Mark McDonald

Predictable Irrational is the primary source book for a range of business books on behavioral economics now flooding bookstores.  Dan Ariely’s readily accessible, insightful and interesting book is the grandfather of popular behavioral economics and highly recommended.

The issue of economic behavior becomes critical given the emergence of new social technologies and customer driven processes making this a non-obvious business book to read.

The book focuses on the fact that economic theory has largely been based on the notion of actors having full knowledge and making rational choices.  While the Internet may be increasing knowledge throughout the economy, Ariely’s book shows that individually few of us make very rational choices.  That observation, backed by a series of innovative and surprisingly simple experiments makes the book a must read.

This book is a foundational resource for the following books: Free (Chris Anderson), Buyology (Martin Lindstrom) and How We Decide (Jonah Leherer).  So if you liked these books, read this, as it’s a primary source for all of these books.

Strengths:

• Ariely breaks the issue of irrationality down into easily digestible chunks focusing on the different types of decisions we need to make each day. This makes the book much more actionable and understandable.

• The experiments are well explained making it easy for a businessperson to identify similar decisions that they create for customers and execute internally.

• The book illustrates and explains the rational behind things that we all know but always wondered about.

Challenges

• The book is long on explanation and exploration of irrationality but relatively short on prescriptions on how to address the issue. Often Ariely’s advice is to have people be more rational as a cure for their irrationality. That makes sense but it is not particularly helpful.

• The book crosses multiple disciplines: economics, psychology, education. This makes for a wide audience and interesting reading, but it causes gaps for people looking for deeper insight. This is not a business book, but it’s a book that business people can take a lot away from.

• The book has an underlying bias that because individual irrationality often leads them to make ‘wrong’ decisions it is the responsibility of some other body (e.g.: Government) to protect people from making bad choices. (Page 48) That is a bit of a slippery slope from a public policy perspective related to personal responsibility, accountability, etc that the reader needs to keep in mind.

Recommended for marketers who need to understand how they position their offerings and structure customer decisions.

Recommended for executives who need to understand behavior in economics, particularly now that new technologies are engaging the individual customer behavior in new ways than ever before.

Recommend for IT professionals as they need to incorporate behavior in the IT solutions they build, the behavior of their own people and the behavior in how they work with their business peers.

Overall a great book, entertaining, insightful and it provides the foundation for much of the books that follow from it.  Highly recommended.

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Category: Book Review Economy     Tags: Book Review, economics, New economy

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