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Dan Ariely is the James B Duke Professor of Psychology and Behavioral Economics at Duke University. He is the founder of The Center for Advanced Hindsight and co-founder of BEworks,[…]

A conversation with the James B. Duke Professor of Psychology and Behavioral Economics at Duke University.

Dan Ariely: My name is Dan Ariely and I’m the James B. Duke Professor of Psychology and Behavioral Economics at Duke University.

What did you find when you started looking into the world of online dating?

Dan Ariely: I became interested in online dating because one of the people who were sitting in an office next to me was incredibly miserable, and he was an assistant professor; he just moved to the university where I was at; he was spending long hours; he was not finding anybody to date; he was, couldn’t date students at the university, he was a professor; he didn’t have time to go outside. You know, we were not particularly a social bunch, you know, he was basically stuck.  And online dating was a very promising way to think about this solution for a marketplace that wasn’t working very well, and he tried online dating and he was just failing miserably, continuously.  So that kind of piqued my curiosity about it.  And then I started looking at online dating.

So I start looking by registering myself and looking at other people and then I said, let me ask some of my friends to enroll. So I didn’t ask them to really enroll, I just took their profile sheets and asked people, "Could you fill those out but without your name?"  And I took people that I liked more and I liked less, and I took their profile and I tried to figure out could I tell the difference?  You know, now, imagine you did this.  Imagine you went to 50 people you really like and 50 people you only like so-so, and you asked all of them to fill this profile, then you took this 100 profiles and you tried to sort them out into piles.  Turns out we’re terrible at this!  Right?  So this is kind of an initial observation that something is going wrong in this, in this market.

And then went a step further, did some studies with online daters about how much they enjoyed it and what they were getting from it, until the final stage, we, I figured out, I thought I knew what was going on, which is that online dating sites assume that people are easy to describe on searchable attributes.  They think that we’re like digital cameras, that you can describe somebody by their height and weight and political affiliation and so on. But it turns out people are much more like wine.  That when you taste the wine, you could describe it, but it’s not a very useful description.  But you know if you like it or don’t.  And it’s the complexity and the completeness of the experience that tells you if you like a person or not.  And this breaking into attributes turns out not to be very informative.

So on the last stage of this process, we created a different Web site.  And that different website allowed people to experience other people without all of these attributes. And we show that this is actually much better and would lead to much more, much higher probability of going on a second, on a real date afterward.  So it kind of goes from an observation to a little study, to a bit more details and then finally proposing some kind of solution of something that I think would actually work better.

So the site basically looks at real dates—and think about what real dates are.  They’re not about sitting in the room and interviewing each other about questions; they’re often about experiencing something together in the real world. And I think it’s because if you and I went out, and we went somewhere, I would look at how you react to the outside world.  What music you like, what you don’t like, what kind of pictures you like, what kind of images, how do you react to other people, what do you do in the restaurant?  And through all these kind of non-explicit aspects, I will learn something about you and I would feel that I’m learning something about you.  And the online system we created was very much like that.  It was about you came up and you got a little avatar, a square or a triangle, some color, and you went into a virtual space in which you could explore it.  And you could see lots of stuff, there were pictures and images and there were words and there movies and there were bands, there was all kinds of stuff, and you could go and when you came to another little avatar, you could start chatting.  And you would chat about something, it wasn’t about interviewing when you went to school and what’s your religion; it was about talking about something else and it turns out it gave people much more information about each other, and they were much more likely to want to meet each other for a first date and for a second date.

What's wrong with the experience of online dating?

Dan Ariely: I think that online dating is an incredibly unsatisfying experience.  In fact, when we do surveys to understand what people do, the basic trade off is for each six hours of searching for people and emailing them, you get one cup of coffee.  And it's not as if people enjoy online dating, it's not as if they have fun searching people and writing blurbs for them.  I mean, imagine that you basically had to drive six hours, three hours each way to have coffee with somebody, and, you know, coffee usually ends up with just coffee.  It's an incredibly unsatisfying experience.  So I think it's a really bad, it's a really bad system.

