Dan Ariely

Thinker

Translating tragedy into empirical insight

Introduction

Dan Ariely is a psychologist and behavioral economist, and one of the most influential academics currently working in his field. With three New York Times best-selling books and several highly-viewed TED talks to his name, he is known not only for his wide-ranging and incisive research but also for his accessible communication style and his sense of humor.

Ariely’s work, which spans many concepts from pain tolerance to financial decision making, has challenged some of the most basic assumptions of traditional economics, and shone a light on the systematic irrationalities of human behavior. His research has implications for individuals (How can we commit to healthier habits? How do we avoid irrational decision making?) as well as for society as a whole (How do we make work more fulfilling? How do we address wealth inequality?).

*The Decision Lab has collaborated with Dan Ariely in the past, when he served as an advisor for our work with the World Bank in Uganda. You can find out more about that project here.

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Quote

 

I do believe that an improved understanding of the multiple irrational forces that influence us could be a useful first step toward making better decisions.

– Dan Ariely, The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home

Important ideas

Sisyphus and the workplace – The importance of meaningful work

What factors make us feel good about the work we do? This is a question Ariely started wondering about after hearing a story from his former student, who was working at a bank. The bank was preparing for a big merger, and Ariely’s student had spent two weeks working constantly on a presentation for it. After many late nights of making graphs and tables, he finally sent the finished product to his boss—only to be told that, actually, the merger had been canceled. The realization that nobody would ever see the fruits of all that labor made the student feel deeply depressed. Seeing this, Ariely started to think about how we find value in our jobs.

Standard economic theory, and the models of labor supply that it has produced, don’t have much to say about the emotional connection that workers have to their jobs—and yet, most adults see their work as a central component of their identity. Labor is often talked about via the metaphor of the rat race: workers are motivated only by money, and they dispassionately do their jobs in order to get paid. But Ariely’s research has shown that this isn’t how people work.

In one experiment, Ariely and his colleagues had participants build Bionicles (a series of kids’ toys) out of Lego blocks, and paid them for each figure they made. For the first Bionicle, the experimenters offered $2.00; for the second, $1.89; and so on, offering 11 cents less each time. After offering a price, the experimenters asked them if they would take the deal—if they thought the price was worth it. Half the subjects, the so-called Meaningful group, built a brand-new Bionicle each round. But for the other half, the Sisyphus group, the experimenters disassembled their Bionicles as they went, and handed the pieces back to them to rebuild. The results: people in the Meaningful group built an average of 10.6 Bionicles, while the Sisyphus group built an average of 7.2.

Sisyphus is a figure from Greek mythology, was banished to Hades by Zeus and cursed to spend the rest of his days perpetually pushing a boulder up a hill. Every time Sisyphus succeeds in making it to the top, the boulder rolls back down to the bottom, and the task begins anew. Like Sisyphus, the participants in the second group were stuck in an endless cycle in which they saw no point, and were less motivated as a result.

This idea has huge implications for how we think about work. Apart from a few prestigious occupations, such as medicine and pedagogy, few jobs are generally thought of as “meaningful.” But Ariely has argued that meaning doesn’t require some noble goal to be attached to a job; instead, it is founded on a sense of purpose, and recognition of one’s labor. Ariely’s work can even be seen as empirical evidence for Karl Marx’s theory of alienation: when a worker has no investment or connection to the object of his labor, it undermines their autonomy, motivation, and happiness.

The Self-Concept Maintenance Model of Dishonesty – Why we think it’s okay to cheat (a little)

Ariely and his colleagues have theorized that people, when they behave dishonestly, usually do so in such a way that they are able to rationalize their actions, while still profiting from their cheating. Explaining dishonest behavior requires reconciling human psychology with economic theory: we don’t like to act immorally, because we don’t want to think of ourselves as immoral people—but we also want the benefits that cheating can bring us.

