Big Data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it.— Dan Ariely
The most heartwarming Dan Ariely quotes that will transform you to a better person
One of the big lessons from behavioral economics is that we make decisions as a function of the environment that we're in.
Even the most analytical thinkers are predictably irrational;
the really smart ones acknowledge and address their irrationalities.
We are all far less rational in our decision-making than standard economic theory assumes. Our irrational behaviors are neither random nor senseless: they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.
The idea that you will make the right decision every time is very unlikely.
Giving up on our long-term goals for immediate gratification, my friends, is procrastination.
Your immediate environment is comprised of coffee shops, supermarkets, websites, apps and all kinds of things - none of which have an interest in your long-term or short-term financial well-being.
When we think about labor, we usually think about motivation and payment as the same thing, but the reality is that we should probably add all kinds of things to it - meaning, creation, challenges, ownership, identity, pride, etc.
The major thing that holds you back when you're trying to change a bad habit like eating, smoking, or drinking too much is your belief you are out of control.
People are willing to work free, and they are willing to work for a reasonable wage; but offer them just a small payment and they will walk away.
A very simple bad decision is to get into debt. And that is very expensive.
People are irrational - and predictably so.
...[D]ivision of labor, in my mind, is one of the dangers of work-based technology. Modern IT infrastructure allows us to break projects into very small, discrete parts and assign each person to do only one of the many parts. In so doing, companies run the risk of taking away employees' sense of the big picture, purpose, and sense of completion.
We usually think of ourselves as sitting the driver's seat, with ultimate control over the decisions we made and the direction our life takes; but, alas, this perception has more to do with our desires-with how we want to view ourselves, than with reality.
You can think about life as a battle between you and a doughnut shop.
The doughnut shop wants you to eat another doughnut and pay the money, and you want to do it in the short term, but in the long term it's not good for you either financially or from a health perspective.
Take a brilliant, creative social scientist, without any respect for conventional wisdom and you get Ellen Langer. She is a fantastic storyteller, and Counterclockwise is a fascinating story about the unexpected ways in which our minds and bodies are connected.
Disasters are usually a good time to re-examine what we've done so far, what mistakes we've made, and what improvements should come next.
For all of us, it's very hard to think about money, and because of that, we need help. In the same way that for all of us, it is hard to eat well, and we need some help. The poor have a particular challenge, which is that their life is actually much more complex - and they're much more complex cognitively.
The retail industry has its own headache: it loses $16 billion a year to customers who buy clothes, wear them with the tags tucked in, and return these secondhand clothes for a full refund.
I don't want to say that the poor are inherently cognitively diminished, but at the end of the day of making difficult, tough decisions, it's very hard to have the energy to think about things with the right mindset.
It is helpful to think of people as having two fundamental motivations: the desire to see ourselves as honest, good people, and the desire to gain the benefits that come from cheating - on our taxes or on the football field.
The problem with opportunity cost is that opportunity cost is divided among many, many things.
In terms of the actual curriculum for management education, my own view is very simple-minded: The world is incredibly complex, it changes all the time, and we should not even hope that we could create a general model that accurately describes the world in all its possible states.
Honesty is a complex and tricky thing, and we don't want to be honest all the time.
We can think about how we reduce the pain in paying.
So, for example, credit cards are wonderful mechanisms to reduce the pain of paying. If you go to a restaurant and you are paying cash, you would feel much worse than if you were paying with credit card. Why? You know the price, there's no surprise, but if you're paying cash, you feel a bit more guilt.
But because human being tend to focus on short-term benefits and our own immediate needs, such tragedies of the commons occur frequently .
Thinking is difficult and sometimes unpleasant.
In a world where everyone is behaving honestly, any dishonesty constitutes a big infraction. But, in a world where many people are behaving dishonestly, and the news is filled with stories of their infractions, even big infractions can feel small to the perpetrator.
Companies, however unintentionally, choke the motivation out of their employees.
I don't think we should go around life and being miserable all the time and feel the pain of paying. It's a question of what categories we want to spend more on and what categories we want feel that we are spending too much on and we want to cut down.
It is very difficult to make really big, important, life-changing decisions because we are all susceptible to a formidable array of decision biases. There are more of them than we realize, and they come to visit us more often than we like to admit.
If you think of people as making decisions actively, every time we think about the cup of coffee, we say, "How much will I enjoy the cup of coffee, what else could I not do in the future because I buy this cup of coffee?
It was shocking to realize how many low-income Americans don't have savings accounts.
With everything you do, in fact, you should train yourself to question your repeated behaviors.
The most difficult thing is to recognize that sometimes we too are blinded by our own incentives. Because we don't see how our conflicts of interest work on us.
In the U.S., I think there is an ideology of not telling kids what to do. Nobody to tell you who to marry, not tell you what job to pick. You're your own person. You have the freedom to choose, including the freedom to fail in magnificent ways. And I think that's the big difference. In other countries there is basically a social norm about saving that is passed from generation to generation. In the U.S. there isn't.
The companies that provide debt, what do you think their goal is? Is their goal for you to fully understand the cost of your debt? No. So they're basically creating these approaches to make you feel like it is incredibly cheap or just to think about the cost per day rather the cost per year or cost for a lifetime. So debt is very simple mistake.
If you have loans, the first thing you want to do is say, "Okay, look I have a credit card, if I really need to borrow, I have this emergency money that I can get, but for now there is no reason for me to keep cash at zero percent interest rate and at the same time, pay all of this money out. So, I think people need to figure out quickly how to pay loans and how much cash they should really keep.
The problem is that people basically dangle debt in front of us.
And the cost for the poor of course is much higher than for the wealthy.
Marketing is all about providing information that will heighten someone's anticipated and real pleasure.
Imagine you owe on five credit cards, you owe five debts.
So which debt should you pay first? And the answer is very simple: You should pay the one with the highest interest rate first. But that's not what people do.
None of us always make the best financial decisions.
Money is a great way to get happiness.
Right? Lots of wonderful things you can do with money. The question is, are we really optimizing on that? So, if you think about getting lattes and getting cable. Which one of those is actually giving you a greater happiness, and if you have to cut on one of those, which one would you cut? So, I think thinking in terms of concrete terms would help us a great deal.
The things that motivate us are to help other people, to feel that we're useful, to feel that we're getting better, to feel that we are kind of living to our potential, to get a sense of meaning. All of those things are positive.
Not all debt is bad. From time to time we should get into debt when there's a good reason for that.
When parents have college savings accounts for their kids, their kids show higher social and cognitive performance.
Money is all about opportunity cost. Every time you spend on something, that's something you can't spend on something else.
Money are very difficult to think about.
So, we think about money as the opportunity cost of money. So, we at some point went to a Toyota dealership and we asked people, what will you not be able to do in the future if you bought this Toyota?
What you should do is wait until the end of each month, and then say, "OK, how much money do I have? How much do I need? Let me send the rest to retirement."
I always found the appeal to the market gods a bit odd.
Why would the market fix mistakes instead of aggravating them?