Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

Imagine standing before a menu with three subscription options: an internet-only plan for $59, a print-only plan for $125, and a print-and-internet plan also for $125. At first glance, the print-only plan seems like a pointless choice—why pay the same amount for less? Yet, when many people face this selection, the presence of the print-only option acts as a silent guide, pushing them toward the combined plan. This subtle manipulation is known as the decoy effect, where an intentionally inferior option makes another choice appear more attractive.

Our minds crave context; we don’t possess an internal absolute meter for value. Instead, we measure everything against what’s around us. This is why the middle option often wins favor—it feels like a balanced compromise, neither too cheap nor too extravagant. For example, a television salesman might price three TVs so that the middle one is the one he wants to sell, knowing customers will gravitate toward it simply because it is the middle ground.

But this relativity goes beyond shopping. It seeps into our emotions and social lives. Consider salary satisfaction: a young employee who triples his salary over three years might still feel underpaid if his peers earn slightly more. Our happiness is often less about what we have and more about how we stack up against others. This endless comparison can fuel envy and dissatisfaction, even when our circumstances improve.

The implications are profound. Recognizing how much our decisions hinge on relative comparisons empowers us to control our environments and expectations. By choosing smaller circles of comparison or broadening our perspective, we can find greater contentment and make more deliberate choices.

As we close this chapter on relativity, consider how much of your own decision-making might be swayed by unseen comparisons. This understanding sets the stage for exploring how initial impressions and prices anchor our preferences, a force that shapes markets and personal choices alike.