The technocratic mind models the economy as though it were a machine: if the machine is left idle for a greater amount of time, then it must be less valuable. But the economy is not a machine – it is a highly complex system. Machines don’t allow for magic, but complex systems do. Engineering doesn’t allow for magic. Psychology does. (Location 328)

The human mind does not run on logic any more than a horse runs on petrol. (Location 369)

Tags: logic

Note: .logic

if we allow the world to be run by logical people, we will only discover logical things. But in real life, most things aren’t logical – they are psycho-logical. (Location 377)

Tags: logic

Note: .logic

Not everything that makes sense works, and not everything that works makes sense. (Location 435)

It’s important to remember that big data all comes from the same place – the past. (Location 473)

Tags: data

Note: .data big data is based on the past

If this book provides you with nothing else, I hope it gives you permission to suggest slightly silly things from time to time. To fail a little more often. To think unlike an economist. There are many problems which are logic-proof, and which will never be solved by the kind of people who aspire to go to the World Economic Forum at Davos.fn3 Remember the story of those envelopes. (Location 492)

Tags: logic

Note: .logic try more experiments which may go against logic

Irrational people are much more powerful than rational people, because their threats are so much more convincing. (Location 505)

Tags: irrational, power

Note: irrational peoples threats are more believable

A rational leader suggests changing course to avoid a storm. An irrational one can change the weather. (Location 511)

Tags: irrational

Being slightly bonkers can be a good negotiating strategy: being rational means you are predictable, and being predictable makes you weak. Hillary thinks like an economist, while Donald is a game theorist, and is able to achieve with one tweet what would take Clinton four years of congressional infighting. That’s alchemy; you may hate it, but it works. (Location 512)

Tags: irrational, negotiation

Note: .negotiation there is power in unpredictability

‘advertisements featuring cute animals tend to be more successful than ads that don’t’. (Location 571)

Tags: ads, animals

Note: have animals in ads

Religion feels incompatible with modern life because it seems to involve delusional beliefs, but if the above results came from a trial of a new drug, we would want to add it to tap water. Just because we don’t know why it works, we should not be blind to the fact that it does. (Location 621)

Tags: favorite, wellphrased

Note: add it to tap water

‘At the federal level I am a Libertarian. At the state level, I am a Republican. At the town level, I am a Democrat. In my family I am a socialist. And with my dog I am a Marxist – from each according to his abilities, to each according to his needs.’ (Location 717)

The problem that bedevils organisations once they reach a certain size is that narrow, conventional logic is the natural mode of thinking for the risk-averse bureaucrat or executive. There is a simple reason for this: you can never be fired for being logical. If your reasoning is sound and unimaginative, even if you fail, it is unlikely you will attract much blame. It is much easier to be fired for being illogical than it is for being unimaginative. (Location 755)

Tags: logic

Note: you dont get fired for being logical, so people in large organisations use logic rather then imagination

There are five main reasons why we have evolved to behave in seemingly illogical ways, and they conveniently all begin with the letter S.fn1 They are: Signalling, Subconscious hacking, Satisficing and Psychophysics. (Location 782)

‘The trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say. (Location 854)

Tags: market research

Evolution does not care about objectivity – it only cares about fitness. (Location 871)

Tags: evolution

Note: .evolution

For a business to be truly customer-focused, it needs to ignore what people say. Instead it needs to concentrate on what people feel. (Location 890)

I would like to see the improvement we have enjoyed in food over the last three decades applied to other fields. It is only when we abandon a narrow logic and embrace an appreciation of psycho-logical value, that we can truly improve things. Once we are honest about the existence of unconscious motivations, we can broaden our possible solutions. It will free us to open up previously untried spaces for experimentation in resolving practical problems if we are able to discover what people really, really want,fn5 rather than a) what they say they want or b) what we think they should want. (Location 949)

is difficult to get a man to understand something, when his salary depends on his not understanding it.’ (Location 1093)

let’s imagine four people toss the coin just twice. There are four possible outcomes: HH, HT, TH or TT, all of equal likelihood. So let’s imagine that each of the four people starts with $100 and throws a different combination of heads and tails: HH HT TH TT The returns on these four are £225, £90, £90 and £36. There are two ways of looking at this. One is to say, ‘What a fabulous return: our collective net wealth has grown over 10 per cent, from £400 to £441, so we must all be winning.’ The more pessimistic viewpoint is to say, ‘Sure, but most of you are now poorer than when you started, and one of you is seriously broke. In fact, the person with £36 needs to throw three heads in a row just to recover his original stake.’ (Location 1401)

Tags: probability

Note: .probability

What happens on average when a thousand people do something once is not a clue to what will happen when one person does something a thousand times.

