How We Overvalue the Things We Create
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, which helps business leaders apply scientific thinking to their marketing and operational challenges. His books include Predictably Irrational and The Upside of Irrationality, both of which became New York Times best-sellers. as well as The Honest Truth about Dishonesty and his latest, Irrationally Yours.
Ariely publishes widely in the leading scholarly journals in economics, psychology, and business. His work has been featured in a variety of media including The New York Times, Wall Street Journal, Washington Post, Boston Globe, Business 2.0, Scientific American, Science and CNN.
Dan Ariely: I don’t know if you’ve had the experience of \r\ngoing to IKEA, but I go from time to time and the last thing I did was I\r\n built a toy chest for my kids. And when I got home with this box, \r\nactually a set of boxes, and I start assembling them, for me, the \r\ninstructions were very unclear, and I kept unscrewing things and \r\nscrewing them wrongly and had to disassemble and put it back together \r\nand so on. By the end of the day, I worked a lot, it was not a \r\nparticularly beautiful piece of furniture, but I was actually quite \r\nattached to it. And I think that’s kind of the interesting idea, is \r\nthat when you put a lot of yourself into it, some sweat and energy and \r\nanger and maybe even frustration, you end up loving the end product a \r\nbit more.
So we tried to do this experiments and we got people to\r\n build Legos and origamis and all kinds of things. And the first thing \r\nwe found was if there was an origami that you built and an origami that \r\nsomebody else built, you think that yours is much, much more beautiful. \r\n Not only is it more beautiful, you’re willing to pay much more for it, \r\nright? Now the question is why? You can imagine, I built an origami \r\nthat is uniquely good for me and you, the other origami is not, so it’s \r\nunique to me, it’s not about the fact that I kind of wrongly value it, \r\nit’s just that it has some features that I particularly like.
\r\nSo we asked people to predict how other people would pay for it and \r\nturns out people are really wrong with it. Not only do we like more the\r\n origami we make, we think other people would love them as well. And \r\nyou can think about kids like this, right? I have two wonderful kids, I\r\n love them dearly, I think they’re amazing. When we go to a party and \r\nthey dance or do something, I can’t believe that any of their parents \r\nwould want to do anything but look in my kids, right? And that’s the \r\nissue, right? They are my kids, I think they are wonderful, but, not \r\nonly that, I think that other people should see them as wonderful as I \r\nsee them. And the same thing happened with origami or with everything \r\nwe make, not only do we overvalue it, we think that everybody will share\r\n our perspective.
And this, of course, creates both opportunities\r\n for better things and opportunities for mistakes, right? So if you’re a\r\n company and you can create things that people would actually put \r\nsomething of themselves into it and actually value it more, that’s a \r\ngreat thing to do, right? There’s lot of opportunities for tailoring \r\nand custom made and user designed on the Web. It’s also about cooking \r\nfor yourself and doing your own garden and fixing things yourself \r\nbecause we might not understand it if we do something of ourselves we \r\nwould like it more, but the fact is, we likely would do the same thing. \r\n But of course, there’s the down side and the down side is if we create \r\nsomething, we end up loving it, perhaps too much, and we don’t see it in\r\n an objective way and as a consequence, we can make mistakes as well. \r\nAnd that’s actually a general comment about rationality and \r\nirrationality. Rationality... irrationality is not always bad, it’s not\r\n always that a rational person is better than irrational, it’s a \r\nmixture, right? It’s really wonderful that we can love our kids so \r\nmuch, that's why they actually get to live and we care about them. But \r\nat the same time, our blindness to them or to the weaknesses can \r\nactually create some negative consequences as well.
Recorded on June 1, 2010
Interviewed by David Hirschman
Ariely's "IKEA effect": Not only do we like things that we make more than similar things made by others—but we think other people should value them more as well.
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