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1-Page Summary of Sway

Overview

This book explains why we make irrational decisions. For example, it shows how people will go on diets but then give up as soon as they see a dessert. It also discusses how our mothers would be hurt if we tried to pay them for cooking us dinner. The author uses studies and anecdotes to prove his points about human nature being predictably irrational in certain situations.

The brain is a strange organ. It often thinks it’s making logical decisions, but instead, it’s actually irrational.

The worst part is that you don’t even realize when it’s happening. Several forces conspire in your mind and environment to make you a risk to yourself.

In this passage, the author will help you understand how to avoid making irrational decisions by explaining why Russians do anything to keep a contestant from winning on Who Wants to be a Millionaire, why you keep buying extra car rental insurance that you don’t really need, and how having negative thoughts about aging will actually make you older.

Big Idea #1: Many people are afraid of losing. In order to avoid the feeling of loss, they often act irrationally.

People like to think that they’re rational and logical, but the truth is that we all act irrationally. Experts can make mistakes as well, such as pilots and surgeons.

Why Do We Act Irrationally?

People hate to lose. Our fear of losing is a driving force behind irrational behavior. Interestingly, the pain of loss is much stronger than the joy of winning; we will do anything to avoid it.

Our sensitivity to changes in the price of an item illustrates how people react disproportionately strongly to loss. When prices decrease, we only slightly increase our consumption. However, when prices rise, we cut our consumption drastically. As a result of this phenomenon, people often rush to make sacrifices just to avoid loss. Sometimes they’re even willing to pay more than necessary just because it prevents them from losing money! For example, many rental car companies charge extra for damage waivers that are completely unnecessary and useless since your own insurance and credit card offer sufficient protections should you get into an accident with their car anyway. Still, the fear of losing money makes us reconsider whether or not we’re safe enough and may lead us to buy coverage regardless – a product designed specifically to take advantage of customers’ irrational assumptions about risk.

Big Idea #2: When we have a lot to lose, we don’t become more rational, but act in an even more irrational manner.

Fear of losing can cause irrational behavior. However, when the stakes are high, we’re even more likely to act irrationally and do things that will only make us lose more.

Investment strategies can encourage irrational behavior. For example, a client decided to put all his money in one company’s stock after it dropped from $47 to $38. He refused to sell until the price went back up to $44.

People are often too committed to their ideas and don’t listen to others. This is what happened in a football game between the University of Florida Gators and the Southeastern Conference (SEC). The SEC was known for its conservative, defensive style of play, but Steve Spurrier changed that by transforming his team’s strategy into an offensive one. Despite losing many games with this new method, no other coaches in the conference changed their tactics; they were too committed to old methods to take a risk.

So, we’re afraid of losing what we have. That’s why we act irrationally sometimes. However, there are other triggers that lead to irrational behavior too. Let’s look at them now.