“The moment you start giving money away, or giving things away to other people, our happiness increases beyond the level that we would anticipate.”

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Dan Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University, and the author of the New York Times bestseller Predictably Irrational: The Hidden Forces That Shape Our Decisions. Author Srinivas Rao recently hosted him on the Unmistakable Creative podcast to discuss why our intuition is not entirely trustworthy, and how a more rational approach will improve not just our own lives, but also the lives of the people around us.

Srini: Can you tell us a bit about your background?

Dan: I got badly burned when I was 18, and I spent about three years in the hospital. I had lots of struggles—there was the pain, the bandages, different procedures, all kinds of things. I started reading academic literature about burns and healing, and I proposed some new procedures to my physicians. At the end of this period, I decided I wanted to be a doctor.

I went to interview for medical school, and they basically disqualified me. My hands are very badly burned—I have a hard time holding a pencil. I have a hard time typing. They said I could never really examine a patient, that I could never hold a scalpel, that I should not risk anybody’s life like this. They basically wouldn’t let me be a physician, but I still had this idea that I wanted to fix things in hospitals.

Because I write about my injury, lots of people who are injured write to me and say, “How do you deal with this? How do you design your future?” I get exposed to a tremendous amount of human misery—it is amazing when you look at it. My mission now is to observe human misery, figure out where it’s coming from, and figure out if we can vastly reduce it.

Srini: That is beautiful. Three years in a hospital is a very long time to be in such a painful situation. What distinguishes somebody like you, who comes out of something like that and makes a mission and a career out of it, versus somebody who lets that get the best of them?

Dan: I think that this is basically the question of resilience. We don’t [yet] have good answer for this, [but] my subjective, non-scientific thinking is that it has two elements to it. One is the perception of randomness. The perception of randomness is actually very, very hard to deal with. [Imagine] losing your job, and nobody tells you why you’ve lost your job. Or you invest your money in the stock market, and all of a sudden, things go down. This idea that things happen to you that are not under your control is devastating. It’s called “learned helplessness.”

I think the second thing is focusing on the outside world. In the beginning, I was just focusing on pain. There’s a phrase called “pain people,” which means that when you experience dramatic pain, it’s hard for you to think about anything but the pain—you’re fully consumed by it. [But] later in life, I stopped looking at my own life, and my own misery, and my own pain. I started looking at the world and saying, “What can I do?”

“I stopped looking at my own life, and my own misery, and my own pain. I started looking at the world and saying, ‘What can I do?’”

I remember trying to figure out how much the healthcare system spent on me, and what my debt to society was, and how long it would take me to pay it back. I think that focusing on helping other people, and on what can you do to even the score, has also been very [helpful for me]. The combination of getting some control and focusing on helping other people was crucial for my recovery.

Srini: I’m curious, how can we overcome learned helplessness if it’s become part of who we are?

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Dan: I have two answers—the first is that we need to focus on our behavior rather than the outcome. The reality is that you can make a good decision, and then the world can act badly as a consequence of that. Things happen. Think about poker—in poker, you play the best hand you can, but somebody else can have a better hand. [Similarly,] you can say, “You made a really good decision to buy a home, and then the hurricane came.” There’s a lot of randomness. We need to focus on our decisions, because that’s what we have control over.

The other aspect is to try and gain some control by saying, “I could have done things differently.” When we break up romantic relationships or when we fire people, we say, “It’s not you… It’s something else [that’s to blame].” It’s easy to say those things because nobody seems to be at fault, but it increases learned helplessness. Because if [the problem] isn’t you, then what can you do [differently] next time? If I say, “Look, I’m firing you. It is you,” it’s a tougher discussion to have, and you’re going to feel worse in the short-term, but you’ll know what you can do to fix it.

Srini: One of the things that you said was this idea of your mission in the world is to reduce human suffering. How can we reduce human suffering in a very practical manner?

Dan: The ability to reduce suffering is everywhere. Of course, we’re curing cancer, alleviating poverty, all of those things are obvious. But the reality is that there’s lots of it out there, and I don’t think we all need to aim for the same things. We just need to be aware of what’s going on around us, and try to reduce whatever is accessible to us. People think about the poverty in Africa, which of course is just terrible, [but] the amount of poverty in the US is also quite terrible. Doing a little bit to help is surprisingly easy, just because there’s so much suffering to go around.

