The Upside of Irrationality: The Unexpected Benefits of Defying Logic

Citation

Conejo, F. (2012), "The Upside of Irrationality: The Unexpected Benefits of Defying Logic", Journal of Consumer Marketing, Vol. 29 No. 3, pp. 240-241. https://doi.org/10.1108/07363761211221783

People like to think of themselves as objective. They pride themselves on decisions based on reason. This notion of rationality is so engrained it is even one of the fundamental assumptions of economic theory. Yet conventional economics fail to adequately explain flawed decision making; why individuals, business, and government organizations regularly make sub‐optimal, counterproductive, even outright dangerous decisions.

New York Times bestseller The Upside of Irrationality, based on the more contemporary and realistic field of behavioral economics, argues that people are not perfectly sensible. Instead, we are quite irrational in our decision‐making. Cognitive biases are more prevalent than we realize and influence us more than we would like to admit. However, instead of seeing human irrationality as something negative, as is usually done, the book considers some of its forms as actually quite positive: For instance, it is people's ability to trust, to be honest or to care about others, all irrational and hence un‐economic behaviors, which make us wonderfully human. By capitalizing on these positive irrationalities, while keeping negative ones in check, individuals, business, and government can be more effective, and ironically, achieve greater economic utility.

As author Dan Ariely summarizes:

When designers design physical products […] they take people's physical limitations into account […] But when people design intangibles such as health insurance, savings plans, retirement plans and even online dating sites, they somehow forget about people's limitations. Perhaps these designers are just overly sanguine about our abilities; they seem to assume that we are like Star Trek's hyper‐rational Mr Spock. Creators of intangible products and services assume that we know our own minds perfectly, can compute everything, compare all options, and always choose the best and most appropriate course of action. But what if – as behavioral economics has shown in general […] – we are limited in the way we use and understand information? What if we are more like the fallible, myopic, vindictive, emotional, biased Homer Simpson than Mr. Spock? This notion may seem depressing, but if we understand our limitations and take them into account, we can design a better world […] (pp. 230‐231).

The Upside of Irrationality discusses cognitive biases influencing decisions. The book's first part covers how people defy economic logic at work, be it the public or private sector. Among others, its five chapters explain why increased compensation does not necessarily improve employee/managerial performance; why work's intrinsic meaning is just as important as its compensation; why people/organizations overvalue what they create, including their own ideas; and what makes people seek justice and ultimately revenge. The book's second part discusses how people defy economic logic at home. Its six chapters explain people's tendency to adapt; the relative perception of beauty; the online dating's market failure; people's skewed emotions, such as empathy; the long‐term effects of short‐term emotions; and the importance of testing everything, especially what seems common sense and is taken for granted.

Unlike most business books, which tend to discuss the efforts and ideas of others, The Upside of Irrationality is based on author Ariely's very own empirical research at top institutions like Duke and MIT. That said, Ariely's first‐hand knowledge is complemented by other sources, including past and concurrent research, pertinent case studies, and a wealth of relevant examples from economics, literature, pop culture, and marketing. This results in a balanced and well‐rounded book of broad appeal.

The book's chapters are introduced through the author's everyday life experiences. This provides contexts to which readers can relate, increasing the book's relevance. Theories or models related to these experiences are then presented and empirically tested. However, experiments are not single‐shot affairs. They are instead broken down into several more specific efforts in order to gain a deeper understanding of phenomena, exceptions, etc. Empirical results and implications are finally discussed, and general principles to improve decision‐making are also offered. These apply from the common person (e.g. how to get children to eat their veggies) all the way to business and the public sector (how to make high‐paid CEOs/officials actually perform). Nonetheless, the author also accepts the limitations of his findings and suggests further research to corroborate and build upon his results. It should be noted that Ariely's experiments are far more interesting, and hence make a better read, than the typically stodgy work of most academics. Experiments range from designing more effective dating websites to testing the pain threshold of people. Yes, on people.

Some of the ideas covered by Ariely are by no means new. Notions, such as work performance not always being directly related to compensation, or people opting for revenge over economic gain, have already been explored. However, the main contribution of The Upside of Irrationality lies in testing these, and other irrational behaviors, in broader, more applicable contexts. Another of the book's values lies in its integrating nature. The Upside of Irrationality discusses ideas from economics, psychology, anthropology, and marketing, among others, and combines them into a meaningful whole. This synthesis, in combination with the author's empirical findings, help better understand consumer decision‐making.

The Upside of Irrationality is written in an interesting, entertaining, and fluid style. The book's tone is also personal and conversational, as if talking directly to the reader. Behind this introspective approach is Ariely's intention to get readers to open up, start thinking about themselves, and hopefully apply the book's findings. While the issues discussed can sometimes be quite existential, and thus hard to internalize, the book is sprinkled with Ariely's often dark and self‐depreciating humor, keeping the read interesting and fun. The Upside of Irrationality's seemingly light and fluid nature thus makes it an ideal read for marketing practitioners and students. Not only will these two audiences likely enjoy the book, but it will also help them transcend conventional economics, better understand consumer decision‐making, and thus become better marketers. Marketing academics should also benefit from reading The Upside of Irrationality. Not only will it update them as to what is happening in the fascinating field of behavioral economics but also give them food for thought to later integrate into their respective research.

The Upside of Irrationality ends with the usual acknowledgements, a list of research collaborators, including a one‐paragraph blurb on each, bibliography, additional readings and an index. However, the book also offers a bonus P.S. section after the index in which additional insights are offered. Readers of this section will even be treated to one of Ariely's secret, and purportedly effective recipes, pasta in chili and vodka sauce. In sum, The Upside of Irrationality is a great read and highly recommended. Bon appétit.