To explain this distinction using an extreme analogy, if you offered ten people £10m to play Russian roulette once, two or three people might be interested, but no one would accept £100m to play ten times in a row. (Location 1411)

Tags: russian roulette, newsletter, outcomes, probability, favorite

Note: Viewing things in a sequential perspective for an individual is quite different than an ensemble perspective

In maths, 10 x 1 is always the same as 1 x 10, but in real life, it rarely is. You can trick ten people once, but it’s much harder to trick one person ten times. (Location 1444)

Tags: probability, outcomes

‘When there is only one woman, she does not stand a chance of being hired, but that changes dramatically when there is more than one. Each added woman in the pool does not increase the probability of hiring a woman, however – the difference between having one and two women seems to be what matters. There were similar results for race when we looked at a pool of four candidates.’ Are people biased against minorities – or are they biased against anyone in a minority of one? This suggests that the prejudice we apply against a lone black candidate or a lone female candidate might also apply to a lone ‘anything’ candidate.fn2 (Location 1585)

What you pay attention to, and how you frame it, inevitably affects your decision-making. (Location 1667)

Tags: attention

business and politics have become far more boring and sensible than they need to be. Steve Jobs’s valedictory injunction to students to ‘stay hungry, stay foolish’ probably contained more valuable advice than may be apparent at first glance. It is, after all, a distinguishing feature of entrepreneurs that, since they don’t have to defend their reasoning every time they make a decision, they are free to experiment with solutions that are off-limits to others within a corporate or institutional setting. (Location 1704)

We should test counterintuitive things – because no one else will. (Location 1715)

Note: Test counter intuitive things

As Alfred Hitchcock once said, ‘drama is just real life with the boring bits edited out’. (Location 1735)

Tags: quote

Note: .quote

Cédric Villani is the holder of a Fields Medal, often described as the highest honour a mathematician can receive. He won his medal ‘For his proofs of nonlinear Landau damping and convergence to equilibrium for the Boltzmann equation’ and says, ‘There are two key steps that a mathematician uses. He uses intuition to guess the right problem and the right solution and then logic to prove it.’ (Location 1745)

Note: Guess the right problem and solution, then use logic to proove it

our tendency to attribute our successes to a planned and scientific approach and to play down the part of accidental and unplanned factors in our success is misleading and possibly even limits our scope for innovative work. (Location 1770)

Tags: story, randomness

Note: Successes are frequently more due to chance and randomness than people say

reason seems to have given us remarkable advantages over other animals – and it is unlikely that we could have produced many of our technological and cultural successes without it. (Location 1773)

Tags: logic, reason

Note: .reason .logic

One astonishing possible explanation for the function of reason only emerged about ten years ago: the argumentative hypothesis suggests reason arose in the human brain not to inform our actions and beliefs, but to explain and defend them to others. In other words, it is an adaptation necessitated by our being a highly social species. We may use reason to detect lying in others, to resolve disputes, to attempt to influence other people or to explain our actions in retrospect, but it seems not to play the decisive role in individual decision-making. (Location 1779)

Tags: reason, logic

Note: .logic .reason reason may not play the deciding role in individual decision making

We don’t value things; we value their meaning. What they are is determined by the laws of physics, but what they mean is determined by the laws of psychology. (Location 1918)

Note: Physics determines what things are, paychology determines whatt they mean

Wine tastes better when poured from a heavier bottle. Painkillers are more effective when people believe they are expensive. Almost everything becomes more desirable when people believe it is in scarce supply, and possessions become more enjoyable when they have a famous brand name attached. (Location 1921)

Tags: meaning, scarcity

Note: .scarcity scarcity increases peoples value of things

look at the paper money in your wallet or purse; the value is exclusively psychological. Value resides not in the thing itself, but in the minds of those who value it. You can therefore create (or destroy) value it in two ways – either by changing the thing or by changing minds about what it is. (Location 1960)

