Book Report – Sway: The Irresistible Pull of Irrational Behavior

Topics: SoBe, Decision making, Person Pages: 5 (1988 words) Published: April 14, 2014
Book Report – Sway: The Irresistible Pull of Irrational Behavior
The book, Sway: The Irresistible Pull of Irrational Behavior, by Ori Brafman and his brother, Rom Brafman dives into the way that we make decisions. Why do humans make the horrible decisions we do when logic would tell us to act otherwise? There are several psychological influences that sway our decision-making ability according to the Brafman brothers. The authors look at several different factors, with a lot of fascinating and logic-breaking examples. This book will help you understand the decisions you make. In many circumstances times when logic would dictate that we take a certain action, we take the opposite. To illustrate, just ask yourself why you have stayed so long in a doomed relationship? Why was it so hard to sell a stock that has lost much of its value…or to sell your house if it will be for less than you paid for it? In their book, Sway, Ori and Rom Brafman explore our decision making process and what influences our behavior. Hence, the subtitle, The Pull of Irrational Behavior is used.

Sway opens with a convincing example — the historic KLM flight where the pilot made a seemingly irrational decision that cost the lives of 584 people in 1977, the largest airline disaster in history. The authors make the argument that because the pilot was so focused on getting to his final destination after being diverted; he was swayed into making a wholly irrational decision, which ended in tragedy. How was he swayed specifically? Well, the book revisits the KLM disaster a few times to flesh out the underlying irrational decisions likely being made by the pilot. The book is filled with such examples, such as people who have bid as much as $200 for a $20 bill. Why? Why would anyone pay more than the face value of a $20 bill? Well, the authors have the answers.Here I will describe all the major sways listed in the book. I will also give an example of the sway and why it affects people so harshly.1. We overreact to potential losses. Humans tend to focus more on the short-term consequences rather than the longer-term effects. This is illustrated well by AOL’s Internet options. For a while, AOL gave consumers access to the web through a pay as you go method. Customers would pay for every minute they used the Internet. Then, when AOL introduced a flat monthly fee, customers began signing up for that plan in masses. Customers wanted to make sure they avoided the perceived losses from the pay as you go method, when in the long run; most users were losing money with the flat rate. 2. Loss averse. The more meaningful a loss is, the more loss averse we become, meaning we don’t want to give up our hold on the loss (even when it’s economically, emotionally or otherwise beneficial to do so). The best example of loss aversion is in the stock market. Inexperienced traders have the hardest time selling a plummeting stock. Say you invest in a stock for $10 a share and in a week the price rises to $20. Now it would be great to sell then. But then the next day the stock drops to $17 a share. For whatever reason, humans perceive this $3 difference as a loss, instead of a $7 gain (you invested at $10 and could sell at $17). So, the investor says, once it gets back to $20 I will sell. Then it drops to $15, then $12, then $6, and before you know it, you have lost money, when you could have gained $7 a share!3. Commitment. When we are committed to a relationship, decision, or position in our lives, it can be very difficult for us to see the better, healthier alternatives available. The best example of this in the book is the $20 dollar bill auction. Harvard Business School Professor Max Bazerman conducts this auction on the first day of his class. There are only two rules to the auction; first, bids are to be made in $1 increments. The second rule is a little trickier; the winner of the auction gets the $20, but the runner up still has to honor their bid,...
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