So this guy might look like Frankenstein, but he’s written a super insightful book in ‘Predictably Irrational’.

I am only half way through it, but he has touched upon some topics that are brilliantly insightful, yet you can’t imagine how you did not think of that yourself. However, don’t let the simplicity fool you into thinking what he talks about is obvious. Its not.

Of the many insightful ideas he brings up, the one that struck me the most is about anchoring. How the price of a particular is always looked at as a relative. Gucci is super expensive compared to a Samsonite. A Samsonite is super expensive compared to the one you get in Chor Bazaar. If someone were to tell you, without you ever having heard of a bag price before, a Gucci salesman would have you believe that the price you’re paying for one of their bags is normal, and you would believe it.

But this is intuitive. Of course everything is relative. Things really start getting interesting when you start thinking about anchoring and the the sub-conscious. Ariely found that even if you mentioned a higher price (or brought a higher price level in the span of attention of the person during a period), that it influenced his decisions.

For instance, on a sample of MIT students (the pinnacle of rational beings in his mind), and asked them to list down their social security number before bidding on a number of identical items. There were further controls and intricacies to the experiment, but the gist was that he found the students with a higher last two digits of the SSN, systematically, bid higher than their counterparts that had lower last two digit SSN numbers.

That kind of thing; if true at a larger scale boggles the mind. And it should, for if it were true, anchoring goes far beyond simply pricing. It goes to the way we look, the way we behave, the decisions we make. Also makes a case for the environment trumping the individual – for the innumerable sub conscious anchors are placed there.

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