On top of that, there's another thing, is which, imagine I gave you this search criteria, which I asked you to search by height and weight and income and all of those things: you're going to use it. That's what I give you to search, you're going to use it.  There's a million people out there, you want to limit them to 3,000, that's what we're going to, that's what you're going to use.  And because of that, I think actually people become much more superficial than we think they are.  So here's an example.  It turns out, women really care about men's height.  I’m 5’9”, if I wanted to be as attractive as somebody who’s 5’10”, right, another inch?  I would have to make about $35-40,000 more a year.  That’s a lot of money for one inch.  At the same time, it turns out that men care a lot about women’s BMI’s.  In fact, they want women to be slightly anorexic, at like 18-1/2.  And you look at women’s attractiveness, it goes really up at low BMI and really drops below that.

Now, people online look incredibly superficial.  They look at hair color and they look at height and they look at income, and that’s basically it... and attractiveness, of course.  And you can ask, is it because that’s all people care about or is that because that’s what the system is giving them to search for.  And I think it’s because of combination, right?  Sure, we are superficial, we do care about attractiveness and height and income and these are features for us, but I think they’re exaggerated by the way the system is created.

Imagine you were looking for something else, imagine you were looking for digital cameras, and imagine that I only allow you to search on megapixels and f-stop for the lens, right?  These things would become incredibly important, right?  And if I drop some things from the search, they would become as if they’re not important or much less important.  So I think part of the problem is that the systems don’t give us the right information that we need.  And because of this, I think the experience of online dating is generally unsatisfying.  I mean, think about it: how many millions of people are participating in this activity and marriage rates has not increased, divorce has not decreased. I mean, not really much has happened because of that.  And at the same time, I think it’s incredibly important, right?  The dating market is perhaps the only market that we moved from a centralized market to a decentralized market.  You know, we used to have a yentl, your parents used to tell you what to do, all this is gone, now you have to fend for yourself.  On top of that, we move a lot, right?  You go to one place for undergrad, then you go to grad school, then you move to another city for a job, two years later you move again.  You have no time to create a social network. We work long hours, so it’s really a system where we don’t have time to find people for ourselves. It’s taboo to date people at the work place, the social networks are weaker in the physical world.  We move all the time and we don’t have a yentl or parents to tell us what to do.

So online dating are incredibly important, it could be central and crucial and we need to create them because it’s really a miserable situation for most single people.  At the same time, the ones that we have created, and they all look the same basically, they’re no real differences between them, the ones that we are creating are just not that useful.

What is "assortative mating?"

Dan Ariely:  So "assortative mating" is the idea that if you took all men and you ranked them on how attractive they are, from the most attractive to the least attractive and you rated all women from the most attractive to the least attractive, and you can think about attractiveness as built, being built from lots of stuff—like it’s not just beauty, it could be beauty and intelligence and so on—but if you created this, it was mostly about beauty, but, you know, if you created that, it turns out that the most attractive would date the most attractive.  The middle attractive would basically date the middle, and the low would date the low.  Now, there could be slight deviations, but that’s what happened, and why?  Because if you’re at the top and you’re a guy, you can pick anybody you want, so you would pick a woman who’s in the top and if she’s at the top, she could pick anybody she wants, she would pick you.

So now the question is, what happens to people in the middle?  You know, most of us.  Or, what happens to people in the middle, how do we make sense of where we are in the social hierarchy?  And for me that thought actually became very kind of crucial and apparent when I got injured.  So here’s what happened: you grow up, and you have some kind of space in society and you know basically where you are and you know who would date you and who would not date you, who is kind of outside of your league, in general terms, and you know where you fit in the social hierarchy.  And I knew where I was in the social hierarchy, but one day I got badly injured.  And, you know, I couldn’t think about romantic stuff for a long time, but when I could, all of a sudden I started wondering about where do I fall now in the social hierarchy?  I was trying to think about, do I fall in the same place?  I’m kind of the same person inside, but I look much less attractive.  Right?  And would the women who would date me before would keep on dating me now?  And I said, "Why would they?  They have other options, right?  I’m not the only guy in the world."