Tags: value

Note: .value value lies in the minds of those whho value something

In nineteenth-century Prussia, a glorious feat of alchemy saved the public exchequer, when the kingdom’s royal family managed to make iron jewellery more desirable than gold jewellery. To fund the war effort against France, Princess Marianne appealed in 1813 to all wealthy and aristocratic women there to swap their gold ornaments for base metal, to fund the war effort. In return they were given iron replicas of the gold items of jewellery they had donated, stamped with the words ‘Gold gab ich für Eisen’, ‘I gave gold for iron’. At social events thereafter, wearing and displaying the iron replica jewellery and ornaments became a far better indication of status than wearing gold itself. Gold jewellery merely proved that your family was rich, while iron jewellery proved that your family was not only rich but also generous and patriotic. As one contemporary observed, ‘Iron jewellery became the fashion of all patriot women, thus showing their contribution in support of the wars of liberation.’ (Location 1978)

Tags: alchemy, gold

Note: .gold .alchemy give gold jewelary and get iron replacements shows wealth and Being patriotic

One eighteenth-century monarch, Frederick the Great, used the same magic in the promotion of the potato as a domestic crop, transforming something worthless and unwanted into something valuable through the elixir of psychology. The reason he wanted eighteenth-century Prussian peasants to cultivate and eat the potato was because he hoped that they would be less at risk of famine when bread was in short supply if they had an alternative source of carbohydrate; it would also make food prices less volatile. The problem was that the peasants weren’t keen on potatoes; even when Frederick tried coercion and the threat of fines, they simply showed no interest in eating them. Some people objected because the potato was not mentioned in the Bible, while others argued that, since dogs wouldn’t eat potatoes, why should humans? So, having given up on compulsion, Frederick tried subtle persuasion. He established a royal potato patch in the grounds of his palace, and declared that it was to be a royal vegetable, that could only be consumed by members of the royal household or with royal permission.fn1 If you declare something highly exclusive and out of reach, it makes us all want it much more – call it ‘the elixir of scarcity’. Frederick knew this and so posted guards around his potato patch to protect his crop, but gave them secret instructions not to guard the patch too closely. Curious Prussians found they could sneak into the royal potato patch and could steal, eat and even cultivate this fabulously exclusive vegetable for themselves. (Location 1990)

Tags: favorite, alchemy, psychology, potato

Note: .potato .psychology .alchemy made potatos royal veg

have you ever eaten Chilean sea bass?fn1 It is the product of a particular sort of alchemy, ‘The Alchemy of Semantics’. The $20 slice of fish that graces plates in high-end restaurants under the name ‘Chilean sea bass’ actually comes from a fish that for many years was known as the Patagonian toothfish. No one is going to pay $20 for a plate of Patagonian toothfish – call it Chilean sea bass, however, and the rules change. An American fish wholesaler called Lee Lentz had the idea, even though, strictly speaking, most of the catch doesn’t come from Chile and the toothfish isn’t even related to the bass. (Location 2007)

Tags: alchemy

Note: .alchemy

Cornish sardines are another example of geographical alchemy at work.fn5 Merely adding a geographical or topographical adjective to food – whether on a menu in a restaurant or on packaging in a supermarket – allows you to charge more for it and means you will sell more. According to research from the University of Illinois at Urbana-Champaign, descriptive menu labels raised sales by 27 per cent in restaurants, compared to food items without descriptors. (Location 2026)

Tags: restaurants, alchemy

Note: .alchemy adding a geographical adjective helps raise prices

Never forget this: the nature of our attention affects the nature of our experience. (Location 2036)

‘aspergic design’ – design which gives consideration to the working of every part of the system, except the biological part. (Location 2143)

Tags: design, systems

Note: .systems systemm design should always think about the humans in the system

If there is a mystery at the heart of this book, it is why psychology has been so peculiarly uninfluential in business and in policy-making when, whether done well or badly, it makes a spectacular difference. (Location 2148)

Tags: psychology

Note: .psychology we should consider psychology in policy design

by removing the recording function from Walkmans, Sony produced a product that had a lower range of functionality, but a far greater potential to a change behaviour. By reducing the possible applications of the device to a single use, it clarified what the device was for. The technical design term for this is an ‘affordance’, (Location 2172)

Tags: focus

Note: .focus sony removed the record function from the first walkmans so people would know what the device was for

‘No one ever got fired for buying IBM’ was never the company’s official slogan – but when it gained currency among corporate buyers of IT systems, it became what several commentators have called ‘the most valuable marketing mantra in existence’. The strongest marketing approach in a business-to-business context comes not from explaining that your product is good, but from sowing fear, uncertainty and doubt (now commonly abbreviated as FUD) around the available alternatives. (Location 2212)

