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Irrational Decision-Making: Embrace the Human Factor!

This McKinsey & Co. interview* with Duke University Professor Dan Ariely explores how subjectivity influences our decision-making process, and argues that totally rational behavior (defined as acting universally in one’s own best interest) can put the actor at a disadvantage. This is partly due to human characteristics such as social comparison, relative advantage, and our ability to weigh long-term versus short-term gains.

I especially like his insight into why senior managers often fail to understand the motivations of their staff, an issue we face (and have to face down) occasionally in our own work. This point cannot be made strongly enough: People have a huge range of personal motivations that drive their behavior, and the best managers understand and adapt to the multiple styles that exist in their own workplace. (Our principal Dave Tighe touched on it in a recent article about pay-for-performance, too.)

I am not sold on everything Prof. Ariely says here, notably his take on “revenge” as a positive irrational impulse in business (and the interviewer’s somewhat disturbing reaction!)

On the whole though, a thoughtfully different take on how the seemingly irrational makes sense in our human world.

*Registration may be required by the McKinsey site, but go ahead. They have good stuff, and it is free!

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