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The Hidden Forces That Shape Our Decisions
REALITY
       VS.
SUBJECTIVE REALITY
D. Purves
BASKETBALL
Count the # of times that the players
in white pass the ball to each other




D. Simons
ILLUSIONS AS A METAPHOR
A FEW EXAMPLES OF

“DECISION ILLUSIONS”
% of drivers donating organs




                                                     0
                                  ...
Opt-in
                                                  n
                                        don ’t joi
            ...
What about professionals?




Redelmeier & Shafir (1995)
The Jam study
                          6 jams   24 jams

         Approach         40%       60%

                 Try   ...
Behavioral Economics ...
    Standard
What a piece of work is a man! how noble in reason!
 how infinite in faculty! in form...
IT IS ALL ABOUT .....


 FREE LUNCHES !!!
Do we know Our
 preferences?
    measurement
 Choice construction
Answer the following:

 Please write 3 reasons Please write 10 reasons
  why you love your       why you love your
    sig...
Answer the following:
Indicate on the following scale how many times do
you floss a day:

      0   1   2   3   4   5   6  ...
What do people infer

     0   1   2   3   4   5   6   7   8   9 >9

“I am below the norm”


                             ...
Do we know Our
 preferences?
    measurement
 Choice construction
Asymmetric dominance


 Attribute 1     R
               R’
                           P
                      P’
        ...
16%   68%

0%
84%   32%
Tom   Jerry’   Jerry
Form A




         Tom   Tom’     Jerry
Form B
The Hidden Forces That Shape Our Decisions




www.predictablyirrational.com


dan@predictablyirrational.com
The value of 1st decisions
Auctions of real products
                     Mean value   Low ss#   High ss#   Increase
 Trackball             16.25    ...
Tom Sawyer
Poetry
10
 8        Poetry, charge
          Poetry, pay
 6
 4
 2
 0
 -2
 -4
 -6
 -8
-10
  Short        Medium      Long
How should people
 What is the self herding
  decide about buying a
version of these decisions?
      cup of coffee?
???
Arbitrary Coherence ...
VS.
We are inherently &
fundamentally emotional!
Hot & cold states




  Never get a tattoo when
  you’re drunk and hungry
Hyperbolic discounting
          More later
          Less sooner
Value




                        Time
Delayed gratification & commitment




✔        ✔
       1 immediately     1 immediately

        No temptation button
    ...
Clocky
One step further ....
Free lunches !
The power of
expectations
taste tests
              Non-Blind                                        Blind


                          Colt 45

Coor...
Coffee “with” add-ons




 anise, nutmeg, clove, cardamom, etc
Expectations & beer: procedure

“Blind”                          ☺
                                 ?

“Before”   B / +V  ...
Price placebo
   effect
The history of medicine is the history
of placebo
Placebo & Classical
         conditioning


                  CS   UCS    UCR

Learning Trial:              Salivation


 ...
Endogenous opioids


      quot;God's Own Medicinequot;
       Sir William Osler
A new exciting medication

                                              Improved Pain Relief




              Veladone-R...
Overview of procedure
                                                              quot;drug repquot; introduces medicati...
Brochure pp. 1 & 4
Brochure pp. 2 & 3
Pain reduction after the pill
40
                              Reduction
                 35           No reduction
30

  ...
Effects of country of origin
30
        China
        USA
20                 22.2

10    13.2
             9.6
 0
        ...
Juliet:

quot;What's in a name? That which we call a rose
By any other name would smell as sweet.quot;

           Romeo a...
OTC medications?
 A pilot study
I shall always be a flower girl to Professor
Higgins because he always treats me as a flower
girl and always will; but I kno...
(Dis)Honesty
Regret
Warfarin: Anti-stroke medication


Chance of stroke / past stroke ≈ 21%
Warfarin (if taken correctly) ≈ 3%
  Cheap, with f...
Regret

• Our happiness and decisions are not guided
  only by our state...
• But also by other possible states
• And ones...
Lessons
VS.
Thanks
dan@predictablyirrational.com
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
Dan Ariely - World Innovation Forum
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Dan Ariely - World Innovation Forum

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Here are Dan Ariely's slides from his presentation at the World Innovation Forum

