The Hidden Forces Behind Our Irrational Decisions | Dan Ariely

[00:00:01]fored TV the world is [Music] thinking so good morning um so um I'll tell you a little bit about the irrational Behavior not yours of course other people's uh so um after being t for for a few years I realized that uh writing academic papers is not that exciting you know I don't know how many of those you read but it's not fun to read and often not fun to write even worse to write so I decided to try and write something uh more fun and I uh came up with an idea that I will write a cookbook and the title for my cookbook was going to be dining without crumbs the art of eating over the sink and it was it was going to be a look at life through the kitchen and I was quite excited about this I was going to talk about a little bit about research a little bit about the kitchen you know we do so much in the kitchen I thought this would be interesting and I wrote a couple of chapters and I took it to MIT press and they said you know cute but not for us go and find somebody else and Nicholas sent me to his book agent I tried her I tried other people and everybody said the same thing cute not for us um until somebody said um look uh if you're serious about this you first have to write a book about your research you have to publish something and then you'll get the opportunity to write something else if you really want to do it you have to do it so I said you know I really don't want to write about my research I do this all day long I want to write something else something a bit more free less constrained and this person was very um forceful and said look that's the only way you'll ever do it so I said okay if I have to do it I had a sabatical I said I'll write about my research if there's no other way and then I'll get to do my cookbook so I wrote a a book in my research um and turns out to be quite fun in two ways first of all I I enjoyed writing uh I regained this interest but more interesting thing was that I start learning from people it's a fantastic time to write because there's so much feedback you can get from people people write me about their personal experience and about their examples and what they disagree and nuances and even being here I mean the last few days I've I've known really Heights of obsessive Behavior I never thought about which which I think is just is just fascinating um so I want to tell you a little bit about IR behavior and I want to start by giving you some examples of visual illusion as a metaphor for rationality so think about these two tables and you must have seen this illusion if I ask you what's longer the vertical line on the table on the left or the horizontal line on a table table on the right which one seems longer can anybody see anything but the left one being longer no right it's impossible but the nice thing about visual illusion is we can easily demonstrate mistakes so I can put some lines on doesn't help I can animate the lines and to the extent you believe me I didn't shrink the lines which I didn't I've proven to you that your eyes were deceiving you now the interesting thing about this is when I take the lines away um it's as if you haven't learned anything in the last minute you can't you can't look at this and said okay now I see reality as it is right it's impossible to overcome this sense that this is indeed longer our intuition is really fooling us in a repeatable predictable consistent way there's almost nothing we can do about it aside from taking a ruler and starting to measure it here's another one this is one of my favorite illusion uh what do you see the color that the top arrow is pointing to Brown thank you the bottom one yellow turns out they're identical can anybody see them as identical very very hard I can cover the rest of the cube up and if I cover the rest of the cube you can see that they're identical and if you don't believe me you can get the slide later and do some arts and crafts and see that they're identical but again it's the same story that if we take the background away the illusion comes back right there's no way for us not to see this illusion I guess maybe maybe even if you're color blind I don't think you can see that so what is the point and why why do I why did I um show you some illusion is I want you to think about illusion as a metaphor you know vision is one of the best thing we do we have a huge part of our brain dedicated to Vision bigger than dedicated to anything else we do more Vision more hours of the day than we do anything else and we're evolutionary designed to do vision and if we have this predictable repeatable mistakes in Vision in which we're so good at what's the chance that we don't make even more mistake in something we're not as good at for example financial decision making um something we don't have an evolutionary reason to do we don't have a specialized part of the brain and we don't do that many hours of the day and the argument is that on those cases it might be the issue that we make many more decisions and worse not have an easy way to see them because in visual Illusions we could e demonstrate the mistakes in cognitive illusion it's much much harder to demonstrate to people the mistakes so I want to show you some cognitive illusion or decision making illusion in the same in the same way and this is one of my favorite plot in social sciences it's it's from a paper by Johnson and Goldstein and it basically shows the percentage of people who indicate that would be interested in giving their organs to donation and these are different countries in Europe and you basically see two types of countries countries on the right that seems to be giving a lot and countries on the left that seems to be giving very little or you know much less the question is why why do some countries give a lot and some countries give a little when you ask people this question they usually think that it has to be something about culture right how much do you care about people giving your organs to somebody else is probably about how much you care about Society how linked you are or maybe it is about religion but if you look at this plot you could see that countries that we think about is very similar actually exhibit very different behavior for example Sweden is all the way