Dan Ariely quotes:

We talk about honesty, but the reality is we have lots of human values, and they are not all compatible. We don't always tell the truth about everything, no matter what the consequences.

Money are very difficult to think about. So, we think about money as the opportunity cost of money. So, we at some point went to a Toyota dealership and we asked people, what will you not be able to do in the future if you bought this Toyota?

It is true that from a behavioral economics perspective we are fallible, easily confused, not that smart, and often irrational. We are more like Homer Simpson than Superman. So from this perspective it is rather depressing. But at the same time there is also a silver lining. There are free lunches!

Because cheating is easier when we can justify our behavior, people often cheat in small amounts: We can come up with an excuse for stealing Post-It notes, but it is much more difficult to come up with an excuse for taking $10,000 from petty cash.

In terms of the actual curriculum for management education, my own view is very simple-minded: The world is incredibly complex, it changes all the time, and we should not even hope that we could create a general model that accurately describes the world in all its possible states.

Disasters are usually a good time to re-examine what we've done so far, what mistakes we've made, and what improvements should come next.

It is helpful to think of people as having two fundamental motivations: the desire to see ourselves as honest, good people, and the desire to gain the benefits that come from cheating - on our taxes or on the football field.

Dishonesty is all about the small acts we can take and then think, 'No, this not real cheating.' So if you think that the main mechanism is rationalization, then what you come up with, and that's what we find, is that we're basically trying to balance feeling good about ourselves.

We should teach the students, as well as executives, how to conduct experiments, how to examine data, and how to use these tools to make better decisions.

It is very difficult to make really big, important, life-changing decisions because we are all susceptible to a formidable array of decision biases. There are more of them than we realize, and they come to visit us more often than we like to admit.

Once you break the social norm and create a new social norm, all of a sudden it can stay with us for a long time.

The retail industry has its own headache: it loses $16 billion a year to customers who buy clothes, wear them with the tags tucked in, and return these secondhand clothes for a full refund.

In a world where everyone is behaving honestly, any dishonesty constitutes a big infraction. But, in a world where many people are behaving dishonestly, and the news is filled with stories of their infractions, even big infractions can feel small to the perpetrator.

Big Data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it.

We are all far less rational in our decision-making than standard economic theory assumes. Our irrational behaviors are neither random nor senseless: they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.

Scaling down individually is very hard. Imagine that if you go to a place where everybody is dressed nicely, and you are the only one who doesn't dress nicely. Everybody goes on vacations to a great place and you go to the Jersey shore. It's very hard to do these things without an organized mechanism, but it looks to me like there might be some organized mechanisms.

We don't really want a huge house, but we want the house to be slightly bigger than our neighbors, and a car that is bigger than our neighbor's, and they're going on vacation that's slightly more expensive, and this escalation happens that things got out of hand.

Giving up on our long-term goals for immediate gratification, my friends, is procrastination.

We all think that in the future, we are wonderful people. We will be patient, we will not procrastinate, we will exercise, we will eat well... The problem is we never get to live in that future. We always live in the present.

A substantial amount of research over the past decade has reinforced the idea that although internal happiness can deviate from its "resting state" in reaction to life events, it usually returns toward its baseline over time.

When people think about a placebo such as the royal touch, they usually dismiss it as "just psychology." But, there is nothing "just" about the power of a placebo, and in reality it represents the amazing way our mind controls our body.

Money is a wonderful invention. It lets us save, it lets us specialize, right? I couldn't be a professor if there wasn't any money. Every day I would have to raise chicken and bread and broccoli and go ahead and spend all my time trading. So, money is a wonderful mechanism.

The more cashless our society becomes, the more our moral compass slips.

What kind of people would be able to rationalize better than other people? Better storytellers, right? Creative people, right? Because if you're creative, you find more ways to cheat and still yourself a story about why this is okay.

Kids don't care what party they have, right? They want cake and they want to run around. Nothing else matters. But in this escalation, all the kids want parties like their friends. So, if all the friends have an amazing, expensive party, they all want the same thing. If we all got to scale down as a coordinated effort, all the kids would have been just as happy.

that when given the opportunity, many honest people will cheat.

The experiments show quite clearly that, as you resist more and more temptation, you're actually more and more likely to fail.

It seems then that instead of consumers' willingness to pay influencing market prices, the causality is somewhat reversed and it is market prices themselves that influence consumers' willingness to pay.

I always found the appeal to the market gods a bit odd. Why would the market fix mistakes instead of aggravating them?

Even the most analytical thinkers are predictably irrational; the really smart ones acknowledge and address their irrationalities.

If I gave you now, $10 as a gift, how happy would you be? Would you be happy, is the marginal $10, the best use of $10 you can use? Of course not. If I have you a CD, you know exactly what you are getting and you will have a value for it. So, money has lots of problems with it.

We're actually trying to develop an iPhone app, now that the Droid is out, we'll do it for that as well, if we ever learn how to program on this thing. But the idea is that to make money concrete. So, you can do this app, and it's not out there, but you can do the app. And you say, "I like vacation in the Bahamas, shoes, lattes, and books." And now, when you are tempted to buy something, that thing translates in terms of the things you are interested in.

One of the big lessons from behavioral economics is that we make decisions as a function of the environment that we're in.

One percent of people will always be honest and never steal," the locksmith said. "Another one percent will always be dishonest and always try to pick your lock and steal your television. And the rest will be honest as long as the conditions are right - but if they are tempted enough, they'll be dishonest too. Locks won't protect you from the thieves, who can get in your house if they really want to. They will only protect you from the mostly honest people who might be tempted to try your door if it had no lock".

I don't want to say that the poor are inherently cognitively diminished, but at the end of the day of making difficult, tough decisions, it's very hard to have the energy to think about things with the right mindset.

Companies, however unintentionally, choke the motivation out of their employees.

When people are in severe pain, there's an expression, you're a "pain person," and what that means is that nothing else matters.

The most difficult thing is to recognize that sometimes we too are blinded by our own incentives. Because we donâ??t see how our conflicts of interest work on us.

Interesting thing that is happening in American society is that people are starting to talk about money. I don't know how you feel about this, but for a long time, nobody was talking about money. It was a secret. And it's kind of very interesting because we do lots of stuff to portray to people about how much money we have, the clothes we wear and the cars we have and the house - they all kind of depict to other people, signal how much money we make, but we don't talk about it specifically.

The idea that you will make the right decision every time is very unlikely.

Honesty is a complex and tricky thing, and we don't want to be honest all the time.

Your immediate environment is comprised of coffee shops, supermarkets, websites, apps and all kinds of things - none of which have an interest in your long-term or short-term financial well-being.

Money actually becomes even more difficult than other things because it's very hard to imagine what the benefits are to saving. So, imagine that you see a new bicycle, a new pair of shoes, or something today. You know exactly what you are giving up if you are not buying it, what are you gaining in the future if you are not getting it. So, you are giving up the bicycle today, what is it in the future? What will happen if you send another $1,000 to your retirement fund? What difference will it make? It is very, very hard to figure out.

I don't know what exactly the translation is but when we do consume something now, something else has to give at some point.

There's something about [cyclically] doing something over and over and over that seems to be particularly demotivating.

Brands communicate in two directions: they help us tell other people something about ourselves, but they also help us form ideas about who we are.

But because human being tend to focus on short-term benefits and our own immediate needs, such tragedies of the commons occur frequently .

People are willing to work free, and they are willing to work for a reasonable wage; but offer them just a small payment and they will walk away.

The major thing that holds you back when you're trying to change a bad habit like eating, smoking, or drinking too much is your belief you are out of control.

For all of us, it's very hard to think about money, and because of that, we need help. In the same way that for all of us, it is hard to eat well, and we need some help. The poor have a particular challenge, which is that their life is actually much more complex - and they're much more complex cognitively.