So it was kind of a very difficult concept for me to think about where do I fall?  Like I fell differently on the social hierarchy, I basically lost my space all of the time and I was trying to understand how this social dance happened and how we find our place.  And I was really wondering about where would I find my own mate?  Where would I fit in this, in this scale? And there was a lot of personal complexities with it.  But eventually it led me to a study, and the study was really asking the question of how do we make sense of where we fit in the hierarchy?  And there are basically kind of multiple explanations, right?  You could say, you never adjust.  You never, if you're kind of in the middle range, or the low range and you only are, you have to date somebody else who is in the middle range, you never make peace with it.  You wake up every morning, you look at your partner across your shoulder and you say, "Well, that's the best I could do.  I really wanted more, sadly, you know, I have to admit my limitations, that's the most I could do."  That means you don't adapt.

It could be that you adapt.  It could be that, for example, if you're unattractive, you start looking at other features that are unattractive and see them as attractive.  You remember the story from Krilov when you have this wolf sees these grapes over the fence and he tries to get them and he can't get them and eventually he said, "Ah, they were sour anyway," and he goes and eats something else.  All right?  So you could imagine if you're unattractive yourself, you start valuing... if you're a woman you start valuing short men who are bald with bad teeth, right?  I mean, you just say, these are really wonderful features: I like hairy chests, I like bald head.  You basically change what you like and that actually helps you adjust.  Or you can imagine that you start liking other things, you stop paying attention to attractiveness and start paying attention to other things.  So we tried that in an experiment.

Initially we went to this Web site called HotOrNot.  It's a wonderful Web site, you see pictures of people and you decide, you rank them on a scale from 0 to 10 about how attractive they are and then you see how you rated this person, how other people rated them.  But the nice feature about this Web site is if I rate people, the Web site knows how I was rated as well, because I have my picture there as well—by the way, I'm not rated very high, I think I'm like 6.4. But the people who are rating, you know how they're rating and you know how they're rated.  So now the question is, the people who are providing the rating, the people who are really attractive that are providing rating and people who are really unattractive providing the rating.  And the first thing you can ask is, do they have different ratings?  Are the people who are inherently unattractive, do they see beauty differently?  And the answer is no, we all see beauty in the same way.  The people who are 9 rate people the same way as the people who are 4 in the hotness rating.  So people don't change their sense of beauty.  Now you could say, so maybe they don't adjust at all, maybe they don't adapt, that the people who are 4 keep on looking for the people who are 9, or maybe they adapt some other way.

So HotOrNot has another feature which is a site called Meet Me, in which you see pictures of people and you decide, do I want to meet them or not?  Now it's not just rating, it's about also thinking about the probability that you will be accepted or turned down.  And it's not so embarrassing to be turned down online, but it's still a little bit embarrassing.  So the question is, do people who are 9, will they approach different people than the people who are 4?  And the answer is absolutely yes.  The people who are 4 basically approach people who are 4 or 5, the people who are 9 approach people who are 9 or 10.  People are a little optimistic, they approach a little too high, but they basically know their range.

So what happened is, people know their range, they know where they are in the social hierarchy, but at the same time, they see beauty as the same thing.  So what happened?  So how people solve it?  Do they wake up every morning feeling bad or do they solve it in some way?

So the last step we did a speed dating event.  We got people to do a speed dating event and we asked them to rate other people and lots of attributes, not just attractiveness, but all kinds of other things.  And what we saw was that people who are very attractive cared more about attractiveness.  This is like one of the dominating criteria, they want to date somebody who is attractive.  While the people who are unattractive basically say we don't care so much about attractiveness, we want people who are kind and have a good sense of humor.  So what happened is that the way people adapt, the people at the low end of the scale, is by changing your priorities.  All of a sudden saying, "I want people with a different set of attributes, I don't care so much about beauty, I want somebody who's kind, goodhearted, with a good sense of humor."  And that's actually the story of adaptations, so that's the story of  how we are coming into a social hierarchy in a certain place, and based on our circumstances, come to understand differently what we want and don't want and how we view the world in a way that is compatible with where we are in the social hierarchy.

