Dan Ariely, Professor of Psychology and Behavioral Economics and author of Predictably Irrational.
Why do people make the choices they do? There is a science behind decision making, and if you can harness it, you can influence and predict the decisions people make. Dan Ariely, Professor of Psychology and Behavioral Economics and author of Predictably Irrational, has made a career of it and shared his expertise with attendees at The Premier Business Leadership Series in Amsterdam.
When an accident landed him in the hospital for an extended stay, Dan observed that “good, caring people can often make irrational decisions and they do so systematically – not because they don’t care, but because they are following accepted wisdom or their own belief that they are doing the right thing,” he said. It was his time in hospital that got him interested in why people make the choices they do, which led to his specialty in behavioral economics.
After extensive research, Dan has demonstrated these five principles:
- Humans are imperfect decision-makers, but our irrational behaviors can sometimes be predicted.
- When forced to make a decision, we will often seek the ‘do nothing’ or ‘default’ option.
- We don’t deal with complexity well and would much rather choose between similar options than different ones.
- The forces of ‘default’ and of ‘complexity’ are very powerful.
- It is often possible to predict the outcome of a decision and, with skill and insight, even influence it by framing the choice in a particular way.
To explain, Dan offered the analogy of the optical illusion: “Not only can you ‘trick’ the brain into seeing something that isn’t there, you can predict that people will see it and, even after they know it is an illusion the brain still sees the illusion,” he said.
“We are evolved to be incredibly good at vision and we still get it wrong,” says Dan. “Imagine how hard it is to make rational decisions about things we are not so good at.”
How we decide
When we are trying to make a decision, we often make comparisons between things that are similar rather than markedly different.
“For example, if you’re going on a vacation and trying to decide between Paris or Rome, you’re facing a difficult decision,” said Dan. “Both are beautiful cities with much to offer, but with different languages, cuisine, history and culture.”
“However, if we add a third option ‘Rome-minus’ (same Rome vacation but without free coffee), people start to compare Rome with Rome-minus, and are more likely to select Rome as a vacation destination than Paris.” Why? Because it’s easier to compare the two Rome options, which are similar, than the Rome / Paris options which are dissimilar.
Opt in or opt out?
In another example, Dan talked about the power of opt-in, rather than opt-out, showing that the differences in organ donation rates in various countries is much more affected by whether the enrollment form is for ‘check the box to opt-in’ (typically low rates of enrollment), or ‘check the box to opt-out’ (high rates of enrolment) than the religion, culture or morality.
It is a big decision and the power of default is typically to do nothing – i.e. not check the box, regardless of the option.
As Dan says, your decision about whether to enroll in the organ donation program is much more likely to be driven by the way the form is designed, than by your own preferences.