As Ariely explains in his book, The Honest Truth about Dishonesty, we get around this conflict by engaging in dishonest behavior that we are able to rationalize to ourselves.3 This allows us to preserve our self-concept and think of ourselves as moral, upstanding people, while still profiting from dishonesty. In one of Ariely’s experiments, for example, he went around a college campus and left both cans of Coca-Cola and plates of dollar bills in a bunch of randomly selected refrigerators. When he came back to check a few days later, all the Cokes were gone—but the money was untouched. Ariely argues this is because it’s difficult to think of taking money as anything other than stealing, and people don’t want to think of themselves as thieves—but when it comes to the cans of soda, people were able to convince themselves that taking a can (or six) wouldn’t be so bad.4

Ariely got interested in cheating after learning about the Enron scandal, when it came to light that the energy trading company Enron Corporation had been grossly exaggerating their profits and concealing billions of dollars of debt from their shareholders. The scandal led to Enron’s collapse, the largest corporate bankruptcy filing in U.S. history at the time. Ariely wondered, how could people be capable of behaving like this? The research he did to answer this question shows us that however we might see ourselves, we are all prone to cheating just a little—or, at least, in ways that feel like “just a little.” Enron executives who defrauded their shareholders had done so mostly by taking advantage of accounting loopholes and other technicalities. Ariely argues that these practices are far enough removed from actual money that the executives didn’t perceive what they were doing as cheating.11

The IKEA effect – Why we value things more if we built them ourselves

Ariely, along with Michael Norton and Daniel Mochon, coined the IKEA effect, a cognitive bias that causes us to value things more highly if we made them ourselves. Like all cognitive biases, this effect happens subconsciously, and twists our perception of the quality of our own work. This, in turn, can compromise our ability to make rational decisions, blinding us to the perspectives of other people, and to the true value of things.

The IKEA effect gets its name from the Swedish furniture manufacturing company, whose protects typically need to be assembled by the customer. Whether or not you find the process of building a coffee table enjoyable, the labor you put into that table is likely to make you appreciate the product more, and to inflate your estimate of what it’s worth. Ariely and his colleagues, in a series of experiments, demonstrated that this effect can be so strong that people sometimes rated their own creations as comparably valuable to those of experts.7

Ariely started thinking about this effect after realizing that he felt particularly attached to a set of shelves he had bought from IKEA and assembled on his own.8 However, the concept of the IKEA effect is grounded in an older psychological concept: effort justification, the tendency for people to assign more values to things if they had to work hard for them, because they want to feel like their effort was “worth it.” Ariely and his colleagues showed how this basic tendency can be easily exploited by certain companies: consumers perceive products from places like IKEA or Build-a-Bear as “good deals,” even though they’re taking on the cost of assembly themselves.

Ariely has even argued that the IKEA effect affects parents’ perceptions of their own children, calling kids the “ultimate IKEA effect.”8 After putting so much time and effort into raising children, parents come to see them as uniquely “valuable,” the best kids imaginable. However, if a parent were to meet a child who was identical to ours in every way, except for the fact that they hadn’t raised them, they probably would not estimate their “value” so highly. As a parent himself, Ariely can relate to this. “When I go to the park and my kids are playing, I can’t imagine that everybody else is not interested in just sitting there watching my kids.”

Historical biography

Dan Ariely traces his career in behavioral economics back to a single incident from his youth: the explosion that nearly killed him. When he was 17 years old, as a high school student in Israel, Ariely was at his graduation ceremony when a magnesium flare exploded right next to him. The resulting blaze left around 70% of his body coated in third-degree burns. It goes without saying, the accident was devastating. For the next three years, Ariely was in and out of hospital, undergoing treatments and surgeries.9

Over the course of his recovery, Ariely was constantly grappling with excruciating pain, and was desperate for a distraction. The one that he eventually chose was observation: he began to pay closer to attention to the oddities of human behavior, and to wonder about what drives people to act the way they do. After years of undergoing treatment for his burns, Ariely became a psychology student at Tel Aviv University, to formally pursue this fascination. He went on to complete a Ph.D. in psychology at the University of North Carolina at Chapel Hill. Later, he followed this up with a second doctorate in marketing from Duke University, after some encouragement from the behavioral economics juggernaut Daniel Kahenman.10

Some of the assumptions that he would later go on to formally research were drawn from his experience as a patient. For example, in the period following the accident, part of Ariely’s new daily routine involved sitting in a bath while nurses stripped off his bandages and scraped away his dead skin—an incredibly painful process. The nurses operated by the conventional wisdom that it’s best to rip a bandage off all in one go, rather than going slowly. Later, as a student at Tel Aviv University, Ariely ran experiments on how people experience pain, and found that his nurses, despite their experience and education, were wrong: people were more able to tolerate a small level of pain over a long period of time, compared to a lot of pain all at once. The subject of pain, whether physical or psychological (like the pain of losing money to a bad investment), has been central to Ariely’s work.