Why do we attach more value to things we create ourselves?

Dan Ariely: I don’t know if you’ve had the experience of going to IKEA, but I go from time to time and the last thing I did was I built a toy chest for my kids.  And when I got home with this box, actually a set of boxes, and I start assembling them, for me, the instructions were very unclear, and I kept unscrewing things and screwing them wrongly and had to disassemble and put it back together and so on.  By the end of the day, I worked a lot, it was not a particularly beautiful piece of furniture, but I was actually quite attached to it.  And I think that’s kind of the interesting idea, is that when you put a lot of yourself into it, some sweat and energy and anger and maybe even frustration, you end up loving the end product a bit more.

So we tried to do this experiments and we got people to build Legos and origamis and all kinds of things.  And the first thing we found was if there was an origami that you built and an origami that somebody else built, you think that yours is much, much more beautiful.  Not only is it more beautiful, you’re willing to pay much more for it, right?  Now the question is why?  You can imagine, I built an origami that is uniquely good for me and you, the other origami is not, so it’s unique to me, it’s not about the fact that I kind of wrongly value it, it’s just that it has some features that I particularly like.

So we asked people to predict how other people would pay for it and turns out people are really wrong with it.  Not only do we like more the origami we make, we think other people would love them as well.  And you can think about kids like this, right?  I have two wonderful kids, I love them dearly, I think they’re amazing.  When we go to a party and they dance or do something, I can’t believe that any of their parents would want to do anything but look in my kids, right?  And that’s the issue, right?  They are my kids, I think they are wonderful, but, not only that, I think that other people should see them as wonderful as I see them.  And the same thing happened with origami or with everything we make, not only do we overvalue it, we think that everybody will share our perspective.

And this, of course, creates both opportunities for better things and opportunities for mistakes, right?  So if you’re a company and you can create things that people would actually put something of themselves into it and actually value it more, that’s a great thing to do, right?  There’s lot of opportunities for tailoring and custom made and user designed on the Web.  It’s also about cooking for yourself and doing your own garden and fixing things yourself because we might not understand it if we do something of ourselves we would like it more, but the fact is, we likely would do the same thing.  But of course, there’s the down side and the down side is if we create something, we end up loving it, perhaps too much, and we don’t see it in an objective way and as a consequence, we can make mistakes as well.  And that’s actually a general comment about rationality and irrationality.  Rationality... irrationality is not always bad, it’s not always that a rational person is better than irrational, it’s a mixture, right?  It’s really wonderful that we can love our kids so much, that's why they actually get to live and we care about them.  But at the same time, our blindness to them or to the weaknesses can actually create some negative consequences as well.

What would the world be like if everyone always acted rationally?

Dan Ariely:  I think the world would actually be quite terrible if everybody would be perfectly rational.  And, you know, when you a ask people this question initially, you say, “Oh, yes, I want everybody to be rational.”  But the fact is, that I picked the title, "The Upside of Irrationality," because I think there’s a lot of wonderful things about irrationality.  I’ll give you two examples.

The first one is, imagine that you left your wallet on your desk and you went out for lunch.  What are the odds that somebody will steal it, right?  And now think about what are the odds that somebody would steal it if everybody you worked with was perfectly rational?  If everybody was constantly doing the cost benefit analysis, if that’s all what people were doing, they would pass by your desk, they would say, “Hey, nobody’s here, nobody’s looking, I can steal this and have no chance of being caught, let me do that,” right?  In fact, if we lived in a society where everybody was just maximizing their own self-interest all the time, it would be quite a terrible place to live. 

Here’s another example: Imagine a game we call the "trust game" and then I’ll tell you about the trust game with revenge.  So imagine two players, player A and player B.  And the trust game looks like this.  We tell player A, “Hey, player A, you have $20.  You can do two things, you can either go home or you can give your money to player B.  And you don’t know who player B is and you’ll never meet them.  If you sent your money to player B, player B will get $80, the money will quadruple magically on the way.  And now player B could decide to do two things, they could go home with $80, in which case you will get nothing, or they could send you back half the money.”  Now, think about this situation, imagine you’re player A and you’re asking yourself, “What would player B do?”  If player B was perfectly rational, what would they do?  They will go home with all the money, right?  They will maximize their self-interest. Why would they give you back any money?  So if you thought that player B was perfectly rational, would you send them the money?  Of course not, right?  So the rational prediction is that player B will never send the money back and because of that, player A will never trust him to start with.

