Business Professor's New Book Suggests We're Not Really That Stupid
THE RATIONAL ANIMAL Uses Evolutionary Lens to Explain Irrational Decisions
September 13, 2013
In a new book, University of Minnesota business professor Vladas Griskevicius challenges prevailing views of decision making and in doing so reveals the hidden wisdom behind many of our irrational tendencies.
"People make many shockingly stupid decisions, like when they buy cars they can’t afford (1.8 million vehicles are repossessed each year) or put $57 billion of their savings into something that has an expected negative 80% return rate – the lottery," says Griskevicius, an associate professor in the Carlson School of Management. But why do humans have all these irrational tendencies?
Since the time of Charles Darwin, when biologists observe a puzzling behavior in animals, they ask if it might serve an adaptive function. Griskevicius and psychology professor Douglas Kenrick of Arizona State University turn the same magnifying glass from animals to humans in THE RATIONAL ANIMAL: How Evolution Made Us Smarter Than We Think (Basic Books | Sept. 10, 2013).
"Once we start looking at modern behavior through an ancestral lens, many decisions that appear foolish at the surface level turn out to be smart at a deeper evolutionary level," says Kenrick. "It turns out that many of our irrational tendencies are smarter than we think."
Consider why Americans spend over $500 billion each year on showy luxury products that have zero survival value. Luxury products are clearly linked to status, but why do people want to show off their status so much? Darwin was similarly stumped when he first observed the peacock’s tail, which makes the animal easier to spot by predators and slows it down when trying to escape. Darwin reasoned that while flashy tails might hinder survival, their adaptive function might be to aid mating.
Conspicuous consumption in humans, it turns out, is not too different from the Peacock’s tail. In the same way that peacocks flaunt their tails to impress the opposite sex, men conspicuously flaunt their luxury products to impress women. Does it work? Yes. Studies have found that women would rather date the guy with the flashy Porsche than the modest Honda.
"It might be economically irrational to spend your last penny on a luxury good, but this tendency pays great dividends when it comes to the most important of evolutionary rewards," says Griskevicius.
The Mystery of Steve Jobs and the Overconfidence Bias
THE RATIONAL ANIMAL also reveals the hidden wisdom of some of the most irrational human biases. Consider Steve Jobs, whose perception of reality was warped by a "reality distortion field." Even back in the 1970s, Jobs was so overconfident that he had the gall to show up to corporate meetings barefoot and reeking of body odor (he showered once a week, believing that his diet of eating apples made deodorant unnecessary). Jobs was not alone in his sense of overconfidence. When men are asked to rank themselves on athletic ability, one study found that 100% rated themselves in the top 50%. In another study, 93% of people rated themselves as "above average" drivers.
"This irrational tendency to warp reality is known as overconfidence bias," explains Griskevicius. "But if you look at it more closely, it actually pays to be biased."
A recent study in the journal Nature found that being overly confident rather than accurate can enhance reproductive fitness. This is because confidence increases ambition and persistence. For example, overly confident sales agents who view setbacks as flukes, rather than accurately viewing them as signs of incompetence, are more likely to persist and sell more policies. And overly confident people are also more likely to get promotions at work.
"Humans are born to be biased – but for good reason. Rather than being design flaws, many of our biases are design features," adds Kenrick.
Despite his hobo appearance and pungent scent, the overly confident Steve Jobs didn’t do too shabbily. But not everyone shared his confidence. Jobs initially convinced Ron Wayne, an engineer at Atari, to become the third partner with him and Steve Wozniak at Apple. But Wayne got cold feet and sold his 10 percent share for $800. Jobs’ persistent self-confidence paid off, and Apple became the single most valuable company in world history. If Ron Wayne had shared Jobs’ confidence, his $800 investment would have been worth $2.6 billion today.
"If we look only at the surface, many of our choices appear rather foolish. But underneath all those biases is an exceptionally wise ancestral system of decision making." This doesn’t mean that following our inner chimp will always lead to good decisions. It also pays to read Consumer Reports. In fact, marketers often exploit our evolutionary tendencies and use them against us. By revealing what to look for, THE RATIONAL ANIMAL provides guidance on how to defend ourselves from scams and rip-offs that seek to take advantage of our otherwise adaptive ancestral biases.