Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 5, Issue 20;   May 18, 2005: Irrational Self-Interest

Irrational Self-Interest

by

When we try to influence others, especially large groups or entire companies, we sometimes create packages of incentives and disincentives that are intended to affect behavior. These strategies usually assume that people make choices on rational grounds. Is this assumption valid?

We often assume that people are motivated by rational self-interest. In this model of behavior, people make choices that they calculate will benefit them most, and most directly. If we want to predict behavior, or direct it, all we have to do is provide the right "incentives" or "disincentives" and we can get people to do what we need them to do.

Carrot and stickIf only Life were that simple.

Although predictions on the basis of the rational model can be successful, some have come to believe that strict adherence to the rational model is not only limiting, but often wrong.

The problem is that sometimes people don't choose rationally, and even when they do, they often choose differently from what we might expect if we consider only the content of the issue. Here are some reasons why.

It's always a judgment call
In the organizational context, the consequences of choices are rarely all good or all bad. People have to decide what they care about and how much, and people do differ.
Some people react to the past
Sometimes people don't
choose rationally. Even
when they do, they
apply their own judgment,
not yours.
Something about the situation might trigger responses from childhood, or from other experiences. People then react to those past experiences instead of reacting to the here-and-now.
Some are overloaded
Some people must choose quickly, because of real or perceived time pressure. In haste, they make choices that differ from those they would make if they felt they had more time.
Some feel peer pressure
Some make choices on the basis of the choices they perceive others making. They want either to be like others, or to be unlike others.
Some fear imaginary consequences
When they lack concrete knowledge, some people make up some pretty terrifying scenarios. Then they react to what they've imagined, instead of to what is.
Some have wrong information
The information on which they base choices can be wrong, out-of-date, or incomplete. Or they might have misunderstood or forgotten the information they did have.
Some seek revenge
Anger or thirst for revenge can cause some to make choices to harm others, ignoring (or blinded to) consequences that are seriously harmful to themselves.
Some have received bad advice
Even when people have all the facts right, some follow bad advice or misguided (or worse) leaders.
Some have cut deals
Sometimes people make choices that are counter to their own interests, because — rightly or otherwise — they expect someone else to intervene or to support them in another context.

Finally, some believe that the world consistently works in ways that it does not. This can cause them to make choices that might not be in their own self-interest — they might even choose to use the rational model to devise ways to influence the choices of others. Go to top Top  Next issue: An Agenda for Agendas  Next Issue

Order from AmazonFor more on irrational decision-making, see the report by Paul Solman on the May 10, 2005, edition of the PBS program The News Hour with Jim Lehrer. The report is available in text, streaming audio, or streaming video. It emphasizes the work of Terry Burnham, author of Mean Markets and Lizard Brains: How to Profit from the New Science of Irrationality, published in 2005 by Wiley. Order from Amazon.com.

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