Turns out people are much nicer than economic theory predicts.  There’s a good chance that player A will send the money and a good chance that player B will send half the money back and if you were player B, you can just imagine, imagine you just got in the mail somebody that says, "Hey, here's what happened, would you send the money back or not, right?"  Most people would do it.

So people... this is the case when people are nice in economic theory.  But imagine if you’re player A, and you send the money to player B, and player B took the money and left.  And now I come to you and I say, "Really sorry, player A, you lost all your money, but I tell you what?  If you go into your checking account and you get more money out and you give it to me, for every dollar you give me, I will go, I will hunt player B down and I’ll take $2 away from them.  You give me $2, I’ll hunt them down and take four.  You give me 10, I’ll hunt them down and take 20 from them."  And the question is, would you lose more of your own money to exert revenge on them?  You just lost $20 and you can lose even more to exert revenge on them.  And everybody who had a divorce or a big break up know the answer, right?  When we feel betrayed, we would spend lots and lots of money to inflict even more pain on the other side.  And when Ernst Fehr and some of his friends did work like this, they basically put people in an imaging so they could image people’s brains while they were executing and plotting revenge.  And what they saw was that the activity of revenge was rewarding, it was pleasurable.

Now, again, it’s irrational—why would it be rewarding and pleasurable?  Think about it this way, imagine that you and I were living on a desert island and imagine I had a mango and you wanted my mango, and imagine I kind of looked, I was away for a minute, and you could steal my mango.  If you thought that the only thing I was doing is a cost-benefit analysis, you would say, "Hey, if I steal Dan’s mango and run far away enough, he will do the cost-benefit analysis, he will decide not to chase me, not to find out what happened, he’ll just go and get a new mango.”  And under those circumstances, a good chance you’ll take my mango away.  But what if I was a revengeful type, what if you knew that if you stole my mango, I will not sleep and I will not rest.  I will hunt you down, it doesn’t matter how long it will take me and how far I’ll have to run and how many nights I will not sleep, I will hunt you down, I’ll take my mango and all your bananas and your goat and your whatever, whatever it is.  Under that condition, you will probably not start with me to start with, right?  You will not take anything away.

So the way to understand it is that trusting is irrational but we do it.  Revenge is irrational but we do it, and we do it because trust and revenge are actually two sides of the same coin.  Trust is incredibly important for society.  Imagine how we would live in a society without trust.  But to have trust, we also have to have revenge and those things together make sense.  They are both irrational, but they both make sense and they actually help us to live in a better society.  So would I prefer a society where everybody is rational—I don’t think so, not in a long shot.

What kinds of things to companies do that are irrational?

Dan Ariely: One of the things that I think companies do to a large degree that makes very little sense, is the use of focus groups.  So think about what a strange idea is that we take 10 people who know basically nothing about your project and you put them in the room and you let them talk for a while and then you take the, whatever they came up with, as a consequence of these two hours of random thinking and you base your strategy on it, to a large degree.  And I don’t want to say that focus groups are always useless and also uninformative, but I think that taking this data and then relying [on] it as extensively as companies do, I think it’s crazy in many ways.

And the reason I think companies do it is because when these people create a sentence or an idea, it’s very easy to say, “Joe, focus group 17, said this,” and it can help you create and formulate an idea around it.  When if you said "87% of the people said X," it just doesn’t have a face, it doesn’t have a desire, it’s just not as concrete and therefore, people are not as excited about the notion.  So I think the focus group is incredibly useful as a persuasive attempt to tell people what to do, but as a way to find out information, it’s not as useful as people think it is.

