Rohan: Dan is one of the most popular behavioral economists in the world today. His books and research have had huge impact on our understanding of how our minds work. I finally managed to find a slot in Dan’s schedule after a year of trying and was greatly looking forward.
EB and I caught Dan in a very thoughtful and reflective mood. He had just finished speaking to a recent burn survivor and discusses his reflections during the interview. I am very thankful to Dan for all his great work – I’ve learnt a lot from him and it was a privilege to meet him on Skype.
I hope you enjoy the interview as much as we did.
Dan Ariely is a professor of psychology and behavioral economics.He teaches at Duke University and is the founder of The Center for Advanced Hindsight at Duke university and also the co-founder of BEworks, a consulting firm that uses insights from Behavioral Economics to business and policy challenges.
Dan Ariely’s talks on TED have been watched over 5 million times. He is the author of Predictably Irrational and The Upside of Irrationality, both of which became New York Times best sellers, as well as The Honest Truth about Dishonesty.
He blogs on DanAriely.com
Rohan: Typically, our first question is a request for the life story. However, in your case, you’ve explained your story in your book “The Upside of Irrationality.” So, instead, we’d love to understand why you chose behavioral economics? What was the driving factor?
Dan: My whole purpose was driven by being very badly injured. My purpose in life is basically trying to think about what we can improve. My first inclination was actually to try to be a physician. I saw physicians around me making lots of mistakes but also being helpful. I wanted to help. It turns out that my hands are so badly burnt that I could not really hold any medical instrument. So at least half of it was luck for me. I think if my hands were not as badly burned I probably would have gone down that path.
For me, social science, behavioral economics was a way to try to fix things I think are wrong. I had an instinct to try and fix things. It’s been a tremendous tool. I’m traveling the world and meeting with people from companies and governments and nonprofits. In a couple of hours I’m leaving for Africa. There are a lot of things we do in terms of designing the world around us that if we understood human nature we would do very differently. I think it’s an amazing time for social science to try and help us redesign the world in a better way.
EB: Were there any results in your research that surprised you?
Dan: Yes. The results that surprise me often are the first experiment. And then I think about it and think oh yes, I should have done this, and then I do the second and the third. By the time I do my fifth experiment I’m always less surprised. There are some things that surprise me just by seeing them. Even when I read a paper on loss aversion or on anchoring effects, doing the experiment for the first time myself surprises me again. There’s something really magical about looking at data and seeing if a pattern emerges. It’s just wonderful.
If I think about surprising things, I think that recently the thing that surprised me the most was the consistency of honesty and dishonesty across the world. Some of my students until last year have been running around the world doing their experiments in different places. We’ve done these honesty experiments in South America, Europe, and China, and I expected these large differences. We all have stereotypes and prejudices. I’m not going to ask you for yours, but some people might say, “People in my country cheat much more.”
Rohan: Yes, that’s what we expected too!
Dan: The basic thing is that when you put people in a room and you give them a chance to cheat with no consequences, we only find tiny differences. We’ve done it with hundreds of people. I have to say we’ve done it twice. It’s terrible, but the experiment we did in Columbia, South America was the one that we didn’t believe the most. It wasn’t just me. The student who was running it was from South America and she didn’t believe it either. So we ran it twice to be extra sure and it was indeed the case. Sometimes there are differences and sometimes there’s a lack of differences, but the reality is every day of getting data is a new wonderful day. It’s like you get to unwrap a gift and see what you find.
EB: Governments can play a huge rule in saving us from ourselves. For example, Singapore government has an opt out system for organ donation. And, more recently, the UK government has created an “opt in” system for porn. What are your thoughts on such intervention?
Dan: Government has the capacity to do a tremendous amount of good intervention. They also have a tremendous capacity to do bad intervention. I think it is important to figure out the rules of government interventions. If they tend to be driven by science, I’m happier about it than if they tend to be driven by intuition. That’s the first thing.
The second thing is that we may have to think about how we want to weigh freedom versus authority. Think about driving. None of us is opposed to the government regulating driving. You have to be a certain age, you can’t drink while driving, and you have to stop at a red light. The amount of regulation in driving is very substantial. The reason we don’t object to it is we see the costs. We see people dying on the side of the road if the government is not intervening in this regard. The problem is that with other things, we don’t necessarily see the human consequence. If the government is not intervening in obesity, or the government is not intervening with medicine, we don’t see a lot of consequences. They are there, they are just not visible.
To me, there are two principles that we need to think about. The first one is, is this intervention driven by data or not? And the second thing is to figure out how to weigh human freedom compared to human benefits. If the government is basing their intervention on data, then there’s no question they can restrict us more, and we will be healthier and live longer. For example if we eliminated chocolate whatsoever – maybe there are some benefits of chocolate. Let’s assume that chocolate is incredibly tasty, but not the healthiest. We could think about a situation in which chocolate was eliminated to save me from myself. Human fun and human freedom are also alterable.
