Ariely's The Upside of Irrationality

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The Upside of Irrationality is a letdown after Ariely' Predictably Irrational. The experiments he describes tend to be pretty interesting, but I frequently don't buy the just-so stories he extracts from the descriptions, and I often get the sense that Ariely doesn't really understand the subjects he is talking about enough to make the sorts of comments he makes.

He studies the effect of large incentives on people's performance. I completely believe all of the results he has reported, but I think Ariely displays a complete lack of understanding of the subjects he applies them to, when he tries to explain the real-world relevance of his findings. He talks about basketball and bonuses as the application of his results. Ariely admits to not understanding basketball and then goes on to discredit the idea that clutch players exist in basketball. He found that the players who are known as "really clutch players" don't shoot any better under pressure, they just don't shoot any worse. Oh, and they also take more shots, if that matters at all. First of all, there's the matter of semantics. If most players break down under pressure, and a few play just as well under pressure as the rest of the time. The players who don't break down are clutch players. That's pretty much exactly what the phrase means. When it matters most, some players figure out how to win games consistently where others can't figure out how to do it. Since sports are entirely about your relative performs remaining exactly as good as your normal self in situations that cause practically everybody else to get worse is performing really well. The second thing is, keeping your normal accuracy while taking more shots and shooting sooner after you touch the ball is actually playing better basketball. Teams frequently use up most of the shot clock looking for an open shot. If you're able to make shots about as well when you are trying to shoot in the first ten seconds of the shot clock as you are when you are willing to use up the whole clock, you are playing better basketball than normal because your taking more heavily contested shots and still getting the same results. It's a lot harder to make the easiest shot you can find in ten seconds of searching for an open shot than it is to take the easiest shot you can find in twenty-four seconds of searching for an open shot.

But Ariely didn't really care about basketball. He was disputing the idea of clutch players existing in basketball, not because he had anything to say about basketball (he freely admitted that he knew next to nothing about the game), but because he was trying to demonstrate that nobody performs better when stakes are sufficiently elevated than they do under more ordinary circumstances. The main point he was trying to make was "Wall Street bonuses are egregious, and they aren't just egregious, they hurt the companies that pay them out because nobody performs better when the stakes are enormous than they do for smaller stakes." Okay, and here's where Ariely demonstrates that he really doesn't understand economics... or experiences that are more complicated than the ones that people might encounter in a lab. First of all the difference between real life experiences and lab experiments. Effort impacts your ability to improve over time a lot more than it does your ability to perform in the moment. Ariely designed experiments that are capable of measuring the impact of choking without having any ability to measure the impact of practicing more or putting in extra hours. In real life, extra hours can add a lot. And people are motivated by heavy stakes to put in a lot more effort and a lot more hours than they would be by lower rewards. If you tell your students that you've revised your grading policy, and the midterm exam that you've just handed out is now worth 100% of their grade instead of the 10% that they'd previously thought, a lot of them are going to choke and nobody's going to suddenly remember everything they didn't study because of the new incentive. But if you tell them the same thing the week before, you're going to have an awful lot of students who wouldn't have studied that much for an exam that was just worth 10% of their grade showing up having studied for this exam like they hadn't studied for any test in a long time. The real world is a place where, if you have advanced warning that something counts extra, you can put in a lot of extra effort to make sure that you're prepared and you've done everything possible to get the best possible results. The more damning critique of Ariely's comments is that it demonstrates a startling lack of understanding of how economics work. Wall Street companies don't pay huge bonuses because they think that paying people huge bonuses will motivate them to get better results. They pay key employees huge bonuses because they want to motivate those employees to stay with the company and keep producing the results they're already producing for them... instead of going to a competitor and producing those results for a competitor instead. You see, there's this thing called a job market, and a job market is a market. A market is a place where people come to exchange goods and services, and... *face palm*

Oh — kay.

Ariely goes on to talk about the joy of work, the IKEA effect, and the "not invented here" syndrome. He separates these into three separate chapters, but they are at least as closely related to each other as the topics he meanders through in most of his individual chapters. His discussion of the joy of work and the IKEA effect is pretty good, though it still seems rather simplistic. For instance, people attach extra value not just to things they've personally made but also to things that their friends and relatives have personally made or even personally possessed. As well as things that people they admire but have never met have personally made or personally possessed. I would guess that these things are somehow related, and the underlying phenomenon is about something a little bit different from the attachment to one's own labor that is part of Ariely's just so story. (And Ariely's just so story is suspiciously compatible with one particular ideological movement that talks a lot about the alienation of man from man's own labor. I am somewhat sympathetic to this ideology, much more so than the average American. Even so, when someone's findings map this well onto an ideology, I have to suspect that there's quite a bit of motivated cognition at play.)

Then there's "not invented here" syndrome. Like most people who describe it, Ariely fails to convincingly establish that NIHS is a real thing. Clayton Christensen has put forth a very convincing theory of how markets work that explain away the phenomena which NIHS was invented to explain. Christensen's theory does an excellent job of explaining a host of other market phenomena in the process without deteriorating into a host of ad hoc explanations or requiring the postulation of man's sinful nature to describe why things fail. Giving the choice between an explanation that describes the workings of impersonal market forces and one that asserts that people almost have a categorical tendency to some particular sin (or "bias" to use Ariely's preferred term for sin), I'm always going to opt for the explanation that has to do with impersonal market forces.

Ariely deals with plenty of other subject in The Upside of Irrationality, but that's all I have the patience to describe tonight.