on the right and Denmark that we think is culturally very similar is all the way on the left Germany is on the left and Austria is on the right um the Netherland is on the left and Belgium is on the right and and finally depending on your particular version of a European similarity you can think about the UK and France as either similar culturally or not whoops but but it turns out that from organ donation they're very different by the way the Netherland is an interesting story you see the Netherland is kind of the biggest of the small group um turns out that they got to 28% after mailing every household in a country a letter begging people to join this organ donation program right so you know the expression begging only gets you so far it's 28% in organ donation but whatever the countries are on the right are doing they're doing a much better job than begging so what are they doing turns out the secret has to do with the form at the DMV and here's the story the countries on the right have a format DMV that looks something like this check the box below if you want to participate in the organ donor program so these are the countries on the left and what happens people don't check and they don't join the countries on the right the one that give a lot have a slightly different form it says check the box below if you don't want to participate interestingly enough when people get this they again don't check but now they join the program now think about what this means you know we we wake up in the morning and we feel we make decisions we wake up in the morning and we open the closet and we feel that we decide what to wear and we open the refriger we feel that we decide what to eat and what this is actually saying that much of these decisions are not residing within us they're residing by the person who's designing that form when you walk into the DMV the person who designed the form will have a huge influence on what you'll end up doing now it's also very hard to Intuit these results think about it for yourself how many of you believe that if you went to renew your license tomorrow and you went to the DMV and you would encounter one of these forms that would actually change your own behavior very very hard to think it will influence us right we can say oh these funny Europeans of course it would influence them but when it comes to us we have such a feeling that we're at the driver seats we have such a feeling that we're in control and we are making the decision that it's very hard to even accept the idea that we actually have an illusion of making a decision rather than actual decision now you might say you know these are decisions we don't care about in fact by definition these are decisions about something that will happen happen to us after we die how could we care about something less than something that happens after we die so a standard Economist somebody who believe in rationality would say you know what the cost of lifting the pencil and marking a v is higher than the possible benefit of the decision so that's why we get this effect but in fact it's not because it's easy it's not because it's trivial it's not because we don't care it's the opposite it's because we care it's difficult and it's complex and it's so complex that we don't know what to do and because we have no idea what to do we just pick whatever it was that was chosen for us I'll give you one more example for this this is from a paper by redmar and shafir and they said you know would this effect also happens to experts people who are well-paid um experts in their decisions do it a lot and they basically took a group of Physicians and they presented to them a case study of a patient and they said here's a patient he's a 67y old farmer he's been suffering from a right hip pain for for a while and then they said to The Physician yes you decided a few weeks ago that nothing is working for this patient all these medications nothing seems to be working so you refer the patient to hip replacement therapy hip replacement okay so the patient is on a path to have his hip replaced and then they said half the physician they said yesterday you review the patient's case and you realize that you forgot to try one medication you did not try ibuprofen what do you do do you you pull the patient back and try ibuprofen or do you let them go and have Hep replacement well I don't know what you think Physicians will do actually how many people here think that the Physicians will pull the patient back and try hip replacement anybody wow by the way you you it's it's kind of average even Physicians don't think but the good news the good news is that most physician in this case decided to pull the patient and try hip replacement very good for the Physicians sorry Tri it's a truprofen this this is why my clock is running so fast I'm getting so many mistakes um the other group of the physician they said yesterday when you reviewed the case you discovered they were too many too medication didn't try out yet ibuprofen and peroxy actually I didn't make a mistake before just testing if you're listening okay they they said your two medication didn't try out yet what do you do you let them go or you pull them back and if you pull them back you try ibuprofen or peroxy which one now think of it this decision makes it as easy to let the patient continue with hip replacement but pulling them back all of a sudden becomes more complex there's one more decision what happens now majority of the Physicians now choose to let the patient go to hip replacement I hope this worries you by the way when you go to see your physician the thing is that no physician would ever say hip peryam ibpr and hip replacement let's go for hip replacement but the moment you set it as the default it has a huge power on whatever people end up end up doing I'll give you a couple of more examples of irrational decision making um imagine I give you a choice do you want to go for a weekend to Rome all expenses paid Hotel Transportation food breakfast the continental breakfast everything or a week Weekend in Paris now Weekend in Paris weekend in Rome these are different things they have different food different culture different art now imagine I added a choice to the set that nobody wanted imagine I said a weekend in Rome