Tags: selling, reputation

Note: .reputation .selling sow fear and doubt about competitors

Medieval guilds existed for this reason. Trust is always more difficult to gain in cities because of the anonymity they afford, and guilds help to offset this problem. If it is costly and time-consuming to join one, the only people who enter are those with a serious commitment to a craft. Guilds are also self-policing; the upfront cost of being admitted adds to the fear of being ejected. (Location 2240)

Tags: guilds, trust

Note: .trust a large effort and upfront costs ensure only those with a serious commitment join

Reciprocation, reputation and pre-commitment signalling are the three big mechanisms that underpin trust. You can repeatedly use a small local firm that needs your loyalty, you can use a larger company with a brand reputation, such as Addison Lee or Green Tomato Cars, or you can trust someone who has made a big investment in getting a badge and stands to lose everything if he is caught cheating. (Location 2246)

Tags: trust

Note: .trust

Many things which do not make sense in a logical context suddenly make perfect sense if you consider what they mean rather than what they are. For instance, an engagement ring serves no practical purpose as an object. However, the object – and its expense – make it highly redolent with meaning; an expensive ring is a costly bet by a man in his belief that he believes – and intends – his marriage to last. (Location 2258)

Tags: engagement

Note: .engagement

What do the following things have in common? The fact that large, carnivorous fish desist from eating useful fish such as wrasse, which clean the parasites from their bodies The posh rope-handled carrier bags you get when you spend an appreciable amount of money on clothes or cosmetics The free extra scoop of fries they give you at Five Guys The fortune spent on a wedding Your modest minibar charges that are waived by a hotel The marble and oak lavishly used in bank branches That fancy training course your company sent you on A lavish advertising campaign A free glass of limoncello given to you by a restaurant after your meal Investment in a brand ... All these things only make sense if we assume that some signalling is going on – they are examples of a behaviour which is costly in the short term and which will only pay off, if at all, in the long term. They are thus – if nothing else – reliable signals that the person, animal or business engaging in that behaviour is acting on the basis of long-term self-interest rather than short-term expediency. (Location 2293)

Tags: signalling

Note: .signalling

two contrasting approaches to business. There is the ‘tourist restaurant’ approach, where you try to make as much money from people in a single visit. And then there is the ‘local pub’ approach, where you may make less money from people on each visit, but where you will profit more over time by encouraging them to come back. The second type of business is much more likely to generate trust than the first. (Location 2317)

‘costly signalling theory’, the fact that the meaning and significance attached to a something is in direct proportion to the expense with which it is communicated. (Location 2362)

Tags: signalling

The psychophysicist Mark Changizi has a simple evolutionary explanation for why water ‘doesn’t taste of anything’: he thinks that the human taste mechanism has been calibrated not to notice the taste of water, so it is optimally attuned to the taste of anything that might be polluting it. If water tasted like Dr Pepper, it would be easier for sensory overload to drown out the hint of ‘dead sheep’, which would alert us to the fact that a car-cass was decaying in a pool five hundred yards upstream. (Location 2381)

Tags: water

Note: .water theory that we have evolved soo that we can detect changes in tasteless water

To quote a Caribbean proverb, ‘Trust grows at the speed of a coconut tree and falls at the speed of a coconut.’ (Location 2538)

Tags: quote, trust

Note: .trust .quote

Some academics have suggested that the Easter Island human civilisation might have been destroyed by competition between tribes over who could construct the largest and most numerous stone heads. There is no competition to build giant stone heads among modern humans,fn2 but are car showrooms, DIY centres, women’s clothes shops and shopping malls, or the preference for taking more expensive holidays, simply consumerist manifestations of the same uncontrolled competitive drive? (Location 2613)

Branding isn’t just something to add to great products – it’s essential to their existence. (Location 2740)

Tags: branding

Note: .branding branding helps ensure higher quality products and company reputations are on the line

In the words of Jonathan Haidt,fn1 1 ‘The conscious mind thinks it’s the Oval Office, when in reality it’s the press office.’ By this he means that we believe we are issuing executive orders, while most of the time we are actually engaged in hastily constructing plausible post-rationalisations to explain decisions taken somewhere else, for reasons we do not understand. (Location 2849)

Several experts I have talked to in the high-end wine business regard their own field as essentially a placebo market; one of them admitted that he was relatively uninterested in the products he sold and would sneak off and fetch a beer at premium tastings of burgundies costing thousands of pounds a bottle. Another described himself as ‘the eunuch in the whorehouse’ – someone who was valuable because he was immune to the charms of the product he promoted. (Location 3005)

Tags: wine

Note: .wine

five giant industries that exist by selling mood-altering substances – alcohol, coffee, tea, tobacco and entertainment (Location 3064)