The other thing that really puzzles me is that companies, how little they understand about how incentives really work.  So the biggest expenditure for any company is salaries.  And you ask people, "What do you know about the relationship between salaries and performance?"  The answer is nothing.  Right?  And the question is, why don’t they study anything?  Why don’t they study?  Why don’t they try different performance, different incentive level and see how it influences performance.  And they often say, well, there are all kind of laws and if we have, pay some people one way and some people another way, we might be sued.  But in the last two years, with all these questions about bonuses and so on, I’ve gone to many companies and said, “Why don’t we at least do some surveys, why don’t we at least see how happy people are in the months where they give them, you give them the bonus and how productive they are?”  And the answer I got 100% of the time is that people are really miserable in bonus season and because of that, they don’t want to ask them any more questions.  And I said, “If people are miserable in bonus season, shouldn’t it mean that you should study it, understand it, and try to prevent it for next year?”  They say, “Well, well, not this year, this year was really miserable, maybe next year, come back to us next year.”  And if you think about it, it’s really incredible.

Now, how do companies decide about compensation?  They look at what other companies are doing and try to equate compensation to what other companies are doing it, but it’s a place of the blind leading the blind, right?  And then if we pay 5% more, other people would start doing it, but the real question is, how do you pay and how do you get people to care about the work and become more productive and be happier at their work?  And the answer is not simply that more money is better.

More money can be part of the equation, but it’s also the question of how do you give that money?  Do you give it as bonus, do you give it as a fixed salary, do you give it as part of the benefits?  Maybe you give benefits for the gym. Do you send people on vacation to the Bahamas?  And it turns out that there are ways to use money that is economically less efficient, but actually get people to be more motivated, care more, and actually become more productive.

Why do we have more sympathy for individual people suffering than for large masses of people suffering?

Dan Ariely: This is you can think of as the Baby Jessica, when Baby Jessica fell to the well and she really suffered and her parents must have been incredibly miserable, she got more CNN coverage than Rwanda and Darfur, right?  And the question is, why does this happen and why do people care so much?  And it turns out, there’s research on what’s called the "identifiable victim effect."  And the question is, if you have how many lives are at stake and how much do we care, you would expect it as more lives are at stake, we would care more, maybe in a linear relationship.  Or maybe we would care more in the beginning and there’ll be kind of a diminishing return, like we wouldn’t care if it’s 100 or 1,000, but we care a lot at the bottom range.

But it turns out, the function is different.  We care a lot about individual life and care less and less as the pie... as the number of people become bigger.  And this goes to kind of an observation of both Stalin and Mother Theresa said... you know, Stalin said, "One death is a tragedy, a million deaths is a statistic."  And Mother Theresa said in the same spirit, "If I look at the masses, I will never act; if I look at the one, I will."  And both of them basically portrayed this idea that what happened when we kind of think about recruiting ourselves to act against something, it’s not about our mind thinking, it’s not about the cold calculated thought about what’s worthwhile and what’s the cost/benefit analysis; it’s about our heart.  It’s about our emotions.

And the question is, what can activate emotion?  It turns out that an individual case can get us to care versus a big set of cases just becomes statistics.  So this beautiful result by Deb Small and George Lowenstein and Paul Slovic that basically says, “Here is one girl in Africa who is hungry, how much money would you give her?”  And then to other people they say, "Here’s the problem of hunger in Africa, there are 3 million kids in Sudan and there are 5 million kids here, and this, how much money would you give?"  And people give half as much to Africa than they give to the single girl, Rokia.  It actually gets worse.  Because, it said, if people give more when it’s emotional than when its statistical, what happens when we give both information.  We say, “Hey, here’s one girl, Rokia, see how sad she is and how much money could help her.  By the way, there’s 5 million more like her,” what would happen?  It goes down.

It turns out that every time you activate cognition, calculation, thoughtfulness, you turn off the emotion—people care less and give much less.  And of course, this explains a little bit, the kind of imbalance between what we give to and what we don’t give to.  So think about how difficult it is to get money for prevention of diseases; prevention of malaria or prevention of diarrhea, or de-worming kids in the world.  You know, lots of kids have worms.  It turns out that those things are incredibly important, incredibly useful, you can actually get people to be much, much healthier, but it’s not motivating, right?  De-worming a kid, or, you know, a million kids in India, just doesn’t make you feel warm and fuzzy. Or preventing kids in the future from getting malaria is again, not that exciting. But if you can help one person, specific, concrete, get something, we all get very excited from it.  So there is a real imbalance between what really matters and what we care about and what we give our time and money to.

