Melvin's digital garden

Predictably irrational

The truth about relativity

  • we are wired to compare things
  • similar things are easier to compare
  • the decoy effect (Paris without coffee, Paris, London)

The fallacy of supply and demand

  • demand can be created (story of Tahitian black pearls)
  • anchoring effect, arbitrary coherence
  • self-herding (switching from Dunkin’ Donuts to Starbucks)
  • question your habits!
  • pay attention to the first decision

The cost of zero cost

  • presence of free may lead us to make a bad choice
  • when something is free, we forget the downside (loss aversion)
  • zero price effect
  • pain of paying (one person should pay the entire bill)

The cost of social norms

  • voluntary, gifts keeps us in social norms, money gets us to market norms
  • even thinking about money shifts us towards market norms
  • open source is primarily in the realm of social norms
  • improving the education system by igniting a social passion
  • Burning Man and its rejection of market norms (money not allowed)
  • gifts are financially inefficient, but they are an important social lubricant

The power of a free cookie

  • when price is reduced to zero, people sacrifice their own desired for the benefit of others (social norm)
  • same thing happens in a communal plate of food (the last piece is left)
  • effort manages to keep a large part of the social norms
  • the dark side of putting a price on pollution

The influence of arousal

  • magnitude of underprediction of how arousal affects our decision making was substantial
  • prediction what we will do in a different emotional state is extremely difficult

The problem of procrastination and self-control

  • equally spaced externally enforced deadlines is the best cure for procrastination
  • without precommitments, we keep on falling for temptation
  • commit up front to a fix schedule
  • schedules of reinforcement (magic of gambling and playing the lottery, occasional nice email/new article)
  • create positive associations to encourage good behaviors
  • our top killer is our inability to make smart choices and overcome our own self-destructive behaviors

The high price of ownership

  • ownership changes our perspective
  • we fall in love with what we have
  • we focus on what we may lose rather than what we may gain
  • we assume other people will see the transaction from our perspective
  • “virtual ownership” in the case of online auctions/trial promotions
  • view all transactions as if you were a nonowner
  • “The Lake Wobegone Effect”

Keeping doors open

  • people are beset not by a lack of opportunity, but by a dizzying abundance of it
  • irrational impulse to chase worthless options
  • consciously start closing some of our doors
  • take into account the consequence of not deciding (story of starving donkey and similar stacks of hay)

The effect of expectations

  • expectations can alter our experience
  • Coke vs Pepsi experiment
  • stereotypes can affect our behavior
  • Joshua Bell’s performance at the Metro
  • positive expectation allow us to enjoy things more and improve our perception of the world

The power of price

  • pricey medicine do make us feel better
  • placebos run on the power of suggestion
  • SoBe drink (message + price was more powerful than the beverage)
  • consumers who stop to reflect the relationship between price and quality are less likely to assume a discounted drink is less effective

The cycle of distrust

  • evidence of deep mistrust in people
  • tragedy of the commons
  • erosion of trust over time (dating site, resumes)
  • origin of a statement affects our trust
  • boy who cried wolf

Why we are dishonest

  • two types of dishonesty (out right criminals vs white collar crime)
  • our internal honesty monitor is active only when we contemplate big transgressions
  • all participants cheat a little, independent of the risk of being caught
  • thinking about an honor code stops cheating!

Dealing with cash makes us honest

  • the further away from cold hard cash, the easier it is to cheat
  • taking a pencil from work vs taking 50cents from the petty cash
  • when we deal with money, we are primed to think about out actions as if we had just signed an honor code

Beer and free lunches

  • announcing orders in public alters the choices (in some societies people want to feel unique, in others people want to belong to the grouop)
  • plan your order before the waiter arrives
  • basis of free lunches: providing benefits for all the parties involved

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