. Terrorism= your control vs. out of control
insurance against nuclear disaster
Emoptions:
- are basic part of human nature
- can overtake cognition
Bye
We can't judge social work on money
people will help for free than to get $3 for change of tires
If we pay nothing willingness to help is more
if we pay less willingness to help is less
If we pay more willingness to help increases again
Gifts? even if they cost less, people are not offended
with cash they are offended even if it is efficient method
late parent at day care centre -> fine for being late -> they are now more late
now they tried to remove fine but this was hard as market was already set
eg: two insurance companies, one fully formal but other builts social relationships
if both levy a fine w/o giving you any scope to mend, you will be more angry at second.
therefor build relationships only if you can keep their norms
if not it is better to not build relationship
similarly, vague contracts such as marriage are much better than constitutional law
3.8 The price of free
the moment something involves zero -> we are overly excited
this can be used as incentive for various social work
zero also plays a major role in free shipping part
the model will attract more if product have zero price and shipping price is $20
managing bill with friends: at one time one should pay
3.9 Micro payment
eg: Apple music store, Google Play etc.
zero price hampers full ecosystem
People don't like making decisions therefore subscription is best.
keeping prices same makes the decison making process simpler
and send bill at the end combining all the purchases
Paytm account money is thought of as categorised for paytm payments
4.1 while we cheat and lie, we don't think ourselves as immoral
Wishful blindness - people turn blindeye as they are getting benefit w/o risk
Active blindness - create an ideology that do not let you look at bad
eg: false paper shreder
people solved only 4 problem but reported 6
false asumption: dishonesty, all moral decisions are based on cost-benefit analysis
but amount of cheating is independent of amount of benefit
it means people want to get more than they deserve but only in small amount
it also means that people can cheat by little bit w/o being caught
4.2 we look in the mirror and think we are good and honest
fudge factor: the range upto which we can act moral even after cheating
cheating reduced after saying them to remember 10 commandment
even self-declared atheist after swearing on bible reduced their cheating
therefor, fear of heaven or hell does not matter
just reminding people of their own morality
eg 2: starting survey with Honor code -> more honesty
but the effect of reminding is of very short duration
week long course on morality does not have any long term effect
but reminding just before taking decision have large effect
Signing first is better than signing at end
would you give $25 in donation to fight corruption at start of IT return form.
image of eyes on form to look like someone is watching
question: would you want a corruption free world for your future generation
How to get people to cheat more?
- increase distance from money
- provide examples of other people cheating -> social proof
- social proof should be from our community not our rival
- prepay
- is it easy to rationalize
taking money from work is not easy morally but taking pen, pencil and stationary is easy
it does not hurt our morality.
thus, cheating increases as the items are more and more different from money
cash>pencil,pen>taking salary w/o working
eg: coke in college fridge vs. 100 rs note in college fridge (both cctv monitored)
coke disappeared but note 100rs note
most people think major cheating is by big players but due to our moral modal majority
cheating is by little cheating by lots of people
therefore, cashless might invite more corruption
4.3 conflict of interest
we are biased due to conflict of interest
sunshine policy: what if everyone knows about your actions, would you still take that action
our own interest can blind us from seeing the interest of others
human creativity helps cheating
4.4 cheating over time across the cultures
when people go from cheating little to cheating a lot? after "what the hell" moment
how to make people stop? confessions, immediate oath etc.
5.1 Extrinsic vs intrinsic motivation
Pride, reputation, sense of purpose, meaning, camaraderie, helping the world, money
Mountain climbing is painful still people do it = sense of accomplishment
We are motivated to do things that we find meaningful,
building lego for some use vs. no use
5.2 Stopping a project [eg: after two years] demotivates people, better way is to allow people to present their work or public locally in their own capacity
Google allows employees to give their 20% of time on other projects
5.3 Acknowledgement
People work more where work is acknowledged
Ignoring people is almost same as you are dumping their work in shredder
5.4 IKEA effect: labor leads to love
Putting effort into something makes you love to a higher degree
Eg: Ready to make food vs. readymade food
We can make products that require more efforts and still have demand
Eg: people loved their own created origami, How much would you pay for them vs how much will you sell them for
Eg: your love for your poems or creation
Q. How much money would you take for your kids? Our love for kids is partially due to them and partially due to our efforts
flip side: Our love blinds us from the perspective of others
May be thats why android is loved more, coz of customization requires effort and effort creates love
other eg: efforts to get product, Iphone queue, RedMI product window, Fee of a course, tickets of crowded concert etc.
Other aspect: Relationship? love marriage or arrange, biological child vs. adopted child
5.5 IKEA effect on Idea
Idea you have created is more important to you.
Sometimes the idea they think they have created seem more important
Even if you make people to invest little bit of their own energy they will like that product more
Eg: Thomas edison's DC and his hate for Tesla's AC
"Not invented here" Bias: gives more effort and value to own ideas but fails to consider other's ideas
We should love what we do but not too much
5.6 Cognitive Disonance
Zappos hiring: first they train for 1-2 weeks and then pay $2000 for not to take the job;
1. those who decided to stay work hard as they have given up something important
2. You don't want people who don't like the job
Learning: playing hard to get is good thing
5.7 Monetory stress and performance
assumption 1: People want only rest and not work; pay is needed to make people work
Contrafreeloading: Even rats will prefer some portion of food which require efforts even when free food is available
Exception: Domestic Cat coz they are awesome
Effort increase performance upto a certain level after that performance goes down
Similarly, Increased incentives increase performance upto a certain level after that stress increases and we perform badly.