The companies that provide debt, what do you think their goal is? Is their goal for you to fully understand the cost of your debt? No. So they're basically creating these approaches to make you feel like it is incredibly cheap or just to think about the cost per day rather the cost per year or cost for a lifetime. So debt is very simple mistake.

...[D]ivision of labor, in my mind, is one of the dangers of work-based technology. Modern IT infrastructure allows us to break projects into very small, discrete parts and assign each person to do only one of the many parts. In so doing, companies run the risk of taking away employees' sense of the big picture, purpose, and sense of completion.

Take a brilliant, creative social scientist, without any respect for conventional wisdom and you get Ellen Langer. She is a fantastic storyteller, and Counterclockwise is a fascinating story about the unexpected ways in which our minds and bodies are connected.

If we all make systematic mistakes in our decisions, then why not develop new strategies, tools, and methods to help us make better decisions and improve our overall well-being? That's exactly the meaning of free lunches- the idea that there are tools, methods, and policies that can help all of us make better decisions and as a consequence achieve what we desire-pg. 241

People are irrational - and predictably so.

We can think about how we reduce the pain in paying. So, for example, credit cards are wonderful mechanisms to reduce the pain of paying. If you go to a restaurant and you are paying cash, you would feel much worse than if you were paying with credit card. Why? You know the price, there's no surprise, but if you're paying cash, you feel a bit more guilt.

If you think of people as making decisions actively, every time we think about the cup of coffee, we say, "How much will I enjoy the cup of coffee, what else could I not do in the future because I buy this cup of coffee?

Marketing is all about providing information that will heighten someone's anticipated and real pleasure.

Who would you trust right now? Which bank would you trust? Which investment would you trust? Do you really want to put your money; do you want to suffer more of these losses that we just had? You know, these volatility that we see is just unexplainable by any rational standards. Nobody has any clue about how to explain this, and nobody wants to experience that. So, we hold more money back, we don't necessarily want to invest in the market and by default, people are saving more.

we usually think of ourselves as sitting the driver's seat, with ultimate control over the decisions we made and the direction our life takes; but, alas, this perception has more to do with our desires-with how we want to view ourselves-than with reality

individuals are honest only to the extent that suits them (including their desire to please others)

While we somehow understand revenge on an intuitive level between individuals, I do suspect that companies, assuming that people are rational, completely miss and underestimate the motivation people have for revenge.

We need to believe that we're good people, and we'll do just about anything to maintain that perception.

In the U.S., I think there is an ideology of not telling kids what to do. Nobody to tell you who to marry, not tell you what job to pick. You're your own person. You have the freedom to choose, including the freedom to fail in magnificent ways. And I think that's the big difference. In other countries there is basically a social norm about saving that is passed from generation to generation. In the U.S. there isn't.

But suppose we are nothing more than the sum of our first, naive, random behaviors. What then?

None of us always make the best financial decisions.

If you ever go bar hopping, who do you want to take with you? You want a slightly uglier version of yourself. Similar ... but slightly uglier.

You can think about life as a battle between you and a doughnut shop. The doughnut shop wants you to eat another doughnut and pay the money, and you want to do it in the short term, but in the long term it's not good for you either financially or from a health perspective.

In life we encounter many people who, in some way or another, try to tattoo our faces.

Why would you take money out of your paycheck at the beginning of the month when you don't know how much money you'll need?

With everything you do, in fact, you should train yourself to question your repeated behaviors.

What you should do is wait until the end of each month, and then say, "OK, how much money do I have? How much do I need? Let me send the rest to retirement."

Thinking is difficult and sometimes unpleasant.

The people who need to overcome temptation to the highest degree have the hardest time doing it.

Money is all about opportunity cost. Every time you spend on something, that's something you can't spend on something else.

The problem with opportunity cost is that opportunity cost is divided among many, many things.

Imagine you owe on five credit cards, you owe five debts. So which debt should you pay first? And the answer is very simple: You should pay the one with the highest interest rate first. But that's not what people do.

