Predictably Irrational Part 1 of 5: Market Vs. Social Forces

December 15, 2008 by dr. lam

I alluded to Dan Ariely’s book, Predictably Irrational, a few months ago when a hair transplant patient mentioned the book to me during surgery. That obviously spurred my interest, and I have since read the book. The book really is quite fascinating in many respects as it relates to predictably irrational human behavior in the field of “behavioral economics.” As much as we would like to think of ourselves as lucidly rational individuals, we are all swayed by an uncanny humanness that is present but that can be mitigated if we are aware of that proclivity.

The single most interesting facet of his book that I have repeated several times to my staff is the concept of market versus social forces. He opens with an example of a Thanksgiving dinner. You go to eat your mother’s cooking and say something to the effect, “Mom, great meal. I really would like to pay for it. How about 250 dollars or better 350?” Obviously, that would be an expensive price for a meal, but it would still be considered an absolute insult to the receiver rather than an honest appraisal. In short, we humans mentally divide market situations from social ones. Clearly, the social force here should preside and the intrusion of a market force destroys the more powerful, abiding social force.

The most interesting example that Ariely described was a day care center that got tired of parents’ occasional tardiness to pick up their kids at the end of the day. Accordingly, the administration levied a $25 fine on all parents who were late to procure their little ones. The effect was that the parents actually became consistently tardier, the reverse effect of the desired one. The application of a market force ($25 fine) over a social one (parents’ feeling guilty of being late to pick up their kids) essentially nullified the social contract and all the attendant guilt. Realizing that this fine backfired on them, the administration removed the fine. The result was quite surprising. The parents actually started to become even later to pick up their kids because they no longer had social nor market forces at play. Social forces had been eliminated because the parents lost their perception of their duty to pick up their kids once the market force was applied, albeit temporarily. Social forces take a long time to be mentally reinstated.

I was approached at a party by a seasoned videographer who said, “Sam, you really should be charging people to watch your videos. For example, Tony Robbins charges people a fraction of what he charges them when they sign up to watch a live webinar versus actually attending his live events.” I replied, “That is not what I am about. I don’t charge people for my time. I look at it as education for procedures that I get paid to do.” I reflected about it, and I look at it as a social obligation that I have toward my patient and prospective patient base that clearly has long-range monetary goals for my business but should not be compromised by turning that information into a market force when I and I think all readers/viewers of my material look at it as a social force.

Share and Enjoy: