Monday, March 31, 2014

Predictably Irrational: The hidden forces that shape our decisions

#author.Dan Ariely

I finished back in March, but was lazy about comments. I will try now to review the ebook before returning it to the library.

1. We choose things in relative terms by comparing.
Example of subscription to the Economist.
- Printed (P) subscription price $125; the decoy.
- Web-only (W) subscription price $59,
- P+W subscription was same as P at $125.
Removing the decoy shifted choice to the cheaper Web subscription.

And we tend to compare easy things and not difficult to compare things. heuristic.rule of thumb.

#Example of distorted picture.
George Clooney, distorted George Clooney (decoy), and Brad Pitt. Addition of decoy shifts choice to the more "familiar" Clooney picture.

Translate into advice for dating... bring a wing man (decoy); he should be like you but defective in a small way (physically or mental).

If prices can be arbitrary, then arbitrary coherence can occur.
Example of students anchoring arbitrary prices by writing the last two digits of their SSN as  price $ on the sheet of auctioned items (SSN became price anchor). When it was time for the auction, students with higher last two digits on their SSN numbers bidded, on average, higher amounts!

Self-herding with Starbucks. I've bought coffee here already, let's just keep buying here.
But to change anchor from Dunkin Donuts to Starbucks, we have to create an entirely different experience so that coffee is not priced with coffee anymore. It is gourmet coffee.

#Example of taking an ambiguous experience, (poetry reading by Ariely) and anchoring with pay or demand payment. Therefore, our decisions not shaped by just likes and dislikes but by lots of arbitrary coherence, anchoring.herding, like the goslings who imprint on the first moving animal, we keep following that initial arbitrary decision.

This affects real market prices because it changes demand. Our memory of past price makes us sensitive to price changes. Ariely thinks without price memory, we would be less resistant to price changes.

>interlace.Inflation Expectations.anchoring.
If Feds foster inflation rate to anchor a 2%, then economy will be resistant to inflation changes.

Or the anchoring might be bad.
"For example, because of some unfortunate initial anchors we might mistakenly trade something that truly give us a lot of pleasure but regrettable had a low initial anchor) for something that gives us less pleasure (but owing to some random circumstance had a high initial anchor)" 
#notes.ch3.Cost of Free stuff
Free is not free. Time cost too. Waiting in line for free Ben & Jerry ice cream cost my time! (which is about $100/hr currently)

#Example of Lindt chocolate vs. Hershey's kisses. 14 cent vs 1 cent got people to pay 73 to 27 ratio, but if kisses were free, then suddenly just 1 cent change causes ration to shift to 21 to 69 of Lindt:kisses!

The cost change from 2 cent to 1 cent is NOT the same as 1 cent to FREE in our minds.
"imagine going to a sports store to buy a pair of white socks, ... later you're leaving the store, not with the socks you came in for, but with a cheaper pair that you don't like at all (...) but that came in a package with a FREE! second pair."
The decoy is very strong! Compared to the relative price of FREE, the cheap socks you don't really like are a bargain that can't be refused.

#Example of Amazon FREE shipping! In France, they were NOT buying the second book because the second book did not offer FREE shipping as a bonus. It offered 20 cents shipping (normal shipping cost being about $3.95). 20 cent close to FREE but not even close!

Social policy
If you want people to drive electric cars, offer FREE registration and inspection fees!

In a social group, one person should pay the entire bill. Everyone else gets their meal for FREE. (Until of course next time, and then someone must keep count, and there's always personality differences that results in different Fudge factor for each person. Small cheaters always want a free meal. Is it worth it to reduce my pain of paying? Trade-off between trust within group and individual pain of paying.

#comment.ch4.The Cost of Social Norms.
Market norm vs. Social norms.
Men don't pay for sex, but men will pay for dinner.

#Example of computer task done for money (Market norm) or as a social request (Social norm).
$5 got 159 task items done.
50 cent got 101 items done.
FREE (social request) got 168 done.

#Example of lawyers not willing to offer services to needy retirees for $30, but agreed when the services to needy retirees was for FREE.
"The sensei was not charging the group for the training. The students, feeling that this was unfair, approached sensei one day and suggested that they pay him for his time and effort. Setting down his shinai, the sensei calmly replied that if he charged them, they would not be able to afford him."
Gifts fall under Social norms. Explicitly priced gifts are not gifts.

>interlace.Giving gifts to politician falls under Social norms. Maybe we should let corporation pay Politicians for favors completely under Market norms. Think of the amount of money companies would pay?! Instead of cheap free meal and plane tickets, they would have to pay millions! The extra money would go back to making the system more transparent. How much did Google pay to get that piece of legislation?
"thinking about money makes us behave as most economists believe we behave and less like the social animals we are in our daily live"
#Example of day-care center imposing a fine for parents who came late to pick up their kids. It backfired. The more parents decide to come late anyways and just pay the fine! Even when the fine system was removed, parent's behavior stayed worse, ie they kept coming late to pickup their kids.

>interlace.Do companies want ANY social contracts with customers? Probably not. Do companies participate in social contracts with their communities? Probably.
Do companies want social contracts with employees? Probably. More hard working.
Should companies give gifts (Hawaii vacation) reward instead of  cash bonus rewards?

A police officer operates in both Market norm (he gets a salary), and in Social norm (he is risking his life for honor of the position).