Quotes

“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.”

― Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions

“Wouldn’t economics make a lot more sense if it were based on how people actually behave, instead of how they should behave?”

― Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions

“Maybe we feel meaning only when we deal with something bigger. Perhaps we hope that someone else, especially someone important to us, will ascribe value to what we’ve produced? Maybe we need the illusion that our work might one day matter to many people. That it might be of some value in the big, broad world out there […]? Most likely it is all of these. But fundamentally, I think that almost any aspect of meaning […] can be sufficient to drive our behaviour. As long as we are doing something that is somewhat connected to our self image, it can fuel our motivation and get us to work much harder.”

― Dan Ariely, The Honest Truth About Dishonesty: How We Lie to Everyone – Especially Ourselves

“In a modern democracy … people are beset not by a lack of opportunity, but by a dizzying abundance of it.”

― Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions

“Resisting temptation and instilling self-control are general human goals, and repeatedly failing to achieve them is a source of much of our misery.”

― Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions

“…[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.”

― Dan Ariely, The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home

Additional sources

Ariely’s website

Featuring video clips, research highlights, blog entries, and more.

Ariely’s TED Talks

With more than 20 million cumulative views, these lectures cover a number of topics that are prevalent in Ariely’s body of work, from self-control to dishonesty to human irrationality in general. Always presented with clarity and wit, Ariely’s talks are guaranteed to be both informative and entertaining.

“The Data Shows We Want to End Inequality. Here’s How to Start…” (Dan Ariely and Michael Norton, TED)

This article, which draws from some of Ariely’s research, explores the problem of growing wealth inequality: the full extent of the issue, how people (mis)perceive it, and what the evidence says we can do about it.

Ask Ariely

Ariely writes a weekly column for the Wall Street Journal, where readers write in with all manner of questions and Ariely responds with tips from behavioral science. The queries span from requests for advice on how to manage a business, to frustrated questions about why people don’t follow social distancing rules a global pandemic.

“Irrationality, Bad Decisions, and the Truth About Lies: My Conversation with Dan Ariely” (Farnam Street, The Knowledge Project)

In this wide-ranging interview, Ariely talks about how irrationality creeps into all kinds of decisions that we make, and how we can adjust our environments to better shape our behavior.

References

  1. Kamenica, E., Ariely, D., & Prelec, D. (2005). Man’s search for meaning: The case of Legos. PsycEXTRA Dataset. https://doi.org/10.1037/e640112011-016
  2. TED. (2013, April 10). What makes us feel good about our work? | Dan Ariely [Video]. YouTube. https://www.youtube.com/watch?v=5aH2Ppjpcho&t=966s
  3. Mazar, N., Amir, O., & Ariely, D. (2008). The dishonesty of honest people: A theory of self-concept maintenance. Journal of Marketing Research, 45(6), 633-644. https://doi.org/10.1509/jmkr.45.6.633
  4. Chandler, D. (2008, April 9). Would you steal a buck? How about a can of soda? MIT News. https://news.mit.edu/2008/ariely-tt0409
  5. CNN Editorial Research. (2020, April 24). Enron fast facts. CNN. https://www.cnn.com/2013/07/02/us/enron-fast-facts/index.html
  6. Mazar, N., Amir, O., & Ariely, D. (2008). The dishonesty of honest people: A theory of self-concept maintenance. Journal of Marketing Research, 45(6), 633-644. https://doi.org/10.1509/jmkr.45.6.633
  7. Norton, M. I., Mochon, D., & Ariely, D. (2011). The ‘IKEA effect’: When labor leads to love. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1777100
  8. Ariely, D. (2013, April 17). The IKEA Effect, by Dan Ariely [Video]. YouTube. https://youtu.be/jkaWYKlnli0
  9. Ariely, D. (2017, March 15). A modified introduction to “Irrationally yours:”. Dan Ariely. https://danariely.com/2015/07/30/a-modified-introduction-to-irrationally-yours/
  10. Shani, A. (2012, April 5). What it feels like to know what we’re all thinking. haaretz.com. https://www.haaretz.com/1.5211747
  11. Zetter, K. (2009, February 7). TED: Dan Ariely on why we cheat. WIRED. https://www.wired.com/2009/02/ted-1/

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