Book Report †Sway: The Irresistible Pull of Irrational Behavior Essay

The book, Sway: The Irresistible Pull of Irrational Behavior, by Ori Brafman and his brother, Rom Brafman dives into the way that we make decisions. Why do humans make the horrible decisions we do when logic would tell us to act otherwise? There are several psychological influences that sway our decision-making ability according to the Brafman brothers. The authors look at several different factors, with a lot of fascinating and logic-breaking examples. This book will help you understand the decisions you make. In many circumstances times when logic would dictate that we take a certain action, we take the opposite. To illustrate, just ask yourself why you have stayed so long in a doomed relationship? Why was it so hard to sell a stock that has lost much of its value†¦or to sell your house if it will be for less than you paid for it? In their book, Sway, Ori and Rom Brafman explore our decision making process and what influences our behavior. Hence, the subtitle, The Pull of Irra tional Behavior is used. Sway opens with a convincing example — the historic KLM flight where the pilot made a seemingly irrational decision that cost the lives of 584 people in 1977, the largest airline disaster in history. The authors make the argument that because the pilot was so focused on getting to his final destination after being diverted; he was swayed into making a wholly irrational decision, which ended in tragedy. How was he swayed specifically? Well, the book revisits the KLM disaster a few times to flesh out the underlying irrational decisions likely being made by the pilot. The book is filled with such examples, such as people who have bid as much as $200 for a $20 bill. Why? Why would anyone pay more than the face value of a $20 bill? Well, the authors have the answers.Here I will describe all the major sways listed in the book. I will also give an example of the sway and why it affects people so harshly.1. We overreact to potential losses. Humans tend to focus more on the short-term consequences rather than the longer-term effects. This is illustrated well by AOL’s Internet options. For a while, AOL gave consumers access to the web through a pay as you go method. Customers would pay for every minute they used the Internet. Then, when AOL introduced a flat monthly fee, customers began signing up for that plan in masses. Customers wanted to make sure they avoided the perceived  losses from the pay as you go method, when in the long run; most users were losing money with the flat rate. 2. Loss averse. The more meaningful a loss is, the more loss averse we become, meaning we don’t want to give up our hold on the loss (even when it’s economically, emotionally or otherwise beneficial to do so). The best example of loss aversion is in the stock market. Inexperienced traders have the hardest time selling a plummeting stock. Say you invest in a stock for $10 a share and in a week the price rises to $20. Now it would be great to sell then. But then the next day the stock drops to $17 a share. For whatever reason, humans perceive this $3 difference as a loss, instead of a $7 gain (you invested at $10 and could sell at $17). So, the investor says, once it gets back to $20 I will sell. Then it drops to $15, then $12, then $6, and before you know it, you have lost money, when you could have gaine d $7 a share!3. Commitment. When we are committed to a relationship, decision, or position in our lives, it can be very difficult for us to see the better, healthier alternatives available. The best example of this in the book is the $20 dollar bill auction. Harvard Business School Professor Max Bazerman conducts this auction on the first day of his class. There are only two rules to the auction; first, bids are to be made in $1 increments. The second rule is a little trickier; the winner of the auction gets the $20, but the runner up still has to honor their bid, while receiving nothing. When the bidding gets closer and closer to $20 the students realize what is about to occur. The two people left in the bidding war both do not want to walk away with nothing, therefore instead of accepting defeat and losing $19 in the auction, somebody will bid $21. The students continue bidding, ignoring all rationality and drive the price upwards. Bazerman states that it once made its way up to $204. 4. Value attribution. Humans have a tendency to place certain qualities upon someone or something based on its perceived value rather than objective data. If we see something labeled a certain way, we’ll take that label at face value. The authors have two amusing examples of value attribution at work — a world-famous violinist is mistaken for a street musician in the subway and a SoBe energy drink that is only as valuable in helping improve your memory as you think it is. In the SoBe energy drinks case, the authors cite a study that measured test results after consumption of the energy drink. The subjects were put into three  categories. Those that had no SoBe, those that were told the powers of SoBe and then bought it at full price, and those that were also told the powers of SoBe but then received it at a discounted price. After taking a test, the results were measured to see if there was a pattern within the groups. The results showed that those who drank the SoBe at full price had better test scores than those who had no SoBe at all. But before we run to buy all the energy drinks we can afford, the group who drank the cheap SoBe performed far worse than those who drank no SoBe at all. When things are discounted off of their regular price, people