Burning Man economy is base on barter, ie gift-exchange with social pricing, bartering of service? in social norm

Examples of cookies for free (social norm) and cookies for 5 cent (market norm)
If you can pay, then take all the cookies!
Free candy or 1 cent candy: 207 students took free candy; 58 students paid for candy.
However, average number candy per person was 1.1 for free and 3.5 for paid.
Fails 2nd Law of Demand.
Therefore, 228 free candy was consumed, while only 203 paid candy was consumed.

When everything is FREE do we start viewing the world as a communal place?

30 truffles per person for 1 cent, or 1.5 truffle per person for free or 8.6 truffles in payment for effort.

#notes.ch6 Arousal influences our decision.

It is better to completely avoid situation where you have to make a critical decision under Arousal.

#Example where 5 guys said they would slip a woman a drug to increase the chance that she would have sex with them increase to 26 (420% increase) when answering the question in a state of arousal.

#notes.ch7.Procrastination and Self-Control

#Example of giving deadlines, letting students make deadlines, and providing students with tools to manage and define deadlines for assignments. It is best to be dictatorial teacher!
Procrastination in health care might be true. Therefore, give us healthcare decision tools! Another tool? More information?
"America's top killer isn't cancer or heart disease, nor is it smoking or obesity. It;s our inability to make smart choices and overcome our own self-destructive behaviors. "
To motivate, use a variable schedule of reinforcement! Or be like Ariely, schedule movie time before the pain. Transient pleasures can be used to motivate us to the doorstep of purgatory.

#notes.ch8.ownership jakes up the price! We invest emotional content into the object, and project a future pleasure revenue stream. The example was Duke basketball tickets. The example was Ariely's remodeled "open-space" house. When they changed it back into a normal "closed-space" house, it sold!

In traditional marriage, you own the other person. That makes you value them as priceless. Today, you don't own the other person, so the relationship doesn't have as much psychological value.

#notes.ch9. keeping our options open, modern gigolos.

#Example of keeping our children in every activity just in case it might spark their interest and passion or habit and obsessive-compulsive behavior. At least they'd get good at something!

Dating door games! Keeping old lovers around, just in case. Social norms says this is bad form.
"The truth is that they could have made more money by picking a room--any room--and merely staying there for the whole experiment."
Loss aversion, even if they are worthless options.
"In our modern society...we are continually reminded that we can do anything and be anything we want to be. The problem is in living up to this dream."
Just pick one side of the coin and go do it. Be a Head or Tail, it doesn't really matter.

Expecting your Team to win blinds you to the fouls they commit during the game.

#Example was MIT beer, budweiser+balsamic. When told the ingredients, they expected bud+balsamic to taste "bad" and so it was. But when not told the ingredients, they liked the bud+balsamic better. Informed before tasting might "prime" their sensory perceptions?

Starbuck effect. When the containers for the "extras" were fancy, they enjoyed the coffee more.

Coke vs. Pepsi, blind and non-blind in fNMR showed brain difference.

#Example of famous violin player in NY subway. Expectation does change our appreciation of whatever it is we are experiencing.

#notes.ch11.the placebo effect is strong!
The examples were fake heart surgery, threshold for pain, cheap cold-remedies.

#notes.ch12.mounting Distrust!
marketing companies know anchoring, social norms and the power of FREE in market and social norms.

#Example of offering free money at a both to measure peoples level of distrust.
$1 = 1% people who stopped.
$5 = more
$50 = 19% stopped. This was interpreted as a low level of trust, but this is correct. There should be a low level when the offer is free money! It severely violates market norms. If an expensive gift (worth ~$50) then I think the trust level would be higher.

I wonder at what implicit price of a gift would give the same 19% of the explicit cash price of $50?
Probably it would be higher!

In the context of shared resources, can low level of trust can lead to Tragedy of the Commons (TotC)?

#Example of a group pot of money. Everyone puts in an equal amount, the total is doubled and the new amount is equally redistributed. From Ariely's other book, we know that there is always a small level of cheating, therefore the return on this experiment will always be less than optimal because one player will always cheat and put in a little less than the agreed upon amount.

What is the correlation between the Fudge Factor and the level of Trust?  If we can reduce the Fudge Factor will this increase the overall level of Trust in a community? Or is it the other way around? Must we increase community Trust to decrease aggregate individual Fudge Factors?

As the Market exploits our trust, the level of distrust increases and spills over into decisions about shared resources (which in the end are what supports the Market) and lead to TotC.

Can we begin to attenuate the rapid decline of our natural resources by first being truthful on our resume, and our online dating profiles?

Who has more influence in determining the Social norm of our communities: Individuals, .com, .org, .net, .gov? Some Market norms are now being set by computer algorithms. That's probably a good thing in the long run. AI as a supplement to HI.

#notes.ch13.ch14.expanded in The Honest Truth About
little cheats.linkedData
Fudge Factor.

Friday, March 28, 2014


First season was in 2007

#creator.Jon Schwartz

Yvonne Strahovski as Sarah and lethal spy; another orphan.

28032014. Season 4, episode 21, "Chuck vs The Wedding Planner", we meet Sarah's father again and learn a little bit more about her past. We learn how her early life with a con man as a father has shaped her view. Know Why the Caged Bird Sings.
chpt. 29 Marguerite is in SF and is 13 years old. She's introduced to the con mens. Her adopted father's friends: Stonewall Jimmy, Cool Clyde, Tight Coat, and Red Legs.

#forwardpropagate.//orphan characterization
Emma.Once Upon a Time