This phenomenon is more in mental tasks but not mechanical tasks
It is related to loss aversion - people hate loosing more than winning
Regular bonuses to employee can change the situation into loss aversion case as they now think it is their permanent salary
learning: Don't give too much incentives or penalty for mental tasks, they will reduce performance, Loss aversion is strict no-no.
Eg: Surgeon, Stock analyst etc. you don't want them to think about money when they should be using brain in tasks
5.8 Social stress and performance
Performance reduces in public situations as compared to private situations where reputation is at risk
Playing golf next to tiger woods would stress you more thus reduce your performance
5.9 Belief, labor and Motivation
Money is only one aspect of motivation and it may, sometimes, backfire.
Large amount of incentive can increase motivation but decrease performance due to stress
We do not operate by simple rules of reward
Efficiency vs. Meaning
Specialization improves efficiency thus everywork should be revolutionalized
Meaning: find meaning in work
Dan Ariely
6.1 Self-control
Present foucs Bias: the tendency to give more weight to our current state
what would you rather have half packet chocolate after 1y or full packet of chocolate aster 1y+1week
Problem: In future, we are fantastic people but in present we are very bad
Reward substitution: replace long term gains with short term gain, this will help in bearing short term pain
To reduce efforts/pain of present associate efforts with some award such as movie watching or coding or learning.
Eg: personal finance planning, Global warming,
Why climate change have low motivation: far in future, affect other first, we do not see it changing, we don't see any person suffering, our effort are drop in a bucket
Solution: pay money, attach with reputation (tesla electric car), make it easy, make people look cool, show their progress
Gamers understand value of reward system, similarly gym going people know value of performance indicators
Ideas: have a leaderboard, provide ego boost,
6.2 Reward Substitution
Taking bitter pills everyday
-> internet enabled pill boxes
-> Give years worth of money in advance and take money for each day on which pill is not taken
-> Donate each days money to some kid and if pill is not taken, make them take that money back
-> 10 times the award with 10% chance of winning it
-> 100 times the award with 1% chance of winning it
-> Best: penalty/regret-> give lottery ticket, bring out their winning no. and tell those who did not follow that we regret to inform you
People with silver smiles the least
happiness is not determined by where we are but what we are comparing us to.
methods: lotteries, randomization, counterfeits, regret, reward substitution,
6.3 self control contracts
you know you will be tempted
you should bind your futureself to not behave badly
make other people track your progress
make it hard to break the promise
promise someone else instead of yourself
remove your alternative of short term reward
eg: remove snooze button from alarm
keep alarm clock very far away from bed
clock that runs away from you
snooze button that donates from your account (to your hated enemy)
www.stikk.com
6.4 Importance of self control
Marshmallow test of kids: kids who resisted temptation did better in college
As the day progresses it becomes hard and hard to resist temptation
therefore, self control task better be done in morning
religion helps in controlling our temptations by limiting our free will
technological advance make us succumb to temptation more and more
Ulysses contract: freely made decision that is designed and intended to bind oneself in the future
we must find balance b/w freedom and control
7.1 Emotions/Two systems
Brain: Limbic system - emotions, Cognitive system-reason
Limbic system is found in animals as well, cognitive system is what saparates us from animals
Emotions help in planning/remebering things in future
Emotions most of the times are short lived
Affective forcasting: People think they will be sad/happy for long time after specific result but it is often shortlived
it happens in dating: rejection or acceptance of proposal
Effect of arousal on: sexual preferences, willingness to take risk(no condom), willingness to engage immorally
People can't predict their behaviour in aroused/drunk condition when they are not aroused/drunk
7.2 Intra-empathy mismatch
You tend to show more sympathy to drought affected people if you are thirsty
Suggestion: Don't host charity party with lavish dinners instead make people feel what you want donation to
7.3 Identifiable victim problem
Trolley problem: most people say - they will turn the handle but not push the fat man in front of train
learning: will not do direct sin but will do indirect sin
Why less funding to maleria but more to Hurricane caterina?
- Some of them look like individual causes instead of natural
- whether preventable or not
"One man's death is tragedy and death of millions is statistics" - Stalin
"If I look at the masses I will never act but if I look at individual I will" - Teresa
Donation - Identify and Image of one girl
Similarly - Picture of one boy on beach
You would jump into a pond to save one child but will not help if the event is far away from you where you can not here their sound
Millions of killing by ISIS
Statistical information (large data/more victims) reduces your empathy
Thus, rationality reduces our empathy and being irrational is good
Eg 2: Your money will go to 1 of 10 needy -> donation reduces vs. Randomly selected kid is shown to them -> more donation
Reason why countries do not do much about genocides,
Why "this individual is going to die" attracts more empathy
Why cognitive approach/ call to help fails here?
Don't say look how big this problem is but focus on one or two specific examples
Eg: Delhi case vs. everyday news
7.4 Emotional Decison making in Identifiable victim
Baby Jessica: fell into borewell -> more tv coverage, more donation
People are unable to multiply suffering of one person by 100 millions that suffer in world
News, in globalized scenario, may contribute to reduction of empathy
Images strike more powerfully than numbers
Spam Emails use similar tactic
- Identifiable
- some Grammar mistake to attract gullible people
7.5 Risk Assessment
What are your odds the you would die from falling airplane part, shark attcke?
the belief comes from ease to imagine the scenario
Driving vs. Terrorism= your control vs. out of control
insurance against nuclear disaster
Emoptions:
- are basic part of human nature
- can overtake cognition
Bye
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