Book: Predictably Irrational

I¬†finished this book (on the recommendation of a friend). Really enjoyable read (or listen, since I did the audible version). Fun book into what the author coins as Behavioral Economics — which amusingly blurs psychological behavior (and human irrationality) with economics, and looks at how people behave. (Which isn’t really economics, but amusing none-the-less).

You learn about things like why offering 3 choices is better than two. Give people an A, B and B- (B with something wrong with it), and humans gravitate towards B — since the choice between B and B- is easier than the choice between A and B. (Even when B costs more than A).

Then it gets into how to create price anchors (what people think are fair prices and how to influence them).

It talks about how people cheat — which turns out to be more than we think, but by less than we think. Most people don’t cheat a lot, but most people will try to cheat, just a little (10-15%) when they’re pretty sure they can get away with it. (At least college kids will). But then it gets fascinating because stealing money is a totally different than stealing tokens that can be exchanged for money. It’s funny how quickly humans can rationalize bad behavior.

It talks about supply and demand and where it falls short. But before it gets into really good economics here, it veers off. So it shows intriguing micro effects, without tracking in the macro (and seeing how self correcting, or exactly where the bias elasticity breaks). So it’s true to a point, but it would be a whole lot of study to figure out what those points are.

It get’s into the cost (or allure) of Zero. People will jump of "free" or zero, even when the costs (or tradeoffs) are excessive. How emotions and priming users with emotions can change their purchase behaviors. And how expectations can manipulate that (or be manipulated). And then into the placebo effect, and how price can influence it. (More expensive placebo’s have a better effect than cheaper ones). And so on.

There’s a more detailed summary of the book in the links below. But it really is a fun read, or listen for those of us who go through audio books like candy. And the synopses don’t capture the fascination of discovery and color of the examples like the author does. So if you have any interest in marketing, or shopping behavior or sociology/psychology — and how irrational humans/consumers are (and are almost completely snow-blind to), it’s a great read. With the caveat that almost all the experiments were done on college students (the old, before their brains are fully formed, and they’d got some intelligence, but might not have all their wisdom, yet).

What I enjoy is that marketing folks had figured almost all this stuff out using A|B testing in the past, but never care as to why’s, or what might be going on in the reasoning centers… and this just touches the surface of that, in a light and entertaining way. And thus is a fun eye-opener to "gimmick’s" being used to manipulate us (and we can use to manipulate ourselves). So my strongest recommendation, if you’re at all interested in the topic (of course).