When parents have college savings accounts for their kids, their kids show higher social and cognitive performance.

It was shocking to realize how many low-income Americans don't have savings accounts.

When you get a checking account, you should have a savings account, and the number for the savings account should be one off of your checking account.

When we save, everybody in the household is just suffering. By having the coin in a visible way, when you scratch, you can say the person that is in charge of the making money for the family is doing the right thing.

What reminds you in your environment about saving? Nothing.

The problem is that people basically dangle debt in front of us. And the cost for the poor of course is much higher than for the wealthy.

Money is very difficult to think about. So, we think about money as the opportunity cost of money. So, we at some point went to a Toyota dealership and we asked people, what will you not be able to do in the future if you bought this Toyota? Now, you would expect people to have an answer. But people were kind of shocked by the question. They never thought about it before. So, the most we got was people said, "Well, if I can't buy this Toyota, if I buy this Toyota, I can't buy a Honda." What is this thing? What is this value of price? Very hard to think about it.

Imagine you have six loans, small to huge. People want to close loans and because of that, they try to pay off the small loans, but that's not the right strategy. The right strategy, of course, is to pay the loan with the highest interest rate. People make this mistake and it costs them lots and lots of money, it's a very expensive mistake because interest rates accumulate and become very, very expensive very quickly.

If you have loans, the first thing you want to do is say, "Okay, look I have a credit card, if I really need to borrow, I have this emergency money that I can get, but for now there is no reason for me to keep cash at zero percent interest rate and at the same time, pay all of this money out. So, I think people need to figure out quickly how to pay loans and how much cash they should really keep.

Linking financial element to energy consumption I think has a huge role if you think about a display instrument that could teach us about what we are using, how much it costs us, how much it is saving, and therefore change our decisions.

Do you know how much money you would save if you changed your light bulb to compact florescent light bubs? How much would you save if you decreased your temperature of your house in the winter by one degree, or increase it by one degree? We just don't know these numbers, but I think displays could make it a memorable change in terms of attention, and also help us translate it in terms of concrete ways on what you can get.

Rainy day savings are incredibly important, because from time to time, bad things happen. And if you're not prepared for that, it's going to be really terrible.

The people that lend you money basically give you an answer based on the risk that they are willing to take. But just because a bank is willing to take a particular risk doesn't mean that that is the right amount for me to spend.

What people do is they pay the small loans first. Why? Because they enjoy making the number of loans smaller. But of course it is a very ineffective way to pay debt down.

With money we really fool ourselves. We are our biggest enemies with money and there are some things we can do about it. Automatic deductions are a wonderful thing. But ideally, you should wait until the end of the month, you can see how much extra money you had, and you should put that in your savings account. We don't do that too well, and if we did that, we would never save. So, what we do, is we take money out of our pocket into the saving account at the beginning of the month, take it outside of our control and as a consequence, we spend less and we save more.

Not all debt is bad. From time to time we should get into debt when there's a good reason for that.

Money is a great way to get happiness. Right? Lots of wonderful things you can do with money. The question is, are we really optimizing on that? So, if you think about getting lattes and getting cable. Which one of those is actually giving you a greater happiness, and if you have to cut on one of those, which one would you cut? So, I think thinking in terms of concrete terms would help us a great deal.

A very simple bad decision is to get into debt. And that is very expensive.

When you're in pain, tomorrow doesn't exist - just the pain - and the only thing that you want in the world is for it to go away.

If you want to spend more money in restaurants, use credit cards more than cash. If you want to spend less, use cash more than credit cards. But in general, we can think about how to use the pain of paying and how much of it do we want. And I think we have like a range. Credit cards have very little pain of paying, debit cards have a little bit more because you feel like today, at least it is coming out of your checking account, and cash has much more.

Believing you are a bad person leads to a slippery slope.

I don't think we should go around life and being miserable all the time and feel the pain of paying. It's a question of what categories we want to spend more on and what categories we want feel that we are spending too much on and we want to cut down.