Dan Ariely and Irrational Comparison

Ariely uses this illustration to make his point about comparison. Which orange circle appears bigger? You’d likely say the one on the right, at least at first. But, both circles are the same size. The only thing that’s changed is what you’re comparing them to. Comparison depends on context.

“…we are always looking at the things around us in relation to others…We always compare jobs with jobs, vacations with vacations, lovers with lovers and wines with wines.”

Comparison is a survival skill that’s served us well our first 50 million years as a species: You need to know your status in the tribe compared to others’ to ensure your own safety. You need to compare how deadly a particular tiger looks compared to other live tigers you’ve seen in wild to assess your threat level. You need to compare how someone looks to other angry people you’ve seen to avoid a bar fight. You need to compare a date to other people you’ve dated in the past to evaluate how they might be as a future spouse for you. You need to know how to compare how fast your car is going relative to all the other cars on the street to stay within the speed limit.

Comparison does hijack our rationality, however.

The Economist

Ariely was trying to figure out what decision people made when given these three options for a subscription to The Economist:

Out of 100 people here is how many chose which options:

But, when Ariely removed the print only option, here is what people chose:

As a business, you want to nudge as many people to the high-end of your sales as possible. So why were people opting for the online only?

It turns out it is easier to compare things that are alike than are not alike. By presenting people with not one but two print options, you’ve now made it easier for them to compare two options that you, as a business, want them to focus on. The mind has now written-off the online only option because that is the hardest option to compare to the other two.

Inside the mind of your potential customer is now a simple question: What’s better? Print only or print AND an online subscription? Everyone in the first experiment opted for the “print + online” because isn’t print plus a little something extra better?

We Can’t Make Decisions In A Vacuum

The second case study Ariely looks at is Williams-Sonoma’s inability to sell a $275.00 bread baker. Their marketing team finally figured out that if they created a second, bigger and even more expensive bread baker placed next to the $275.00 dollar one, their sales would take off. And they did.

“…people didn’t have to make their decision in a vacuum. They could say: “Well, I don’t know much about bread makers, but I do know that if I were to buy one, I’d rather have the smaller one for less money.”

Ariely then goes on to joke that if you want to have better luck socially finding someone to date you, you should find a decoy friend of similar physical characteristics but who is slightly less attractive than you. Although the morality of this is questionable.

If you are a business, the takeaway is simple: to make more profit, create a favorable context for the product you want your customer to buy. Create an ultra-premium ridiculously high-priced product that when placed next to the product you really want to sell, makes its price not seem so bad.

Tesla knows not everyone is paying $100K + for their Cyber Truck, but they do know that by having their ridiculous premium products, it makes the $60K price tag for their “lower models” not seem so crazy.

Place vs. Person

I have some of the best friendships I’ve had from my former football teammates. We go through experiences, games, high and lows like few others friend groups might. But would we all have been friends were it not for football? How about military veterans who are bonded together in combat - were it not for that experience, would they have chosen to be friends?

Ariely uses the example of meeting a fellow American in a foreign place and finding an uncanny connection in an airport. He met one fellow American overseas:

…as cultural outsiders we were each other’s best alternative for companionships. But once we returned home to our beloved American families and friends, thebasis for comparison switched back to “normal” mode.

Would that foreign exchange student you dates in high school have been as “cool” or “exotic” had they been from Germantown, PA instead of Germany? Was that experience teaching overseas in Peace Corps really that cool or am I just assigning extra romanticism to it because I was an “outsider” in a foreign land?

Takeaways

We’re very smart, but we’re also very irrational as people. We’d like to think logic and rationality governs most of our lives but Ariely has a knack for showing us just how reliant we are upon split second and irrational comparisons to the available yet limited information we have around us.

Morally speaking, as a business owner or person you have a duty to make decisions now with this comparison fallability in mind. While yes, you can structure your products in a way to extract more profit than normal from your customers, you need to do this only when you truly feel like that high-end product you’re directing them to is actually giving them more value.

Personally, don’t find the most repulsive personality to take out on a double date hoping that it makes you look good. This might even back fire since your double date might end up comparing you to the company you hang out with and irrationally judge you just as repulsive.

Comparison is a force of nature that can’t always be controlled, but it can be guided. Ariely shows us how.

Bren

P.S. Here is a fun video by Dan at a Ted Talk

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