Dan Ariely: Confronting Irrationality

Dan Ariely’s genius in Predictably Irrational is for simple social experiments that become giant public parables. Here’s how playing with the taste of beer, for example, takes him to the Israeli-Palestinian impasse: in the student pub at MIT, where Ariely taught, drinkers much preferred the “MIT Brew” to straight Budweiser — unless they were told in advance that “MIT brew” was Budweiser doctored with a few drops of balsamic vinegar. If they knew beforehand what they were drinking, a sour expectation overrode the pleasure of the experience. Moral: preconceptions rule. Application: since memory and preconditioning are so irremediably different between Israelis and Palestinians, only a strong and fair third-party can lift them to a resolution.

Click to listen to Chris’s conversation with

Dan Ariely (37 minutes, 14 mb mp3)

Dan Ariely’s measure of irrationality

What could he learn at Duke University from the prolonged test of wills by which “Final Four” basketball tickets were alloted to rabid student fans? When the lottery was over and the tickets awarded, Professor Ariely tried to make a market with students who’d won and others who’d lost out. But there was no price point to be found. Students without tickets wouldn’t pay more than $175 for what they’d missed. Students who had tickets wouldn’t take anything less than $2400 for what now felt invaluable. Moral: we overprice what we already have. Application: commentators and Congress folk are stuck (hopeless, but still stuck) with an Iraq war in which they signed (irrationally) for what are now “sunk costs.”

Neither does war remorse necessarily restore rationality, as Dan Ariely observes in our conversation. The Iraq war has set a new “anchor” price for foreign adventure, just as Starbucks re-set the price of your morning coffee. At $1-trillion or more, the Iraq war could make a sequel look like a bargain. Beware also what Ariely calls the “decoy effect.” We all shop by comparision, and tend to go for the less-flawed version in a pair. The “decoy effect” is the reason why Dan Ariely suggests that for success at a singles’ event: bring along a friend who looks like you but is slightly less attractive. It’s the decoy effect that’s being used to suggest that a mere air attack on Iran, without a ground invasion, would be a cinch compared to Iraq.

Dan Ariely’s Predictably Irrational reads to me like a catalog of the Bush follies and how a lazy great nation fell for them. In the book and in our conversation there may also be a rough map of the road back to American Pragmatism and the William James test of policies and ideas: how do they work in practice?

On Leaving Iraq: It turns out that the bigger and more effortful thing that you have done – the more attached you feel to it. Partially it’s regret. If we have invested $400 billion dollars and we will just leave it as it is and we haven’t achieved anything, we will feel like it’s a real waste. So what do we do? We keep on investing more and more in the hope that it will achieve something in the future. We can speculate evolutionarily how much [the attachment process] makes sense. You do want a mechanism that gets us attached to our kids, family, community and ideology, but it turns out it’s a very strong force and even when we adapt a wrong path, we have a very hard time overcoming this. This is the place where you can actually think of what the role of democracy is, reflecting people’s opinions versus people’s best interests. If we have people that are extremely attached to the war in Iraq, and the cord was severed, in two months they would not be attached any more. I don’t think people are able to predict how quickly they would get over this feeling of complete waste of this war. Right now, people think that if we stop [the war], it would have all had been for nothing. And how long would it take them to get used to the fact that it will have all been for nothing? I think it’s much shorter than they would have guessed. It’s a real dilemma about who you’re serving for a politician. The people of the moment who think that they will feel that it’s gone to waste or the people in two months who would be relieved that the war is over.

On Obamania: I’ll tell you another thing that worries me about Obama. We wrote a paper about a year ago on online dating. What we basically found was that when people describe themselves in less precise terms, they are more popular. The reason is that when you are vague, everyone can read into them what they want. You say you like music. It turns out that everyone thinks you like the same music that they like. Vagueness translates into liking. It turns out that the same thing happens with pictures, by the way. You put up pictures that are slightly more fuzzy and people think that you are more attractive. The second thing that we discovered is that people get crushed when they meet for coffee… I think Obama has been relatively vague compared to Hillary. We’ve known her for a very long time and she’s been more clear. People can read into Obama what they want, which is one of his appeals. At the same time, I think that we’ll have coffee with Obama at some point. The only question is when will we have coffee with Obama? The truth is that no human being can stand up to the expectations that the public has for Obama. At some point we will get disappointed. The question is how much and when.

Dan Ariely of Predictably Irrational, in conversation with Chris Lydon, June 9, 2008