I think that there are cases in which it is quite clear that the government should intervene, and then there are cases in which things are much more complex. Thankfully there are lots of places where interventions are useful and clear, and we should start with those and over time figure out the more complex ones. Think about the regulation of the banking system. I think that’s one where we just learned a big lesson. It’s time to intervene and regulate to a higher degree. The same thing works for medicine, clean water, clean air, and so on.
Rohan: I’m going to move to the next theme which is dishonesty. I have to thank you. When I was in university, piracy was the norm. It was not even thought about. Two years into work, I did not even think about it until I read your book about all the societal aspects of dishonesty. I also have to give credit to Clayton Christenson because I read his book right after I read yours. It was Marginal Cost Theory, and he said there’s no such thing as a little dishonesty. Either you’re right 100% or you’re not. Ever since then I’ve deleted a lot of pirated content and I’ve been buying legal content. This is almost a different topic, but Apple makes it so hard for you to do so when you’re not in the U.S. that I’ve almost had to be a little dishonest in terms of having a U.S. address in order to buy my own stuff! I owe you a big thank you. I can see so many things that have been better ever since. The big turning point was your book. Now I’m on a mission to convert my friends. (haha)
One of the things that keeps coming up is, is dishonesty ever justified? I’ll give you an example. If a man steals a loaf of bread for his dying family, is dishonesty pardoned?
Dan: Yes, dishonesty is a part of human nature and I think it plays an important role in society. If you think about the ancient question, “Honey, how do I look in that dress?”
I’ll give you an example. Two days ago, I lied to a friend of mine. This was a guy who was going through a very difficult surgery for his hand. I had lots of surgeries on my hand. He’s going in for this surgery in about two weeks. He asked me how much pain I think he will have. If I told him the perfect truth, he would be very worried for two weeks and then he would have another two months of pain. If I didn’t tell him the truth he would be a little less worried for two weeks, then have the same amount of pain at the end. I didn’t do the full computation, but I thought that he sounded worried and I wanted him to worry less.
Actually I thought about the moments of getting in to surgery and the uncertainty and the fear and the unpleasantness connected to it. I had these images of being taken on a stretcher into the operating room and I wanted to reduce his anxiety. I told him that he will probably have less pain. Was it justified or not? This was a particular lie in which I did not have much benefit. It was done for him and it did not change the consequences or the final outcome, maybe only improved it. I have a hard time thinking that this was not good. It’s not simple, but it’s probably in the category of good things. I think there are things like this. The problem of course is there are a lot of things in the other category as well.
Rohan: What is the biggest lesson you have learned from your studies? Are you happier for it? You probably know the human stripped bared. You know how irrational we are. Do you feel it has made you a happier person, or has it made you more cynical of our actions?
Dan: I’ve taken this research in two ways that make my life better. The first one is that there are some things I do better. I’ve made some mistakes and I try not to get into them. Where do you want to live? How do you live your life? What are the things you do and don’t do? How do you approach experiences in terms of optimistically or pessimistically about life. I think there’s a version of this in which you say, “My goodness, we’re limited.” And because we’re so limited, there’s a sad view of human life. Everybody I see is not as perfect and wonderful as they seem.
I look at it differently. I look at the whole world, and then I say, “Is this a place that is the outcome of 7 billion rational people? If everybody was perfectly rational this would have been the best world imaginable. The conclusion very easily is no. In a couple of hours I’m leaving for Africa where there’s a tremendous amount of illness and poverty. There is also a tremendous amount of hope. If this world is not the outcome of 7 billion rational people, maybe we can do better.
It’s true that when you look at individuals, you can say for each individual, “I wish you were more rational in some ways.” But for the planet as a whole you say “My goodness the gap between where we are and where we could be is tremendous.” There are a lot of things to improve. I think we can do much more. That’s my hope. My hope is that as we’re learning more we will improve things. Both in terms of my personal life and in terms of my outlook on the world in general, it’s a good thing.
It’s also very sad. This morning before talking to you, I talked to a kid who was badly burned. Somebody drove into his car and his car exploded and he got badly burned. He’s been in the hospital for two months and it’s going to take a while before he gets better. It’s very hard to look at this and not think about the very quick mistake of one driver and the tremendous consequences it had on this kid and his family for a very long time. Sometimes people have accidents and they pass away, you think it’s very sad. I often think the sadder thing is when people survive. Now the pain is just starting and the duration of suffering. I can’t help but think what a human waste of the one terrible decision creating terrible consequences. That kind of thing saddens me because I just see the mounds of human stupidity in this regard all around us. But I try to balance it with some hope of doing better.