Dan Ariely - World Innovation Forum

  1. 1. The Hidden Forces That Shape Our Decisions
  2. 2. REALITY VS. SUBJECTIVE REALITY
  3. 3. D. Purves
  4. 4. BASKETBALL Count the # of times that the players in white pass the ball to each other D. Simons
  5. 5. ILLUSIONS AS A METAPHOR
  6. 6. A FEW EXAMPLES OF “DECISION ILLUSIONS”
  7. 7. % of drivers donating organs 0 20 40 60 80 100 De 4 Johnson & Goldstein (2003) nm ark Ne the 28 rlan Un ds ited 17 Kin gdo m Ger 12 ma ny Au 100 stri a Bel 98 giu m Fra 100 nce Hu 100 nga ry Pol 100 and Organ donations? Por 100 tug al Sw 86 ede n
  8. 8. Opt-in n don ’t joi and Check the box below ox -- want to b if you s the donor program participatechethe organ in ck on’t pe o ple d Opt-out nd join Check the box belowhif you -- a x don’t want t e bo to participate che cksorgan donor program n’t in the le do peop
  9. 9. What about professionals? Redelmeier & Shafir (1995)
  10. 10. The Jam study 6 jams 24 jams Approach 40% 60% Try 1.4 1.5 Buy 30% 3% Iyengar & Lepper (2000)
  11. 11. Behavioral Economics ... Standard What a piece of work is a man! how noble in reason! how infinite in faculty! in form and moving how express and admirable! in action how like an angel! in apprehension how like a god! Will Shakespeare (Act II,scene 2, of Hamlet)
  12. 12. IT IS ALL ABOUT ..... FREE LUNCHES !!!
  13. 13. Do we know Our preferences? measurement Choice construction
  14. 14. Answer the following: Please write 3 reasons Please write 10 reasons why you love your why you love your significant other significant other Please write 3 reasons Please write 10 reasons to buy a BMW to buy a BMW
  15. 15. Answer the following: Indicate on the following scale how many times do you floss a day: 0 1 2 3 4 5 6 7 8 9 >9 Indicate on the following scale how many times do you floss a month: 0 1 2 3 4 5 6 7 8 9 >9 Should you call the dentist to make an appointment?
  16. 16. What do people infer 0 1 2 3 4 5 6 7 8 9 >9 “I am below the norm” “I am above the norm” 0 1 2 3 4 5 6 7 8 9 >9
  17. 17. Do we know Our preferences? measurement Choice construction
  18. 18. Asymmetric dominance Attribute 1 R R’ P P’ Attribute 2
  19. 19. 16% 68% 0% 84% 32%
  20. 20. Tom Jerry’ Jerry Form A Tom Tom’ Jerry Form B
  21. 21. The Hidden Forces That Shape Our Decisions www.predictablyirrational.com dan@predictablyirrational.com
  22. 22. The value of 1st decisions
  23. 23. Auctions of real products Mean value Low ss# High ss# Increase Trackball 16.25 10.38 21.52 107% Keyboard 32.47 21.81 42.03 93% $9 wine 15.80 11.62 19.55 68% $82 wine 22.89 17.42 27.76 59% Design book 18.81 14.15 23.00 62% Belgian Chocolates 13.31 10.04 16.24 62% High dependency between the prices of the 2 wines and 2 computer accessories
  24. 24. Tom Sawyer
  25. 25. Poetry 10 8 Poetry, charge Poetry, pay 6 4 2 0 -2 -4 -6 -8 -10 Short Medium Long
  26. 26. How should people What is the self herding decide about buying a version of these decisions? cup of coffee?
  27. 27. ???
  28. 28. Arbitrary Coherence ...
  29. 29. VS.
  30. 30. We are inherently & fundamentally emotional!
  31. 31. Hot & cold states Never get a tattoo when you’re drunk and hungry
  32. 32. Hyperbolic discounting More later Less sooner Value Time
  33. 33. Delayed gratification & commitment ✔ ✔ 1 immediately 1 immediately No temptation button ✔ 10 w/ 10sec delay Ainslie & Herrnstein 1974
  34. 34. Clocky
  35. 35. One step further ....
  36. 36. Free lunches !
  37. 37. The power of expectations
  38. 38. taste tests Non-Blind Blind Colt 45 Coors Pabst Guinness Budweiser Pabst Colt 45 Miller Lite Guinness Miller Lite Coors Budweiser
  39. 39. Coffee “with” add-ons anise, nutmeg, clove, cardamom, etc
  40. 40. Expectations & beer: procedure “Blind” ☺ ? “Before” B / +V ☹ ? “After” B / +V ? ☺
  41. 41. Price placebo effect
  42. 42. The history of medicine is the history of placebo
  43. 43. Placebo & Classical conditioning CS UCS UCR Learning Trial: Salivation Test Trial: Salivation CS CR
  44. 44. Endogenous opioids quot;God's Own Medicinequot; Sir William Osler
  45. 45. A new exciting medication Improved Pain Relief Veladone-Rx Didehydro-Methoxymethyl Phosphate (250 mg oral formulation) Finally, a more potent opioid-agonist that provides fast-acting, long-lasting relief for moderate to severe pain.
  46. 46. Overview of procedure quot;drug repquot; introduces medication Improved Pain Relief Experimenter calibrates stimuli Veladone-Rx Didehydro-Methoxymethyl Phosphate (250 mg oral formulation) First set of shocks Participant ingests pill Finally, a more potent opioid-agonist that provides fast-acting, Second set of shocks long-lasting relief for moderate to severe pain. Questionnaire administered Debriefing
  47. 47. Brochure pp. 1 & 4
  48. 48. Brochure pp. 2 & 3
  49. 49. Pain reduction after the pill 40 Reduction 35 No reduction 30 25 20 16 10 6 0 Low Price High Price
  50. 50. Effects of country of origin 30 China USA 20 22.2 10 13.2 9.6 0 -5.8 -10 Non Asians Asians
  51. 51. Juliet: quot;What's in a name? That which we call a rose By any other name would smell as sweet.quot; Romeo and Juliet (II, ii, 1-2)
  52. 52. OTC medications? A pilot study
  53. 53. I shall always be a flower girl to Professor Higgins because he always treats me as a flower girl and always will; but I know I can be a lady to you because you always treat me as a lady and always will. —Eliza Doolittle Pygmalion; George Bernard Shaw
  54. 54. (Dis)Honesty
  55. 55. Regret
  56. 56. Warfarin: Anti-stroke medication Chance of stroke / past stroke ≈ 21% Warfarin (if taken correctly) ≈ 3% Cheap, with few side-effects Seemingly VERY strong incentive to take it However, only 66% adhere, even in best conditions (warfarin clinic) Can we increase adherence through incentives and regret?
  57. 57. Regret • Our happiness and decisions are not guided only by our state... • But also by other possible states • And ones that easily come to mind
  58. 58. Lessons
  59. 59. VS.
  60. 60. Thanks dan@predictablyirrational.com

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