Mark McDonald

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Mark P. McDonald
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8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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The Upside of Irrationality drops the other shoe in behavioral economics, a book review

by Mark P. McDonald  |  June 15, 2010  |  1 Comment

Dan Arliey’s first book Predictably Irrational introduced business leaders to issues of behavior economics when it was released in 2008.  His latest the Upside of Irrationality drops the other shoe in behavioral economics concentrating more on how economic behavior influences issues the context of business and everyday life.

This book is a worthy compliment to his earlier work and it pretty much follows the same pattern as Predictability Irrational.  It is organized around a set of interrelated observations that are described first in terms of the hypothesis, then the tests conducted to evaluate the hypothesis and finally the results and implications. This would normally be quite boring, but Arliey’s writing and the novel way of testing economic behaviors keep the book entertaining and interesting.

In addition, Ariely peppers the second half of the book – which focuses on personal irrationality – with stories of his experiences following a horrendous accident he suffered as a teen-ager.  These personal notes are essential in translating ideas from the antiseptic academic to the messy real world.

Here are brief summaries of the chapters.

  1. aying more for less: why big bonuses do not always work – the bonus structure that raises the performance of physical work often freezes out knowledge workers.
  2. The Meaning of Labor: what Legos can teach us about the joy of work – how work defines us and the value we place on that definition.  There are deep reasons why everyone’s baby is the most beautiful in the world.
  3. The IKEA effect: why we overvalue what we make – the behavioral realities of ‘sunk effort’ and how to make products and services more sticky by stealing from Betty Crocker.
  4. The not-invented-hear bias: why my ideas are better than yours – an examination of author bias and the behaviors behind executive, expert and management hubris in the workplace.
  5. The case for revenge: what makes us seek justice – it is more than a dish best served cold.  In fact revenge is a very powerful force in business.
  6. On Adaptation: why we get used to things, but not all things and not always – provides a fascinating study of the behavioral economics of change that helps you understand why traditional change management does not work.
  7. Hot or Not?  Adaptation, assertive mating and the beauty market – if you always thought it was a jungle out there, you were right and this chapter talks about the realities of how you seek and form lasting social relationships.
  8. When a market fails: an example from online dating – a fascinating look at how the most sophisticated technology and psychographics cannot resolve a fundamentally flawed market structure.
  9. One empathy and emotion: why we respond to one person who needs help, but not to many – explains the rational and reality behind how to mobilize people and their resources and why the American Cancer Society is so effective
  10. Long term and short term emotions: why we shouldn’t act on our negative feelings – the reasons and science behind why it really is best to sleep on it.
  11. Lessons form our irrationalities: why we need to test everything – provides a framework and way of thinking to get your rationality back.

STRENGTHS

The book has kept the structure and formula that made Predictably Irrational successful.  If you liked that book, then you will like this one.

The book connects with other research studies to demonstrate findings that go beyond one person, which is refreshing as many business books think that the individual authors are the single font of all wisdom (see Chapter 4)

The book is backed by real research and the author is not afraid to show you how they tested the idea, the results and the implications.

The writing style is personal, you feel as if Ariely is explaining the ideas in the book to you over a conversation without it getting stale or too academic.

CHALLENGES

In keeping with the formula for Predictably Irrational, the book can drag in places as you go through the same structure for each of the first 10 chapters.

The experiments, while interesting, involve college students (MIT and Harvard mostly) working with relatively trivial sums of money.  This does not invalidate the findings, just raises an issue of applicability in a bigger business setting.

Others have already hijacked some of these findings and experiments, which may lead you to believe that Arliey’s work is lagging rather than leading investigations into behavior economics.  Just because others are talking about this, it does not mean that they did the work.

Overall Recommendations:

  • Required reading for people who liked Predictably Irrational.
  • Recommended for anyone who has heard of behavior economics, or read the dozens of other ‘brain science’ books out there: How We Decide, Buy-ology, etc.
  • If you a new to this area I really recommend reading Predictably Irrational first, not because I want you to buy more books, but starting here can easily lead you to get lost.

This review also appears in Amazon at http://www.amazon.com/gp/product/0061995037

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  • 1 Some Great Books From 2010 « TalentedApps   January 3, 2011 at 2:22 am

    [...] a lot of thinking (which connects well with Lehrer’s book.) Mark McDonald has a very helpful review of the book, and he recommends reading “Predictably Irrational” first. I think you’d be okay [...]