How can charitable groups use this information to their advantage?

Dan Ariely: If you run a not-for-profit, of course, you want to build on this irrationalities because you care about your not-for-profit, and I think the example here is of course the American Cancer Society.  They have done a really good job.  First of all, the word "cancer" is great in a money-recruiting way, right?  It’s an awful disease.  The second thing is the word "survivor" is really good.  And the third thing they do is they create an incredible fear from cancer.  I mean, the truth is, we all have lots of cancer and we all usually get over it, I mean, some, some people of course, don’t, but in our lifetime, we all have cancerous cells and in most cases it will be just part of the deal of living, but they create this really negative association that now everybody who had cancer, even if it was not malignant and will not cause them to die or it was so slow it will take 50 years to develop... they call everybody a cancer survivor.  And because of that, everybody who knows them and everybody who cares about them starts caring about cancer.

Now, you know, it’s kind of interesting because they have basically have mastered this issue, right?  They’ve mastered making it central, focal... created very strong fear about cancer.  And caring about it and they basically get a lot of money.  And if you look at them as a not-for-profit, they’re an incredibly wealthy not-for-profit.  In fact, the other not-for-profits feel that the Cancer Society is getting so much money, that people just don’t give to other causes because they give so much to that cause and now there’s all kinds of movements to basically stop their status as a not-for-profit because they’re so wealthy and they spend so much money on salaries and so on.  But in a sense of understanding human psychology, they’re the top, basically.

Why do we do things, like smoking and overeating, that aren't in our best interests?

Dan Ariely: There’s lots of... lot of behaviors like this.  So the basic essence is the trade-off between the short term and the long term. 

Let me give you kind of a personal story about this.  When I was in hospital a long time ago I got a liver disease from a bad blood transfusion, and for a long time they didn’t know what it was and from time to time I would get some liver infection, it was kind of bad.  And about seven years after I got injured, I was already out of the hospital, I was in grad school, I had another flare up, I had to check myself into hospital and they found out it was hepatitis C.  And there was an experimental treatment at that time called interferon, said, “Why don’t you try this?”  I was very happy to try it, because, you know, who would want to die from liver cirrhosis?  And I basically got these injections, I had to inject myself three times a week for a year and a half.  And these injections basically symbolized for me the kind of the essence of the human condition.  Here was an injection that could potentially be very useful for me 30 years later, but what happened is that it also had very bad side effects. So every time I would take an injection, I would be sick for about 16 hours.  Vomiting, shaking, fever, nothing really terrible compared to liver cirrhosis, but for sure unpleasant and now.  And here’s the question: liver, really important; injection, slightly important, but now and for certain.

And that’s basically a trade-off we have everything.  It’s about saving: not for good for now; good for the future.  Exercising: not good for now; good for the future.  Dieting, not good for now, good for the future.  Safe sex: not so good for now; good for the future.  Lots of things have these trade-off and in turns out that when you face these trade-offs, we often do what’s called a present bias focus.  We focus on the present too much and as a consequence, we undermine the long term, the long-term effect.  This is the problem of Adam and Eve, when you could ask yourself, you know, who would ever give up eternity in the Garden of Eden for an apple?  Well, if you ever texted and drive at the same time, you basically have done this mistake, right?  And most people have texted while driving.

And why do we do it?  It’s not because we weigh the cost benefit analysis and we say it’s a really good idea to text while driving.  It’s because we’re tempted at the moment to do something that we realize is really stupid from the long-term perspective.

