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In The U.s., I Think There Is An Ideology Of Not Telling Kids What To Do. Nobody To Tell You Who To Marry, Not Tell You What Job To Pick. You're Your Own Person. You Have The Freedom To Choose, Including The Freedom To Fail In Magnificent Ways. And I Think That's The Big Difference. In Other Countries There Is Basically A Social Norm About Saving That Is Passed From Generation To Generation. In The U.s. There Isn't.

-Dan Ariely

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In The U.s., I

Dan Ariely

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In The U.s., I Think There Is An Ideology Of Not Telling Kids What To Do. Nobody To Tell You Who To Marry, Not Tell You What Job To Pick. You're Your Own Person. You Have The Freedom To Choose, Including The Freedom To Fail In Magnificent Ways. And I Think That's The Big Difference. In Other Countries There Is Basically A Social Norm About Saving That Is Passed From Generation To Generation. In The U.s. There Isn't.

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Imagine You Have Six Loans, Small To Huge. People Want To Close Loans And Because Of That, They Try To Pay Off The Small Loans, But That's Not The Right Strategy. The Right Strategy, Of Course, Is To Pay The Loan With The Highest Interest Rate. People Make This Mistake And It Costs Them Lots And Lots Of Money, It's A Very Expensive Mistake Because Interest Rates Accumulate And Become Very, Very Expensive Very Quickly.

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Imagine You Owe On Five Credit Cards, You Owe Five Debts. So Which Debt Should You Pay First? And The Answer Is Very Simple: You Should Pay The One With The Highest Interest Rate First. But That's Not What People Do.

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Once We Start Thinking Of Ourselves As Polluted, There Is Not Much Incentive To Behave Well, And The Trip Down The Slippery Slope Is Likely.

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When It Comes To The Mental World, When We Design Things Like Health Care And Retirement And Stock Markets, We Somehow Forget The Idea That We Are Limited. I Think That If We Understood Our Cognitive Limitations In The Same Way That We Understand Our Physical Limitations … We Could Design A Better World.

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Money Is A Wonderful Invention. It Lets Us Save, It Lets Us Specialize, Right? I Couldn't Be A Professor If There Wasn't Any Money. Every Day I Would Have To Raise Chicken And Bread And Broccoli And Go Ahead And Spend All My Time Trading. So, Money Is A Wonderful Mechanism.

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I Don't Know What Exactly The Translation Is But When We Do Consume Something Now, Something Else Has To Give At Some Point.

The Most Difficult Thing Is To Recognize That Sometimes We Too Are Blinded By Our Own Incentives. Because We Don’t See How Our Conflicts Of Interest Work On Us.

Thinking Is Difficult And Sometimes Unpleasant.

The More Cashless Our Society Becomes, The More Our Moral Compass Slips.

Even The Most Analytical Thinkers Are Predictably Irrational; The Really Smart Ones Acknowledge And Address Their Irrationalities.

Money Is Very Difficult To Think About. So, We Think About Money As The Opportunity Cost Of Money. So, We At Some Point Went To A Toyota Dealership And We Asked People, What Will You Not Be Able To Do In The Future If You Bought This Toyota? Now, You Would Expect People To Have An Answer. But People Were Kind Of Shocked By The Question. They Never Thought About It Before. So, The Most We Got Was People Said, "well, If I Can't Buy This Toyota, If I Buy This Toyota, I Can't Buy A Honda." What Is This Thing? What Is This Value Of Price? Very Hard To Think About It.

The Bad News Is That Ignoring The Performance Of People Is Almost As Bad As Shredding Their Effort In Front Of Their Eyes. Ignoring Gets You A Whole Way Out There. The Good News Is That By Simply Looking At Something That Somebody Has Done, Scanning It And Saying "uh Huh," That Seems To Be Quite Sufficient To Dramatically Improve People's Motivations.

People Are Willing To Work Free, And They Are Willing To Work For A Reasonable Wage; But Offer Them Just A Small Payment And They Will Walk Away.

If You Want To Spend More Money In Restaurants, Use Credit Cards More Than Cash. If You Want To Spend Less, Use Cash More Than Credit Cards. But In General, We Can Think About How To Use The Pain Of Paying And How Much Of It Do We Want. And I Think We Have Like A Range. Credit Cards Have Very Little Pain Of Paying, Debit Cards Have A Little Bit More Because You Feel Like Today, At Least It Is Coming Out Of Your Checking Account, And Cash Has Much More.

