This week, Room for Discussion hosted Dan Ariely, James B. Duke Professor of Psychology and Behavioral Economics at Duke University. Being regarded as one of the most prominent behavioral economists in the world, it was great to see him on the famous couch of RfD. You probably know him from his famous TED Talks in which he portrays cognitive psychology and behavioral economics in a down-to-earth narrative. He often asks questions “What makes us feel good about our work?” or “Are we in control of our decisions?”
The room was full of students and professors, surprisingly even more than when Gita Gopinath, Chief Economist of the IMF was there. The interview started with the question, “Do we have a free will?”. He turned to the audience and directed the same question to us. It was half-half yes and no. He continued: “Whoever says that we have 100% free will, the person is lying because the environment actually matters. We think that when we do something nothing shifts our decisions but take your rationale in paying with a credit card or cash. We tend behave more cautiously while paying with cash, compared to the recklessness we have while paying by a credit card. So not only the environment, our cognition even restricts our free will.”
Subsequently, the discussion came down to the issue of “personal interest vs. social interest” embedded in “regulation vs. self-regulation”. According to Ariely, we get an education to learn tricks not to get tempted in between those eternal conflicts. Apart from that, the education we take in school is transferable to real life to a small extent. Take the endless discussion in business, “shareholder value vs. stakeholder value” or “everybody else is doing it so why not” approach. We take education to “learn tricks”, to find our way around these endless discussions. And at the end, we don’t have the capacity for much ration. We make lots of mistakes.
Coming to the topic of ration, as Ariely put it, “a rational businessman would be an awful person. No emotions, no charity affiliation, just personal benefit. We all have our reasons not to be rational. So if we are irrational and if we’ve been doing mistakes that often, the question comes down to “Which mistakes to intervene?” Big mistakes mean big decisions. And eventually, the biggest decisions have the biggest costs and information asymmetry.
What about Big Data? Does he see it as a rational paradigm though? according to him, people put too much hope on Big Data but not many experiments are there. More than datasets, at this point, we need variations. The answer wasn’t surprising though, as he is known with his experiments, he would always want more.
So in the end are we happy according to Mr. Ariely? On this, he referred to one of his ongoing research. In the research, he’s been asking quite a sum of employees from various sectors “What makes you happy at your work?”. At first glance, you would say salary or benefits but it turns out as more tricky. According to his ongoing research, the factors are “autonomy, the fairness of earnings among employees, transparency and motivation”. Why autonomy? Because goodwill comes from love and passion. So essentially we like being autonomous in the things we have passion for. Why the fairness of salary? Because salary is an issue of “cap”. We are happy with our salary unless it is fair compared to the salary cap, so the relative value of it.
In a more general context, we have “momentary happiness” (take having a mojito on a sunny beach) or “the happiness we get from what we do”, the satisfaction, the one has a meaning like working or creating. Eventually, it is all about the ratio between the two. Drinking mojito every day would make us happy to a certain extent, as much as working every day. Which one do you choose predominantly? Looking at his own happiness perception, a 20:80 ratio is enough for him (he travels 300 days a year for work).
Social media is another issue though. He describes social media as a “low quality substitute of human connection”. We share nothing deep in social media because you just cannot get deep enough online. After sitting face to face someone for a while, however, we start getting deeper into our inner selves or begin discussing abstract ideas. He admits social media is a buffer, but at the same time what is it really a buffer for?
All in all, it was a privilege listening to Dan Ariely in such a sincere atmosphere. After meeting him face to face later, I must say he was one of the coolest guests I’ve met in RfD. Will be following his work!