tend to give the product or service a reduced value attribution. In other words, when we get a discount on something, we tend to unconsciously value it less than if we had paid full price.5. Diagnosis Bias. Humans have a propensity to label people, ideas or things based on our initial opinions of them. This includes our inab ility to reconsider those initial value judgments once we’ve made them. Again, the authors bring this sway to life with their examples of how players perform directly in relationship to their NBA draft pick number, amongst many others. A single word or label can color our entire perception of a person, closing off avenues of shared experience and seeing people for who they really are. Once a person is given a label (and even directly, a diagnosis), it’s hard for people to see people in a way that isn’t biased by that label. The authors also note that hiring interviews are actually a terrible way to identify possible employees. Turns out â€Å"first date† style interviews are completely unscientific and at the end of the day, quite horrible at helping managers choose a good employee.6. Fairness. People want and expect fairness in all of their dealings with other people, companies and organizations. It is vitally important for people to feel they have a voice. People want to be listened to and heard, even if nothing changes. Talking through our reasons for a price or our position in an argument or debate, explaining how we arrived at it, and communicating what we feel is the fair thing to do makes other people feel like we’ve treated them more fairly and reasonably. The authors cite a study done which pair’s strangers and offers up a chance at winning cash. The strangers are placed in separate rooms and told that they will never meet the other person, even after the study is over. Then the instructions are given to the first subject. They are told that there is $10 dollars to be split between them and the partner. They  have been chosen as the person to divide the money however they see fit. The catch is that the other person must agree to the offer. If the person does not agree, both partners will walk away with nothing. The same speech is given to the second pa rticipant except with minor changes letting them know that the other person will be splitting the money and that they have the power to say yes or no to the deal. The study showed that all splits of 50/50 were accepted and almost all of the uneven splits were denied. Even though people were offered some money, they chose to deny it because they saw it as â€Å"unfair†. People did not seem to realize that they were in a fortunate position just to be offered any money at all.7. Altruistically or Selfishly. Humans approach everything from one of these two viewpoints, but usually not both at the same time. When the two centers of the brain (altruism and pleasure) compete, pleasure usually wins. When the pleasure, self-interested perspective is operating, unexpected behavior or effects can occur. Essentially, a person cannot act in their own interest while looking out for others, because your desires to look out for number 1 will always win. This portion of the book also speaks on the most relevant portion to our class. It speaks on how rewards can damage someone’s work ethic when it is believe that they will actually help. It’s not that rewards for specific tasks or behavior are bad, it’s the possibility of a reward dangled ahead of time that can potentially result in destructive, unintended effects. It’s okay to reward someone after the fact, but don’t always create the possibility of the reward ahead of time. And know that money defeats/negates altruism.8. Groups. Groups can have profound effects on our ability to reason rationally. A study was done on individuals and their ability to ignore wrong information. Subjects were placed in a room with several other people and the task was given to all subjects; identify which two lines were the same lengths. Then, on the screen 4 lines would appear, two of which were the same length. The study made it very obvious too; no rulers were needed, for the lines were glaringly different. The catch was that only one person in the room was an actual subject, all other people were paid actors told to identify the wrong line. When the researchers asked the group which lines matched, all the actors would give the same incorrect answer, and the effects were powerful. 75% of the subjects incorrectly identified the lines because they did not want to go against the group. Then a second round began  and one actor was told to give the correct answer, or at least an answer different than the group. In almost all cases, the subject spat in the face of the actors and correctly identified the lines. The lesson to be learned here is that dissent is invaluable – you need a dissenter, even if you don’t agree with the specific dissent itself. Dissenters open up discussion and allow individuals to express their views. I highly recommend this book. It was nearly impossible for me to put down and only took me about a day to read. I think very economically and logically (or at least I would like to believe), so the book spoke to my every thought. The book offers a few solutions in the epilogue; solutions that help individuals think more rationally. However the solutions are very trivial. Suggestions such as â€Å"take a deep breathe and evaluate the situation† are recommended. The problem with these solutions is that the situations don’t allow for deep breaths! That is why irrational behavior takes place in the first place. Overall, the book was a great read and a valuable lesson.