I live in Durham, North Carolina, and about a year ago we had a day with local organizations that help the poor with money issues—community banks, organizations that help with tax preparation, all kinds of other financial organizations. We said, “Let’s spend the day teaching you about the psychology of money.” At the end of the day, we said to the organizations, “Look, if you want to work with us, let us know.” We picked a few, and we are helping them out. It’s incredibly rewarding because the moment you get them to do something different, it affects lots and lots of people.

Srini: It sounds like a big part of reducing suffering is about taking our focus from being internal and about ourselves and shifting it to become about other people.

Dan: Yeah. There’s a wonderful book called Happy Money that basically tells you that the moment you start giving money away, or giving things away to other people, our happiness increases beyond the level that we would anticipate. It’s really incredible.

At the same time, there is some incredible misery out there in the world. There’s a slum in Kenya called Kibera. The sewage is running in the street, there’s no running water—a really, really tough place. People live there on about $10 a week. We are trying to get them to save a little bit of money, because if you don’t have any money, and something goes wrong, things start deteriorating very quickly.

Imagine that you’re living hand-to-mouth, and one day your goat gets sick. Your goat gave you 20% of your income, and now you need to make up the income. You borrow 10% a week for a few weeks, and at the end of these few weeks, the goat is fine, but now you owe four weeks’ worth of money, plus the interest. It’s really hard to get out of this. But if people save a little bit of money, then they could have money for those rainy days.

The most interesting thing we did [to help the people of Kibera] was create a gold-colored coin. Every week, we asked them to scratch the coin one way if they saved, and to scratch it a different way if they didn’t save. This coin led to twice as much saving compared to [a different approach we tried]. It was by far the best [solution].

Now, I’ll take you a step back. One of my favorite [academic] papers ever is a paper [in which experimenters] opened college savings accounts randomly to kids when they were born. By the time these kids were four years old, they had slightly higher social and mental skills. How come? Do the kids know they’re going to college? Of course not—but their parents knew. Because their parents knew the kids were going to college, they treated them slightly better. Then the kids had better skills.

“The moment you start giving money away, or giving things away to other people, our happiness increases beyond the level that we would anticipate.”

The same thing happened with the coin. The moment you have this coin, you change the discussion in the household around savings. Before that, the discussion was just about spending. Now that you had this coin, it was both about spending and about saving. On top of that, it was a tangible representation of savings, and people saved much more.

Those are the kind of things I’m trying to do. I’m trying to figure out the interventions that can make people’s lives slightly better.

Srini: How might we take some of the lessons from this study and apply these interventions into our own lives?

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Dan: The coin idea [indicates] that the objectives that are present in your life—the ones you pay attention to—are likely to get achieved. Things that are out of sight are out of mind, and are going to go by the wayside. Now the question is, how do you take the things that are important to you and make them more central into your life?

On a regular calendar, the things that get represented are meetings with other people, and the things that don’t get represented are things like exercise, meditation, writing a book, calling your mother. The things that are represented are going to be carried out, and the things that are not represented will not get carried out. As a consequence, your life is going to be full of things that might not fit your agenda. [So] the real question is, how do we get the representation of our lives to fit our real objectives?

If we were farmers in the 16th century, we would wake up in the morning, work the field, and then go to sleep. There were not many questions about what you should do and what you shouldn’t do. Life would have been really quite simple. But modern life is very tempting—there are lots of things to do. The amount of stimulation, the amount of personal growth, the ability to spend time with family, the flexibility we have with our lives… All of those things are really amazing. The question is, are we using them to the best of our ability, or are we not really tapping this amazing potential of richness and opportunity? I think sadly, we don’t tap.

Timeful is a startup that Yoav Shoham, Jacob Bank, and I started working on, and we’re trying to look at this problem of scheduling. We say, “Look, time is an unbelievably scarce resource. We don’t have much of it, and if we waste it, there’s no way back. How do we create a system that represents what people want to achieve in a way that would help people actually achieve those things?”

“When you are on your deathbed, what are the things that you are going to regret doing and not doing?”

One of the things we are thinking about is what we call “deathbed regret.” When you are on your deathbed, what are the things that you are going to regret doing and not doing?

[During] your regular day, it is very easy to do the things that seem urgent but unimportant. Think about something like smoking—if you enjoy smoking, you could wake up every day and say, “Should I smoke one more cigarette or not?” You would say, “Well, one more cigarette would give me pleasure. One more cigarette would certainly not kill me, so let me smoke one more cigarette.” If you thought about life one cigarette at a time, it would always be “One cigarette is pleasure,” and “One cigarette will not kill you.”

