Predictably Irrational

Dan Ariely is a behavioral economist working at MIT.  He studies how people make decisions and has recently published a book about how irrational we all are.  Dan's book suggests that we are not randomly irrational, but rather our irrationality has patterns and themes that make it entirely predictable.  So for instance, why do home buyers often place their first offer much lower than the sale price on a house?  (The answer is that existing ownership of something creates an intrinsic "value gap" between seller and buyer).  Another brilliant example is how easily and irrationally we are influenced on price & value by the context of how something is sold, rather than a supply/demand/quality equation that we have in our head.  Expensive wine should be good, right? Or a ripped t-shirt sold in a fashionable LA boutique is "reasonably priced" at $100, because the jeans on display next to it are $450.  Anybody who works in the consulting business should read the chapter about pricing different offers - you'll never price a proposal the same way again.

It made me question a lot of my recent purchase decisions, from investing in an uncertain market, to buying property, to purchasing a coffee at my local Starbucks. In an effort to becoming more less predictably irrational, I'm going to try to immunize myself through awareness of these irrational behaviors. I'm going to attempt a week of no irrational behavior. Let's see how that goes.