Our body is calibrated not to notice the taste of pure water, because it is valuable in evolutionary terms that we notice any deviation from its normal taste. (Location 3078)

Tags: water

Note: .water water may be tasteless so that we can detect any additives in it

My contention is that placebos need to be slightly absurd to work.fn1 All three elements that seem to make Red Bull such a potent mental hackfn2 make no sense from a logical point of view. People want cheap, abundant and nice-tasting drinks, surely? And yet the success of Red Bull proves that they don’t. Something about these three illogicalities may well be essential to its unconscious appeal, or to its potency as a placebo. If we are to subconsciously believe that a drink has medicinal or psychotropic powers, perhaps it can’t taste conventionally nice. Imagine a doctor saying, ‘I have some pills here to treat your extremely aggressive cancer – take as many as you like. Now, would you like them in strawberry or blackcurrant flavour?’ Somehow, that last sentence doesn’t quite work. (Location 3083)

Tags: placebo

Note: .placebo placebos have to be slightly obsurd to work

‘Dog Bites Man’ is not news, but ‘Man Bites Dog’ is. Meaning is disproportionately conveyed by things that are unexpected or illogical, while narrowly logical things convey no information at all. And this brings us full circle, to the explanation of costly signalling. (Location 3097)

We fetishise precise numerical answers because they make us look scientific – and we crave the illusion of certainty. But the real genius of humanity lies in being vaguely right – the reason that we do not follow the assumptions of economists about what is rational behaviour is not necessarily because we are stupid. It may be because part of our brain has evolved to ignore the map, or to replace the initial question with another one – not so much to find a right answer as to avoid a disastrously wrong one. (Location 3143)

Note: We deviate from what economics predict because we make devisions to avoid the worst scenario rather than optimising from the best

This practice of answering an easier proxy question is what leads to a lot of ‘irrational’ human behaviour. It may fall short of being perfectly rational and it may not even be conscious, but that’s not to say that it isn’t clever. Never call a behaviour irrational until you really know what the person is trying to do. (Location 3154)

Tags: irrational

Note: .irrational people often replace a question with an easier to answer question. Dont think something is irrational until you know what they are trying to do

‘People do not choose Brand A over Brand B because they think Brand A is better, but because they are more certain that it is good.’ (Location 3224)

Tags: brands

Note: .brands people buy brands for a higher level of certainty that it will be good

Remember, when making decisions you have to consider two things – not only the expected average outcome, but also the worst-case scenario.

It is no good judging things on their average expectation without considering the possible level of variance. (Location 3266)

Tags: risk, decisions

Note: .decisions when making decisions you must weigh up both the probability and the magnitude of each option

A former US Air Force fighter pilot, Sullenberger was a glider pilot in his spare time, and all glider pilots learn a simple instinctive rule which enables them to tell whether a possible landing site on the ground is within their reach.

They simply place the glider in the shallowest possible rate of descent and look through the windshield: any place which appears to be moving downwards in the field of view is somewhere they can safely land, while anywhere on the ground that appears to be moving upwards is too far away.

It was by deploying this rule that he was able to decide within seconds that the Hudson River was the only feasible landing site. (Location 3303)

Habit, which can often appear irrational, is perfectly sensible if your purpose is to avoid unpleasant surprises. (Location 3348)

Blame, unlike credit, always finds a home, and no one ever got fired for booking JFK. (Location 3390)

Tags: decisions, blame

Note: blame always finds a home. People make safe decisions to avoid blame

‘Defensive Decision-Making’ – making a decision which is unconsciously designed not to maximise welfare overall but to minimise the damage to the decision maker in the event of a negative outcome. (Location 3393)

Tags: decisions

Note: .decisions many decisions are made to minimise the potential foor damage to the decision maker rather thn optimising for the best outcome

our different senses – though we don’t realise this – act in concert; what we see affects what we hear, and what we feel affects what we taste. (Location 3408)

Tags: senses

Note: .senses our senses combine to effect our experience and effect each other

We should also remember that all big data comes from the same place: the past. Yet a single change in context can change human behaviour significantly. For instance, all the behavioural data in 1993 would have predicted a great future for the fax machine. (Location 3593)

Tags: big data

Note: Big data is based on the past. All the data in 1993 would have predicted a great future for the fax machine

Economic logic is an attempt to create a psychology-free model of human behaviour based on presumptions of rationality, but it can be a very costly mistake. Not only can a rational approach to pricing be very destructive of perceived savings, but it also assumes that everyone reacts to savings the same way. They don’t, and context and framing matter. (Location 3639)