...[d]ivision Of Labor, In My Mind, Is One Of The Dangers Of Work-based Technology. Modern It Infrastructure Allows Us To Break Projects Into Very Small, Discrete Parts And Assign Each Person To Do Only One Of The Many Parts. In So Doing, Companies Run The Risk Of Taking Away Employees' Sense Of The Big Picture, Purpose, And Sense Of Completion.

There's Something About [cyclically] Doing Something Over And Over And Over That Seems To Be Particularly Demotivating.

A Very Simple Bad Decision Is To Get Into Debt. And That Is Very Expensive.

Giving Up On Our Long-term Goals For Immediate Gratification, My Friends, Is Procrastination.

Procrastination

Companies, However Unintentionally, Choke The Motivation Out Of Their Employees.

The Problem With Opportunity Cost Is That Opportunity Cost Is Divided Among Many, Many Things.

When We Think About Labor, We Usually Think About Motivation And Payment As The Same Thing, But The Reality Is That We Should Probably Add All Kinds Of Things To It - Meaning, Creation, Challenges, Ownership, Identity, Pride, Etc.

We Are All Far Less Rational In Our Decision-making Than Standard Economic Theory Assumes. Our Irrational Behaviors Are Neither Random Nor Senseless: They Are Systematic And Predictable. We All Make The Same Types Of Mistakes Over And Over, Because Of The Basic Wiring Of Our Brains.

If You Get People To Feel That They Are Putting Something, That They Are Creating It And So On, Their Love For The Project Would Increase. The More Something Is Yours, The More You're Willing To Invest In It.

Money Is A Great Way To Get Happiness. Right? Lots Of Wonderful Things You Can Do With Money. The Question Is, Are We Really Optimizing On That? So, If You Think About Getting Lattes And Getting Cable. Which One Of Those Is Actually Giving You A Greater Happiness, And If You Have To Cut On One Of Those, Which One Would You Cut? So, I Think Thinking In Terms Of Concrete Terms Would Help Us A Great Deal.

We Can Think About How We Reduce The Pain In Paying. So, For Example, Credit Cards Are Wonderful Mechanisms To Reduce The Pain Of Paying. If You Go To A Restaurant And You Are Paying Cash, You Would Feel Much Worse Than If You Were Paying With Credit Card. Why? You Know The Price, There's No Surprise, But If You're Paying Cash, You Feel A Bit More Guilt.

Disasters Are Usually A Good Time To Re-examine What We've Done So Far, What Mistakes We've Made, And What Improvements Should Come Next.

The People That Lend You Money Basically Give You An Answer Based On The Risk That They Are Willing To Take. But Just Because A Bank Is Willing To Take A Particular Risk Doesn't Mean That That Is The Right Amount For Me To Spend.

Because Cheating Is Easier When We Can Justify Our Behavior, People Often Cheat In Small Amounts: We Can Come Up With An Excuse For Stealing Post-it Notes, But It Is Much More Difficult To Come Up With An Excuse For Taking $10,000 From Petty Cash.

When People Are In Severe Pain, There's An Expression, You're A "pain Person," And What That Means Is That Nothing Else Matters.

What Reminds You In Your Environment About Saving? Nothing.

Our Environment

None Of Us Always Make The Best Financial Decisions.

For All Of Us, It's Very Hard To Think About Money, And Because Of That, We Need Help. In The Same Way That For All Of Us, It Is Hard To Eat Well, And We Need Some Help. The Poor Have A Particular Challenge, Which Is That Their Life Is Actually Much More Complex - And They're Much More Complex Cognitively.

Kids Don't Care What Party They Have, Right? They Want Cake And They Want To Run Around. Nothing Else Matters. But In This Escalation, All The Kids Want Parties Like Their Friends. So, If All The Friends Have An Amazing, Expensive Party, They All Want The Same Thing. If We All Got To Scale Down As A Coordinated Effort, All The Kids Would Have Been Just As Happy.

Rainy Day Savings Are Incredibly Important, Because From Time To Time, Bad Things Happen. And If You're Not Prepared For That, It's Going To Be Really Terrible.

Money Actually Becomes Even More Difficult Than Other Things Because It's Very Hard To Imagine What The Benefits Are To Saving. So, Imagine That You See A New Bicycle, A New Pair Of Shoes, Or Something Today. You Know Exactly What You Are Giving Up If You Are Not Buying It, What Are You Gaining In The Future If You Are Not Getting It. So, You Are Giving Up The Bicycle Today, What Is It In The Future? What Will Happen If You Send Another $1,000 To Your Retirement Fund? What Difference Will It Make? It Is Very, Very Hard To Figure Out.