Now, back to my story. When I, after a year and a half, there were two pieces of good news, the first one was that my liver was working fine and there was no trace of the disease.  The second thing that the doctors told me was that I was the only patient they ever had who took the medication on time.  The question is, how could I do it?  Do I have nerves of steel, am I not succumb to temptation?  And the answer is, of course: we all succumb to temptation all the time, there’s no difference.  But what I did was I found a trick.  And my trick is that I love movies, if I had time, I would watch lots and lots of movies.  So every Monday, Wednesday, and Friday on the way to school, I would stop at a video store, I would rent two or three videos I really wanted to see, I would carry them in my backpack the whole day, anticipating watching them.  I would get home, I would give myself the injection, I would push a video in.  I would get the bucket, I would get the blanket, I was already to the side effect, and I would start the video immediately.  I wouldn’t wait for the side effect to settle in, I started immediately.

Now, you can ask yourself, did I really care about my liver and the answer is no.  The fact is, that the liver is really important and me and all the other patients should have kept on taking our medication on time because of the liver, but it wasn’t strong enough.  So what did I do?  I substituted the liver with movies.  Now, you might say, this is a stupid idea!  Liver is really important, movie is not that crucial.  If you ask me what do I prefer, movies or liver, you know, there’s no question.  But because the liver is in the future, it was vastly discounted and because the movies were in the immediately, it was actually motivating me.  And we call this "reward substitution."  When I behave as if I care about my liver, by actually caring about movies. 

And I think there’s actually a big lesson there.  You can think about how do we get people to care about their health and money and longevity and so on, can we really get people to wake up every day and care about those things that will happen 30 years from now?  The answer is, it will be very difficult, expensive, and unlikely, but can we find other reward substitutions.  Can we get people to behave because of other things in a way that would make them behave as if they care about the thing that they’re doing for.

So why do people go to the gym, right?  Do they really wake up every morning worrying about how they will look... feel like 30 years from now?  Probably not, but can we get them to do something that is about the moment, to actually get them to behave because they do something that makes them care about, behave as if they care about something else.  And I think that reward substitution actually provides a general answer to lots of problems in human behavior, we just need to find out what these rewards can be.

Are there adaptive reasons that humans do things which aren't in our self-interests?

Dan Ariely: Absolutely!  So if you think about the question of trust and revenge, that’s a great example.  The fact is that we live in a society, we’re inherently social animals, unlike some other species and because of that, we need things that kind of connects us in a social way.  So we have this social utility in which we just care about other people.  Now, that creates lots of problems. For example, if you do a favor to me, I’ll like you more, and then it might put me in conflict of interest because I would want to reciprocate in some way, or, you know, trust and revenge and all of those things.

So, the fact is that there are some things that we are irrational and we would’ve liked to fix it, but there are some things where our irrationality is actually what allows us to live in a society.  And if we lived as individual organisms that basically had no social ties and we’re just working each one of us separately, it will be a very different social structure.  But we might want to actually have different strategies for our decision making, but because we’re inherently social animals, there’s all kinds of things that are irrational from the perspective of thinking that everybody’s a social, is a selfish maximizer, but nevertheless makes sense when you think about people as social animals.

The other thing, of course, is about processing information.  So the fact is that we have a limited brain, you know, we’re kind of limited physically in many ways, right?  We can’t jump very high, we can’t sustain cold or heat, I mean, think about all the stuff in the world that we do to make ourself more comfortable.  We have chairs and clothes and glasses and headphones.  I mean, lots and lots of stuff.  It turns out our brain is also not perfect, right?  In the same way that our bodies are not perfect, we can’t do everything we would like to, we’re not superman, our brain is also not perfect.  Our brain processes information in a certain way and the reality that we experience is not out there, it’s in here.  That’s what gives us, the brain gives us the world.  Brought to us courtesy of our brain and its processing ability. And because the brain is not perfect, the way we get information and process it is also not perfect.  And that’s just kind of functional, structural limitations to how rational we can be.  And the fact is that we better recognize it, it’s really good to recognize it and the standard limitations and act accordingly.  If we don’t, you know, we’ll just make more and more mistakes.  We’ll just assume that we can be perfect, we’ll create a world as if people can be perfect and then we’ll just set us up to disappointment time after time.

Recorded on June 1, 2010
Interviewed by David Hirschman