Tags: economics

Note: .economics

The Polish-American academic Alfred Korzybski (1879–1950) is perhaps most famous for his dictum that ‘The map is not the territory.’ He created a field called general semantics, and argued that because human knowledge of the world is limited by human biology, the nervous system and the languages humans have developed, no one can perceive reality, given that everything we know arrived filtered by the brain’s own interpretation of it. Top man! (Location 3664)

Tags: perception

Note: .perception nobody can perceive reality as we filter via our brain

‘If the wind rustles the grass and you misinterpret it as a lion, no harm done. But if you fail to detect an actual lion, you’re taken out of the gene pool.’fn1 It is thus in our evolutionary best interests to be slightly paranoid, but it is also essential that our levels of attention vary according to our emotional state. When walking on our own down an unlit street, the sound of footsteps will occupy more of our attention than it would on a crowded street in daylight. (Location 3727)

PSYCHOPHYSICS TO SAVE THE WORLD How can you stop environmentally friendly cleaning products from being perceived as less effective? Fortunately, there are tricks you can play to fool your unconscious into thinking that environmental gains don’t necessarily come at the cost of effectiveness. Again, such tricks fall under the category of ‘benign bullshit’. One way in which businesses can reduce their environmental footprint is to sell a product in concentrated form, which reduces packaging and distribution costs, and can also reduce the volume of chemicals used. But there are several problems: Some people will continue to use the same volume as before, despite the increase in concentration, which leads to overdosing. A smaller cap might reduce this problem, but some people cannot help assuming that less volume means less effect, and compensate with an extra capful. People may not buy the product at all, because although more concentrated it looks to be worse value for money on the shelf. People may believe that the product is inferior simply because there is less of it, and lose faith in its value. A smaller product takes up less space on the shelf, which may reduce its visibility and allow more room for the products of competitors. There are a few ways to counteract this: Radical honesty,fn1 such as announcing that the product is, say, 4 per cent less powerful than previously, but 97 per cent better for the environment. Or alternatively, be explicit about a product’s weakness.fn2 Deploy the ‘Goldilocks effect’ – the natural human bias that means that, when presented with three options, we are most likely to choose the one in the middle. Washing detergent manufacturers use language that normalises the lower and middle usage of the product, while implicitly stigmatising overdosing. For example, ‘Half a capful for light–normal wash’; ‘One capful for a full or heavy wash’; ‘Two capfuls for extreme soiling.’ This creates the impression that one would only use more than one capful if they had committed some brutal crime: as a result, even overdosers will likely use only one cap.fn3 Change the format: it is hard to believe that a lower amount of powder or liquid will do the same job as before, but if the formulation is changed to a gel or tablets we are more likely to believe it. And if you produce the product in tablet form, consider packaging them in a thin, wide and high packet, so their visibility on the shelf is not reduced. Add intricacy: simply adding coloured flecks to a plain white powder will make people believe it is more effective, even if they do not know what role these flecks perform. Similarly, tablets that consist of a mixture of liquids, gels and powders help people believe that less is doing more. Remember stripy toothpaste. Add effort. If a concentrated product requires you to mix it with water first, or to mix together two separate ingredients before using it, our belief in its potency is restored by this small amount of extra… (Location 3769)

There is a name for the addition of consumer effort to increase someone’s estimation of value. It should perhaps be called the Betty Crocker effect, since they spotted it first, but it’s instead known as the IKEA effect, because the furniture chain’s eccentric billionaire founder Ingvar Kamprad was convinced that the effort invested in buying and assembling his company’s furniture added to its perceived value. When working with IKEA I was once advised: ‘Do not, under any circumstances, suggest ways of making the IKEA experience more convenient. If you do, we shall fire you on the spot.’ (Location 3812)

Tags: value, ikea

Note: adding efort increases customers perceived value

I was familiar with this system because it was how rooms had been allocated at my university college, a practice that I believe has gone on for centuries. In their first year, everyone is allocated a fairly standard room in college – none of the markedly good ones are given to first-year students. In their second year, a ballot is run, with the person at the top receiving the first pick, the second the second, and so on; and in the third year, the positions on the ballot are reversed. I never met anybody who was unhappy with the result. This seems to offer an extraordinarily valuable psychological insight into the best way to divide unequal resources between a random collection of people – when presented with either good plus bad, bad plus good or average plus average, everybody seems equally content. (Location 3886)

Note: Dividing shared resources