The same thing [applies to] sacrificing things for family: “Should I do this urgent thing at work, or should I go and hang out with my kids?” You could say, “Well, this one time, I should probably just do this thing at work because it’s so urgent. My kids can wait another day.” [But] if you keep making this decision every day, then it’s a very different approach.

We are trying to get people to think about the long-term action. If you were thinking about cigarettes not one day at a time, but thinking about it forever, do you want to be a smoker or do you want not to be a smoker? When you look at back at your life, what do you want to have achieved? We think that’s a better perspective on what people want, and that’s the perspective we should try and help people achieve.

Srini: I love that. Let’s shift gears a little bit. I want to talk about this idea of irrational behavior, especially because I had a chance to dig into your book Predictably Irrational. Talk to us about what you’ve learned about irrational behavior, and how that applies to our lives.

Dan: My interest in irrationality came from the hospital. The first thing I ever studied was the question of how to remove bandages from burn patients. Should you remove the bandages quickly or slowly? The nurses believed that quickly was the right approach, and I hated this, but they wouldn’t listen to me because they thought they knew what they were doing. At university, I started doing experiments on how to remove bandages, and it turns out that slower was better.

The reason was that we don’t incorporate duration into our evaluation in a direct way. We just published a paper on pain in the delivery room. We got women to report pain every 15 minutes in the delivery room, and we tried to understand the effect of duration on delivery pain.

There was really no effect. Deliveries that lasted 12 hours versus three hours are not perceived as more painful. They are longer, but they are not perceived as more painful.

If you think about this more generally, sometimes we have intuitions, and the intuitions are not what actually maximize our well-being. Think about the book Happy Money. If I gave you some money or a Starbucks gift card and said, “Go out and get coffee,” your first instinct is, “Let me get coffee for myself—that will make me happier!” It turns out if you actually give the coffee to somebody else, you would be happier. But we don’t understand that—there are all kinds of ways in which our intuition misleads us.

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Also, the world is not designed to minimize the damage that we do to ourselves. Think about something as simple as the refrigerator. In the refrigerator, there’s this drawer—usually at the bottom, usually opaque—where they ask you to put all the fruits and vegetables. As a consequence, almost everybody has rotting fruits and vegetables at the bottom of the refrigerator. It’s a shame, because they are healthy and expensive, and we waste an unbelievable amount of them. If we instead designed the refrigerator such that fruits and vegetables were front and center when we opened the refrigerator, we would eat more of them.

Similarly, one of the things we find with time management is that most people get to the office, and they are at their peak performance in the day. They are very focused between 8:30 and 11:30—[but they] waste those hours on email and Facebook. I have nothing against email or Facebook, but if you take the few precious hours in which you are able to produce high-quality work and you use it on low-capacity [activities], it’s just a waste.

[Also], in most organizations, the calendar allows other people to hijack your time. Other people can schedule things on your calendar, [but] other people don’t know your priorities. Other people don’t see all the things that are not in your calendar. All of a sudden, people take over your time, reducing your productivity. I think it’s a design that is clearly without any understanding of human nature.

If you understood human nature, you’d say, “Let’s take these two, three hours and protect them, and let’s think about how to get the most out of people, and get them to be happy at the end of day, [feeling like] they have achieved something.” You would create a very different system.

Srini: One final question for you: In your mind, what is it that makes somebody or something unmistakable?

Dan: The world is changing, and our intuitions [about the changing world] often fail.

I’ll give you an example—there was legislation in quite a few states to make texting and driving illegal. I assumed that this would reduce the incidence of accidents while texting. It turns out that it actually increased the incidence of texting and driving, and having accidents. The reason is because people stopped texting and driving above the wheel, and they started texting and driving below the wheel [so as not to be seen]. I just didn’t predict that human stupidity would go that low… It really puzzled me.

At the end of the day, I would like to think that data is the winner, and that we need to be more systematic about data. We need to be much more humble in our assumptions about our own success. We need to turn to data whenever possible, and we need to understand that the world is changing. Even if we give an answer to something at one [stage in] our development, we might want to visit it five years later, because the world might have changed in all kinds of ways, especially given the fast pace of technology.

I guess my answer [to what makes something “unmistakable”] is “a continuous investigation by the scientific method.” I think it’s the only way to go without making too many mistakes.

This conversation has been edited and condensed. To listen to the full version, click here.