I own this book and took these notes to further my own learning. Taking notes, publishing them and re-reading them allow me to flatten my forgetting curve. If you enjoy these notes, I highly encourage you to do the same, buy this book here and take your own notes.
- The truth about relativity
- Economist print + internet subscription - decoy effect
- 1st learning most people don't know what they want unless they see it in context. We don't know what kind of bike we want until we see a champ winning the tour de France with this model
- 2nd learning we tend to look for comparison to make our choice. We avoid comparing things that are not easily comparable
- Honeymoon full pension in Paris or Rome at the same price? Add an offer same price Paris full pension + Rome full pension + Rome not full pension at the same price, and we tend to pick the Rome full pension
- The fallacy of supply and demand
- 1st learning = Anchor price
- 2nd learning = first decision resonates over a long sequence of decisions
- Arbitrary coherence: although initial prices (Assael's peals) are “arbitrary”, once those prices are established in our mind, they will shape present but also future “prices” (“coherence”). NB: The price tag is not necessarily the anchor, it becomes anchors when we look for buying something and we use this price as a comparison price
- 1 = Just showing a simple 2 digits social number before an experiment influenced the bid price given by students for a bottle of wine. The higher the social digit, the bigger was the bid.
- 2 = the first bid then influenced students’ second bid, their anchor price remains (coherence principle). People that move to another city generally remain anchored with the price they were used to pay in their former city.
- 3 = how to change an anchor price? Starbucks example, they create a new anchor price of coffee, with a new experience of coffee (more premium European roasted coffee). Anchors can move with times and new experiences/products.
- Economy consequences: Descartes, cogito ergo sum " I think therefore I am”, in fact, we are more the sum of our first naïve, random behaviors. The logic of anchor questions the elegant assumption liberal that market price is dependent on the offer and demand. The free market is ideal in a world where we are rational, but we are not, hence the importance of regulating some market activities
- Question yourself now: how did this habit of buying a coffee every morning began? What amount of pleasure do you get from this? Could you spend this on something else?
- The cost of zero cost
- The power of free with the experience of Lindt & Kisses that drop just to 1 cent both (one becomes free); Amazon free shipping increase sales everywhere but not in France (shipping was 1 franc in France); the zero calories beer increase the feeling of healthiness a lot compared to the 3 calories beer (which is very few)
- Free lead us to take an irrational decision and go against the theory of rational cost-benefit analysis
- A social policy could benefit from this irrational behavior by offering free things for electric cars, getting rid of fees for early detection of severe illness, etc.
- The cost of social norms
- We tend to apply 2 very different norms for market exchange and social exchange
- Introducing market exchange (money, giving money instead of gift) into a social exchange violates the social norms and hurts the relationships. Once this mistake has been committed, recovering a social relationship is very difficult (experience of the kindergarten and the fine in Israel).
- Today companies see an advantage in creating social exchange (google, startup..) o improve the loyalty and commitment of their employees.
- Introducing money incentive in talks relative to the teacher, doctors, etc. are likely to decrease the performance of this profession in the end
- The Influence of arousal
- The experiment showed that we think we know how we may behave in aroused states, but in reality, when aroused, sexual motivation becomes more intense. In a real aroused state the subjects acted very differently than what they expected.
- Hence the importance to focus more on the strategy to deal with the emotions that accompany sexual arousal. It's easier to fight temptation before it arrives than after it started
- The problem of procrastination and self-control
- Giving up on long term goals for immediate gratification = procrastination
- People aware of our irrationality and procrastination manage better to coax themselves into good behavior. They fix to themselves rules and deadlines or they align instant gratification with long term goals (running while watching a movie)
- Honda and ford bundled their maintenance service so that users were not procrastinating them
- The high price of ownership
- Endowment effect = when we own something we are beginning to value it more than other people do
- Aversion to loss can lead us to make an irrational decision
- It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.
- The IKEA effect
- Keeping doors open
- The irrationality of spending months selecting the best cameras, the opportunity cost of not taking photos within these months is, in fact, higher than the difference bwn each camera
- We never take into account the cost of the non-decision in our maths, we are paralyzed with choice (example: Hamlet, Shakespeare)
- The effect of expectations
- Telling people up-front that something might be disgusting will lead them to effectively think that it is disgusting. Expectations change the way we perceive and appreciate experiences
- Pepsi vs. Coke experiment
- The power of price
- The placebo (Latin = I shall please) effect: works thanks to 2 effects: 1) belief and confidence in the drug, 2) conditioning (Pavlov effect), the body builds up expectancy after repeated experiences and release various chemicals to prepare us for the future.
- The context of our character I
- In general, the superego is pleased when we comply with society's ethics, and unhappy when we don't. This is why we stop our car at 4 AM when we see a red light, even if nobody is around. This is why we get a warm feeling when we return a lost wallet to its owner.
- People cheat when they have the change to do so, but they don't cheat as much as they could. Moreover, once they begin thinking about honesty they stop cheating completely. In other words, when we are removed from any benchmarks of ethical thought, we tend to stray into dishonesty. Just a reminder of morality is enough to make us more honest
- The context of our character II
- Dealing with cash makes us more honest… indeed looking around us, the dishonesty we see involves cheating that is one step away from cash
- Beer and Free lunches
- In a group, most people won't necessarily choose their favorite beer (or other product), other factors than taste will occur such as showing their individuality, showing their originality, their status, etc.
- People are willing to sacrifice their own pleasure to project a certain image to others
- The pain of paying lunches could be reduced if a paying rotation was made with your friends at a restaurant.