My notes from one of the best books I've ever read. Enjoy.
Notes Predictably Irrational:
If you want people to choose option A then instead of offering A and B offer A, A- and B. For example you want to sell Honda. Offer Honda, Honda without package, Toyota. Higher chances people select something that is better than it’s own thing.- 75% of the time people will do this.
In order to make a man want to covet a thing, it is only necessary to make that item hard to attain.
Anchoring – first impression makes a huge impact on how we view and compare. To break away from competition, create a different environment all together so people can’t compare. For example Stabrucks is trying to make their whole store unique with coffee names and outlook and atmosphere to break away from Dunkin doughnuts coffee which has lower prices people are used to paying. Since it’s a “different†thing they can try charging $5 a cup.
Power of first and anchoring.
Be careful making a bad decision because you can anchor yourself with it and it will be easier to do it later. Buy lottery ticket – silly. But do it a few times and it will feel normal, because you have done it before.
FREE is dangerous – causes people to buy things they don’t need because of FREE bonus. Free offers lead to us making bad decisions. (free tshirt with credit card app anyone?)
Experiment: truffles vs Hershey kisses.
15 cents and 1 cent - 73% truffles 27% kisses
14 cents and FREE – 69% kisses 31% truffles. Price decreased the same 1 cent on both items!!!
Point: if you want item X, don’t buy item Y that’s similar because it has FREE if it is inferior. (like socks or shirts)
Cost of social norms: Someone is happy to do something for you, but if you offer to pay they get mad. (help me move? Ok. How about I give you $20? For 3 hours?! No!!)
Test: kids daycare. Parents are late = bad! But offer $5 penalty if parent is late – parents are MUCH MORE tardy. They know that there is a market cost (5) not social cost (bad parent) that is working now and can choose to be late and not care too much what people think.
Then fine removed – parents still late!! So be careful charging for social norms because market norms will prevail if you do.
Social norms are lot more effective in getting things to do something – employees included. So free lunches or gifts or perks are a lot BETTER than just giving cash, it creates a stronger link. Hence why gift cards are better gift than cash. Sometimes money is the most expensive way to pay someone.
Influence of arousal- when aroused men think like monkeys and would almost rape anything .. same for women more or less, we all knew this lets move on.
Procrastination – if you write goals down : by this date I do this, your chances of doing it are about 30% higher – sutdents who did this with their papers for the year got B+ avg vs no dates got C avg
We value what we have more than we should. I like this car so much – all the fun trips we had! And girl hookups! $5000! For someone else, he doesn’t have those memories, it’s a $3000 car. He is right.
Trials work because we assume ownership over item and when trial is done we will be hurt to give it up so we just buy/extend it. (cable service..etc)
Very interesting – chasing options HURTS us than just going after one thing. We need to actively CLOSE options so we waste less time and $$.
Think girls at bar – you want to concentrate on ONE and go for it, not run around girl to girl and then end up with nothing. Not that I am speaking for experience or anything
Don’t sent cards to people who don’t care, don’t do stuff when you have to concentrate on more important things (like family) Put stuff you don’t really do behind you (clothes u don’t wear but keep, hobbies you WISH you return to one day but never do)
Expectations:
Multiple tests found out that placebos worked just as well as the real thing, amazingly patients responded that they got better at the same rate!
No just aspirin and pills, but surgeries as well!!
People who are told what to expect let their brain respond: given regular sobe drink and told that “it makes your brain more active and you smarter†– 28% better test scores on a test
So our mind is infact associating price with quality, we have to actively try to break that link, and realize that it might not be the case, but it is very very hard and subconsciously we might believe that the product will not work as well as the expensive counterpart. Just have to work hard on reminding ourselves it is just as good.
Cheating.
People (in the US) have a cheating “barrier†for example we might not steal a car, but we might take a pen from work. Almost all people will cheat if there is a chance, as long as it is a small thing (in this experiment about 10% of value) so if they have a chance to steal $100, they will not do it since it is BAD, but taking $10 is no big deal. As long as the “I am a cheater because this is a big deal (item) and I am bad†trigger is not activated people do it, but added up it costs retailers and US govt billions of dollars. Buying clothes and returning them after wearing = 16 billion loss annually.
What is interesting, in experiments where people had a degree of getting away with it from possibly caught to 0% chance at all they can get caught, EVER. The cheating % is the same – around 10-15%, hence people think this way:
I am not going to cheat and be bad, but I will embezzle a bit – no matter if they can get caught easily or not at all.
However, if people are presented with a quick message such as “by taking this test you agree to the Honor code†or “Can you recite the 10 commandments?†people will not cheat… at all. This shows that if you trigger the “good person†switch in the mind people will remember it when they take the test and will not cheat. This can be very useful in a variety of ways..good and bad.
Lastly, when a person is not dealing with cash, but is one step removed (property, electronic money, credit) it is much more likely he will cheat or embezzle. If you remove the cash factor people don’t view it as strongly – hence casinos have chips. Experiment – 6 cans of coke in the communal student dorm vs plate with 6 $1 bills. After 2 days all cokes gone after a week still all $1 bills laying there.
Lastly, when you go to order food or drinks, always try to order first. Person who follows tries to show his individuality and will not order same thing even if preferred. Tests show the first person is the only one who is satisfied fully with their choice where everyone else is lower. Restaurant idea – written orders, so no one knows what the other one ordered, more complicated but higher satisfaction with the meal.