EB: What are your favorite books?
Dan: One of my favorite authors is P.G. Wodehouse. He’s a British author who writes about a master and his servant, Wooster and Jeeves. I’m a big fan of his writing style. The master, Wooster is a not so smart guy who gets dragged into all kinds of instances by the power of other people and the environment and his own foolishness. Jeeves is the smart butler who gets him out in very clever ways. Wodehouse has a beautiful language. He describes the world in an interesting way but he also describes human emotions and motivations. For me it’s a discussion between our two sides. The more rational, thoughtful, deliberative planning side and the more foolish immediate side, in this case in two separate people. It’s really unraveling stories of human nature. I love Wodehouse.
There’s another very short book that I love a lot called Three Men in a Boat, also by a British author Jerome K. Jerome. It was written over 150 years ago. What’s interesting about this book is how well he captures human nature. For example he has a part where he describes how he drives around town and all of these pedestrians are trying to commit suicide by running into the car and not caring and so on. Then he becomes a pedestrian and very quickly his perception changes, and all of a sudden he thinks that the drivers are trying to kill him and the pedestrians have the right of way. He has lots of those deep psychological insights that are very interesting. Some of them I’ve even done research on.
Rohan: What movies or TV shoes are you a big fan of?
Dan: I love TV series. I don’t get much of a chance to watch TV, but I watch it on flights. I started it on a flight from India to China, which was a very long flight. I watched a TV series called 24 which is an espionage, terrorism show. It was an amazing experience. It was a long flight. I would fall asleep; I was not sure where I was. I would wake up having memories and dreams about the show. The whole combination was an amazingly emotional experience. Since then I’ve been trying to watch on flights. I used to only work on flights, now I only watch things on flights.
I’m probably behind the times. I’m not watching something current, but now I’m watching a series called Breaking Bad. It’s an interesting series. It’s about a guy who has basically become a drug dealer, and drug manufacturer out of necessity. It’s an interesting show to get us to think about reality and crime. I’m enjoying that as well.
Rohan: If you get a chance, check out The Game of Thrones. You will particularly like it because it’s not good versus bad, but a whole bunch of morally ambiguous characters who are facing decisions in situations where they have to make calls. I have a feeling you’ll really like it.
Dan: I watched The Game of Thrones. It was actually interesting because I had to watch it as homework. I was asked to interview Peter Dinklage who is one of the main actors in this show. We got to be on stage together and I asked him some questions about life as an actor through the perspective of behavioral economics. It was really quite interesting. I was trying to get him to reflect on his profession as a function of this. I’ll share with you one thing. I asked him about the role of expectations. If you know that something is going to be of a particular type, it changes your expectations.
These days we know a lot about actors, and can we really filter this out and experience them in a new role, or is every role associated with previous roles? He said he thinks that one of the greatest actors ever was Marlon Brando. He said that Marlon Brando gave only one interview. And because of that he could go into a different role and of course people had some knowledge about him from previous roles, but people didn’t know much about his personal life. He said that these days, you know everything about every actor. There’s so much information. If you care, you can find out. That actually makes it much tougher for them to really adopt a role and for the audience to truly believe them. It was an interesting contrast between an actor’s desire for fame on one hand and our desire for information on the other hand and the potential negative aspect of that information.
Rohan: What are your productivity hacks that you use?
Dan: I basically try not to waste time. What I do is when I get tired of one task, I move to another one. I think often when people get tired of one thing, they think let me go to Facebook, and I’ll get some energy and I’ll go back to this. When I get tired of one thing I just switch to something else. I think the amount of hours I end up working is much higher because of that. I’m also a big fan of coffee. I stay awake for more hours.
Rohan: What is something that inspires you on a daily basis that you would like to share with us?
Dan: One of the really magical things that happened with my books is that I meet people who told me that I changed something about their lives. After I wrote my first book Predictably Irrational, I met a woman on a flight. She was sitting next to me and she was so excited to have me next to her and she told me that she was diabetic and she was debating whether to install an insulin pump or whether to keep on taking the injections. In her mind she had a discussion with me about what I would say about this and she concluded that I would say that she should put the insulin pump in with the surgery, and then she went ahead and did that.
It just amazed me that you can put something out there in the world and people read it and think about it and take it seriously and maybe make a better decision or two. It’s such a tremendous feedback and motivation. Since then I’ve met other people that I got to influence and I can’t tell you how gratifying and motivating this is.
Thank you so much for taking the time, Dan! We’re looking forward to many many insights from your research in the future.
The Real Leaders Team