The Knowledge Project – Irrationality, Bad Decisions, and the Truth About Lies with Dan Ariely

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Intro
Decisions and Decision Making
  • The 3 categories of decisions
    • Small decisions 
      • Ex. – buying coffee
    • Big Decisions – we think about these a little more
      • Ex. – Buying a car, having kids
      • Dan feels he thrives here
      • Here, there’s lots of room for improvement in the general populations
    • Decisions as habits
      • Habits are small decisions that we make enough times, that they become as important as big decisions
  • We make decisions as a function of the environment we’re in
    • Ex – kitchen design can influence how likely you are to eat healthy
      • Think about this – the drawer for fruits and vegetables is at the bottom of your fridge (where it’s hard to reach) and also usually opaque
        • If you want to eat more fruits and vegetables, put them front and center
    • Apple Pay is designed to get you to spend more and think less
      • So, don’t use it if you’re prone to spending problems
      • Dan recommends using a prepaid card for all discretionary spending – have a set amount to spend every week, and start each Monday
    • Everyone is usually their most productive for the first two hours of the work day
      • To take advantage of this – do your most important tasks earliest and don’t have anything important scheduled during the “afternoon lull”
Rationalizing Our Choices
  • We tend to rationalize our choices with stories that we like to tell ourselves
  • “We are so quick in telling ourselves stories about why what we did was actually the right thing, that we convince ourselves we can’t hide this – not just from other people, but from ourselves”
    • We end up thinking we are making the right decisions when we probably aren’t
Behavioral Economics
  • In standard economists, we assume people are perfectly rational
    • Because of this, recommendations are made that are good for rational people
  • In behavioral economics, we don’t assume this – it’s realized that people behave both rationally and irrationally
    • Because of this, recommendations are made that are good for ..”normal people” (or people who behave both rationally and irrationally)
  • “We are comparative creatures inherently, and we do it everywhere”
    • We’re more likely to add value to a larger cup of coffee, when it’s next to a smaller one
  • Cross culturally – “lots of people lie a little bit”
    • We don’t see cross-cultural differences unless you’re examining tasks that have the complexity that comes with being embedded in a social context
      • When it comes to questions of “Would you bribe a policeman?” or “Would you not pay your taxes?” – HUGE cultural differences
The Honest Truth about Dishonesty
  • Why are we so dishonest with ourselves?
    • Partly because we are unable to see it in ourselves in a deeper way
    • We’re protecting our ego
    • “The amount of dishonesty that we exhibit ends up being a balance between wanting to benefit from dishonesty, but not wanting to feel that we’re thieves” – We cheat up to the level that we’d feel uncomfortable about it
      • We want to be dishonest AND look in the mirror and feel good about our actions
  • Can you test for “how dishonest” a person is?
    • One study Dan designed, showed that people tend/want to hire people who will cheat for the company
  • How can we not lie to ourselves as much, and allow our ego to let in more of actual reality?
    • Check out the documentary Dan made – Dis(honesty) – The Truth About Lies 
    • “Honesty is like dieting, it’s something you have to fight with every day”
    • We need a hightened awareness, but also need to realize that dishonesty is something we can’t get rid of
    • Right now, everyone just assumes they’re honest. and that doesn’t help
    • Think about yourself as an adviser, instead of just in terms of your self-interest
      • Ask yourself – “What would I advise someone like me to do?”
    • Think in terms of the long term
      • Imagine having to make this same decision over and over again – how would it affect you?
    • Ask – “If this was a larger decision, would I still make the same one?”
Pluralistic Ignorance
  • The idea that when we’re in the company of other people, we look at the behavior of other people as indicating what the right thing to do is
    • In a large class, people tend not to ask questions, we tend to think – “Everyone must understand this”
  • How do we overcome this?
    • Blame it on your nationality/home town
      • Ex – Tim Ferriss might say, “Pardon my ignorance, I’m from Long Island after all, but what did you mean by that?’
    • Have rules
      • Ex – Dan has a rule that he always tells people if they have something in their teeth, and he then tells that person that he has that rule, so as not to make them feel embarrassed
      • “Having rules protects us”
        • Like “I only eat desert on Saturday”
        • Violating the rule, violates the principle
        • Instead of having a rule like “‘I’m trying to eat healthier”, have a rule like “I don’t eat desert” – it makes the decision making process much easier 
        • “Whenever you can create a rule for behavior, even if you give up some flexibility, it’s probably a good idea”
What is Dan reading?
Some More on Dan
  • Dan’s Rules
    • He only works with people he really loves
      • He hires people before he needs them, assuming he really likes them and desires to work with them in the future
  • What holds Dan back?
    • He doesn’t get as much sleep as he should
    • He says yes a lot, and takes lots of risk with his time – he likes to learn by experience
      • “I take invitations for different things, and see where it leads me”
  • “The people I think are incredibly successful, are people who create a short term goal, that they can measure, and see progress on”
  • What one message does Dan hope his students take away from his teachings?
    • Take the idea of environment redesign very seriously
      • “Don’t be a slave to the environment somebody else created for you”
    • Doubt your intuitions
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