Notes Predictably Irrational:
If you want people to choose option A then instead of offering A and B offer A, A- and B. For example you want to sell Honda. Offer Honda, Honda without package, Toyota. Higher chances people select something that is better than it’s own thing.- 75% of the time people will do this.
In order to make a man want to covet a thing, it is only necessary to make that item hard to attain.
Anchoring – first impression makes a huge impact on how we view and compare. To break away from competition, create a different environment all together so people can’t compare. For example Stabrucks is trying to make their whole store unique with coffee names and outlook and atmosphere to break away from Dunkin doughnuts coffee which has lower prices people are used to paying. Since it’s a “different†thing they can try charging $5 a cup.
Power of first and anchoring.
Be careful making a bad decision because you can anchor yourself with it and it will be easier to do it later. Buy lottery ticket – silly. But do it a few times and it will feel normal, because you have done it before.
FREE is dangerous – causes people to buy things they don’t need because of FREE bonus. Free offers lead to us making bad decisions. (free tshirt with credit card app anyone?)
Experiment: truffles vs Hershey kisses.
15 cents and 1 cent - 73% truffles 27% kisses
14 cents and FREE – 69% kisses 31% truffles. Price decreased the same 1 cent on both items!!!
Point: if you want item X, don’t buy item Y that’s similar because it has FREE if it is inferior. (like socks or shirts)
Cost of social norms: Someone is happy to do something for you, but if you offer to pay they get mad. (help me move? Ok. How about I give you $20? For 3 hours?! No!!)
Test: kids daycare. Parents are late = bad! But offer $5 penalty if parent is late – parents are MUCH MORE tardy. They know that there is a market cost (5) not social cost (bad parent) that is working now and can choose to be late and not care too much what people think.
Then fine removed – parents still late!! So be careful charging for social norms because market norms will prevail if you do.
Social norms are lot more effective in getting things to do something – employees included. So free lunches or gifts or perks are a lot BETTER than just giving cash, it creates a stronger link. Hence why gift cards are better gift than cash. Sometimes money is the most expensive way to pay someone.
Influence of arousal- when aroused men think like monkeys and would almost rape anything .. same for women more or less, we all knew this lets move on.
Procrastination – if you write goals down : by this date I do this, your chances of doing it are about 30% higher – sutdents who did this with their papers for the year got B+ avg vs no dates got C avg
We value what we have more than we should. I like this car so much – all the fun trips we had! And girl hookups! $5000! For someone else, he doesn’t have those memories, it’s a $3000 car. He is right.
Trials work because we assume ownership over item and when trial is done we will be hurt to give it up so we just buy/extend it. (cable service..etc)
Very interesting – chasing options HURTS us than just going after one thing. We need to actively CLOSE options so we waste less time and $$.
Think girls at bar – you want to concentrate on ONE and go for it, not run around girl to girl and then end up with nothing. Not that I am speaking for experience or anything
Don’t sent cards to people who don’t care, don’t do stuff when you have to concentrate on more important things (like family) Put stuff you don’t really do behind you (clothes u don’t wear but keep, hobbies you WISH you return to one day but never do)
Expectations:
Multiple tests found out that placebos worked just as well as the real thing, amazingly patients responded that they got better at the same rate!
No just aspirin and pills, but surgeries as well!!
People who are told what to expect let their brain respond: given regular sobe drink and told that “it makes your brain more active and you smarter†– 28% better test scores on a test
So our mind is infact associating price with quality, we have to actively try to break that link, and realize that it might not be the case, but it is very very hard and subconsciously we might believe that the product will not work as well as the expensive counterpart. Just have to work hard on reminding ourselves it is just as good.
Cheating.
People (in the US) have a cheating “barrier†for example we might not steal a car, but we might take a pen from work. Almost all people will cheat if there is a chance, as long as it is a small thing (in this experiment about 10% of value) so if they have a chance to steal $100, they will not do it since it is BAD, but taking $10 is no big deal. As long as the “I am a cheater because this is a big deal (item) and I am bad†trigger is not activated people do it, but added up it costs retailers and US govt billions of dollars. Buying clothes and returning them after wearing = 16 billion loss annually.
What is interesting, in experiments where people had a degree of getting away with it from possibly caught to 0% chance at all they can get caught, EVER. The cheating % is the same – around 10-15%, hence people think this way:
I am not going to cheat and be bad, but I will embezzle a bit – no matter if they can get caught easily or not at all.
However, if people are presented with a quick message such as “by taking this test you agree to the Honor code†or “Can you recite the 10 commandments?†people will not cheat… at all. This shows that if you trigger the “good person†switch in the mind people will remember it when they take the test and will not cheat. This can be very useful in a variety of ways..good and bad.
Lastly, when a person is not dealing with cash, but is one step removed (property, electronic money, credit) it is much more likely he will cheat or embezzle. If you remove the cash factor people don’t view it as strongly – hence casinos have chips. Experiment – 6 cans of coke in the communal student dorm vs plate with 6 $1 bills. After 2 days all cokes gone after a week still all $1 bills laying there.
Lastly, when you go to order food or drinks, always try to order first. Person who follows tries to show his individuality and will not order same thing even if preferred. Tests show the first person is the only one who is satisfied fully with their choice where everyone else is lower. Restaurant idea – written orders, so no one knows what the other one ordered, more complicated but higher satisfaction with the meal.
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