It Was Shocking To Realize How Many Low-income Americans Don't Have Savings Accounts.

Dishonesty Is All About The Small Acts We Can Take And Then Think, 'no, This Not Real Cheating.' So If You Think That The Main Mechanism Is Rationalization, Then What You Come Up With, And That's What We Find, Is That We're Basically Trying To Balance Feeling Good About Ourselves.

The Retail Industry Has Its Own Headache: It Loses $16 Billion A Year To Customers Who Buy Clothes, Wear Them With The Tags Tucked In, And Return These Secondhand Clothes For A Full Refund.

Money Are Very Difficult To Think About. So, We Think About Money As The Opportunity Cost Of Money. So, We At Some Point Went To A Toyota Dealership And We Asked People, What Will You Not Be Able To Do In The Future If You Bought This Toyota?

Big Data Is Like Teenage Sex: Everyone Talks About It, Nobody Really Knows How To Do It, Everyone Thinks Everyone Else Is Doing It, So Everyone Claims They Are Doing It.

The Problem Is That People Basically Dangle Debt In Front Of Us. And The Cost For The Poor Of Course Is Much Higher Than For The Wealthy.

Scaling Down Individually Is Very Hard. Imagine That If You Go To A Place Where Everybody Is Dressed Nicely, And You Are The Only One Who Doesn't Dress Nicely. Everybody Goes On Vacations To A Great Place And You Go To The Jersey Shore. It's Very Hard To Do These Things Without An Organized Mechanism, But It Looks To Me Like There Might Be Some Organized Mechanisms.

With Everything You Do, In Fact, You Should Train Yourself To Question Your Repeated Behaviors.

The People Who Need To Overcome Temptation To The Highest Degree Have The Hardest Time Doing It.

Once You Break The Social Norm And Create A New Social Norm, All Of A Sudden It Can Stay With Us For A Long Time.

If You Have Loans, The First Thing You Want To Do Is Say, "okay, Look I Have A Credit Card, If I Really Need To Borrow, I Have This Emergency Money That I Can Get, But For Now There Is No Reason For Me To Keep Cash At Zero Percent Interest Rate And At The Same Time, Pay All Of This Money Out. So, I Think People Need To Figure Out Quickly How To Pay Loans And How Much Cash They Should Really Keep.

You Can Think About Life As A Battle Between You And A Doughnut Shop. The Doughnut Shop Wants You To Eat Another Doughnut And Pay The Money, And You Want To Do It In The Short Term, But In The Long Term It's Not Good For You Either Financially Or From A Health Perspective.

To Summarize, Using Money To Motivate People Can Be A Double-edged Sword. For Tasks That Require Cognitive Ability, Low To Moderate Performance-based Incentives Can Help. But When The Incentive Level Is Very High, It Can Command Too Much Attention And Thereby Distract The Person’s Mind With Thoughts About The Reward. This Can Create Stress And Ultimately Reduce The Level Of Performance.

Money Is All About Opportunity Cost. Every Time You Spend On Something, That's Something You Can't Spend On Something Else.

Opportunity Cost

We Need To Believe That We're Good People, And We'll Do Just About Anything To Maintain That Perception.

Do You Know How Much Money You Would Save If You Changed Your Light Bulb To Compact Florescent Light Bubs? How Much Would You Save If You Decreased Your Temperature Of Your House In The Winter By One Degree, Or Increase It By One Degree? We Just Don't Know These Numbers, But I Think Displays Could Make It A Memorable Change In Terms Of Attention, And Also Help Us Translate It In Terms Of Concrete Ways On What You Can Get.

In Terms Of The Actual Curriculum For Management Education, My Own View Is Very Simple-minded: The World Is Incredibly Complex, It Changes All The Time, And We Should Not Even Hope That We Could Create A General Model That Accurately Describes The World In All Its Possible States.

But Suppose We Are Nothing More Than The Sum Of Our First, Naive, Random Behaviors. What Then?

We Usually Think Of Ourselves As Sitting The Driver's Seat, With Ultimate Control Over The Decisions We Made And The Direction Our Life Takes; But, Alas, This Perception Has More To Do With Our Desires-with How We Want To View Ourselves, Than With Reality.

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