a weekend in Paris or having your car stolen now it's it's a funny idea because why would having your car stolen in this set influence anything but what if the option to have your car stolen was not EX exactly like this what if it was a trip to Rome all expenses paid Transportation breakfast but doesn't include coffee in the morning if you want coffee you have to pay for it yourself it's €250 now in some ways given that you can have room with coffee why would you possibly want Ram without coffee it's like having your car stolen it's an inferior option but guess what happened the moment you add Rome without coffee Rome with coffee become more popular and people choose it the the fact that you have Rome without coffee makes Rome with coffee look Superior and not just to Rome without coffee even Superior to Paris the same thing happens with Paris so you don't think here are two examples of this principle this was an ad from The Economist a few years ago that gave us three choices an online subscription for $59 a print subscription for 125 or you could get both for 125 now I looked at this and I called up the economist and I tried to figure out what were they thinking all right what was going and they passed me for one person to another to another uh until eventually I I got to the to a person who was um kind of in charge of the website and I I called them up and they went to check what was going on and the next thing I know the ad is gone and no explanation so I so I decided to do the experiment that I I would have loved the economist to do with me I took this and I gave it to 100 MIT students I said what would you choose and these are the market share most people wanted the combo deal thankfully nobody wanted the dominated options it means our students can read um but now if you have an option that nobody wants you would take it off right so I took I printed another version of this when I eliminated the middle option and I gave it to another 100 students here's what happens uh now the most popular option became the least popular the least popular became the most popular what was happening is that option that was useless in the middle was useless in a sense that nobody wanted it but it wasn't useless in a sense that it helped people figure out what they wanted in fact relative to the option in the middle which was um get get only the print for 125 the print n web for 125 looked like a fantastic deal and as a consequence people chose it the general idea here by the way is that we actually don't know our preferences that well and because we don't know our preferences that well we're susceptible to all of these influences from the external forces the defaults the particular option that are presented to us and so on one more example of this uh people believe that when we deal with physical attraction we see somebody and we know immediately whether we like them or not attracted or not this is why we have these four minute dates um so I decided to do this experiment with people uh I'll show you graphic images of people not real people experiment was with people I showed some people a picture of Tom and people picture of Jerry and I said who do you want to date Tom or Jerry but for half the people I added an ugly version of Jerry I took Photoshop and I made Jerry slightly less attractive the other people I added an angly version of Tom and the question was Will ugly Jerry and ugly Tom help their respective more attractive Brothers and the answer was absolutely yes when ugly Jerry was around Jerry was popular when ugly Tom was around Tom was popular this of course has two very clear implications for uh for life in general um if you ever go bar hopping who you want to take with [Applause] you you want you want a slightly uglier version of yourself similar similar but slightly uglier and and the second point of course is that if somebody else invites you you know how they think about you now you're getting what is the general point the general point is that when we think about economics we have this beautiful view of human nature you know what a piece of work is meant how Noble in reason we have this view of ourselves of of others H the behavioral economics perspective is slightly less um generous to people in fact in medical terms that's our [Laughter] view but but there is there is a silver lining and the Silver Lining is I think kind of the reason that behavioral economics is interesting and and exciting you know are we are we Superman or are we Homer Simpson um when it comes to building the physical world um we kind of understand our limitations we build steps and we build these things that not everybody can use obviously but we build them we understand our limitations and we build around it but for some reason when it comes to the mental world when we design things like healthc care and retirement and stock markets we somehow forget the idea that we're limited and I think if we understood our cognitive limitations in the same way that we understand our physical limitation even they don't stare Us in the face in the same way we could design a better world and that I think is the hope of this thing now let can I take one more minute I'm I'm on time um a lot of people showed great uh great pictures and great movies and I kind of felt a little inadequate in that perspective it's my first time here I didn't know what was expected um now I don't have a half an hour documentary about myself [Applause] um but I do have a 45 minute clip oh there's no sound though and I'm standard economics isn't this a wonderful world that we live in people always making rational decisions all the time never letting their emotions Cloud their judgment and always thinking about the future I don't see where you get this so think for example have you ever been to a restaurant where you were planning to be on a diet and not having dessert and all of a sudden the waiter comes with some fancy dessert maybe chocolate Su and offer it to you and you fall to Temptation oh no I I always plan out my meals in advance in my daily food log what about sex imagine that you're aroused you're with somebody and you don't have a condom what would you do under those circumstances that would never happen I use my much smaller daily sex [Music] planner thank you very much