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Predictably Irrational: The Hidden Forces That Shape Our Decisions

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Why can people be irrational when it comes to making simple everyday decisions?

Well, it’s as simple as understanding the human psychology of the hidden forces that shape our decisions. Predictably Irrational by Dan Ariely is a fundamental book on why humans, customers and buyers decide to take action.

For instance, the concept of anchoring is an important tool to understand. If you purchased your first KIND Bar for $4.00 and your friend purchased the same KIND Bar for $0.50 at another store, when you and your friend purchase another KIND Bar for $2.50, the perspective between you vs your friend will be completely different. In the real world, anchoring comes from the manufacturers suggested retail prices (MSRP), advertised prices, promotions, product introductions, etc. – all of which are supply side variables, meaning pricing can be controlled to influence customer decisions.

What does this show? That our first decisions resonate over a long sequence of decisions. First impressions are incredibly important.

“….people are sometimes willing to sacrifice the pleasure they get from a particular consumption experience in order to project a certain image to others.” – Dan Ariely

On another note, the power of FREE! has tremendous benefits. Experiments were ran in France comparing the results of offering shipping for $1 Franc vs offering FREE! shipping. What happened was that shipping for $1 Franc was virtually ignored by purchasers. FREE! shipping on the other hand resulted in an enthusiastic response by customers.

APredictably Irrationalnother interesting thing to note about FREE! is that it subtly changes decisions from monetary transactions to social transactions, which has an enormous impact on how others view us and our actions. The conclusion: no one is offended by a small gift, because even small gifts keep us in the social exchange world and away from market norms. Hundreds of years ago when individuals were mostly farmers and fending for themselves and their families, economies mostly ran on social transactions, resulting in bonds between traders, potentially connecting people and their resources.

These experiments show that cash will only take you so far – social norms are the forces that can make a difference in the long run. Our task as entrepreneurs is to figure out which of the two – social or market norms – will product the most desirable outcome.

The price of ownership is another interesting concept in the book. It is true that the idea of possessions causes us to view objects in different perspectives. We fall in love with what we already have. Another thing is that we focus on what we may lose, rather than what we may gain. A third quirk is that we assume other people will see the transaction from the same perspective as we do. All this mean is that ownership has its own pecularities. The more work you put into something, the more ownership you begin to feel for it and lose perception of its actual value in the marketplace.

Our brains work in fascinating ways. Although we may believe we are rational and logical decision makers as consumers in our everyday lives, the hidden reality is that we are emotional creatures that make seemingly questionable decisions. Understand these hidden forces and you will be aware of how decisions are shaped in our everyday lives.

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

Author:
Tag: Recommended Books
Publisher: Harper Perennial
Publication Year: 2010
ASIN: B002C949KE
ISBN: 9780061353246
Why do our headaches persist after we take a one-cent aspirin but disappear when we take a fifty-cent aspirin? Why do we splurge on a lavish meal but cut coupons to save twenty-five cents on a can of soup? When it comes to making decisions in our lives, we think we're making smart, rational choices....
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Why do our headaches persist after we take a one-cent aspirin but disappear when we take a fifty-cent aspirin? Why do we splurge on a lavish meal but cut coupons to save twenty-five cents on a can of soup?

When it comes to making decisions in our lives, we think we’re making smart, rational choices. But are we?

In this newly revised and expanded edition of the groundbreaking New York Times bestseller, Dan Ariely refutes the common assumption that we behave in fundamentally rational ways. From drinking coffee to losing weight, from buying a car to choosing a romantic partner, we consistently overpay, underestimate, and procrastinate. Yet these misguided behaviors are neither random nor senseless. They’re systematic and predictable—making us predictably irrational.

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Books Books By Billionaires

Sam Walton: Made In America

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The story of Sam Walton’s life is not just a story of a successful businessman, but rather an autobiography of the true American success story who started out in humble beginnings in the Midwest and compounded into the largest retail chain in the world. The book takes you through the story of how Sam took one retail shop and out competed all of his neighbors time and time again. From raising a family to recruiting his team, Sam Walton’s formula for creating a multi-billion dollar company is a true classic.

Sam Walton: Made In America simulates first-hand how the largest retailing empire ever was built long before Amazon ever existed. In scaling a business, especially a physical retail brand such as Wal-Mart there are many challenges that can come up. Sam succeeded in an era where technology was not prevalent by optimizing pricing, product promotions, retail locations, distribution systems and most importantly customer service. Sam overcame obstacle after objection and eventually thrived during a time when competing retailers were just struggling to survive.

Not only is Sam Walton’s story filled with wisdom, actionable knowledge and perception but the true gem inside the book is one for the ages.

Sam Walton: Made In America Cover

You will learn the essential fundamentals firsthand from the very man himself. Sam explains it all from his eyes and experiences. An American legend, this book brings the reader back to the grassroots of industrialization and culminates in the building of the largest retailing brand in existence (at the time).

Sam Walton’s Top 10 Rules For Success

  1. Commit
  2. Share
  3. Motivate
  4. Communicate
  5. Appreciate
  6. Celebrate
  7. Listen
  8. Exceed
  9. Control
  10. Swim

If you want to learn what these rules mean more in-depth, then I suggest you take the time to read the book. After all, it is only $7. The hard part, as so eloquently stated by Sam Walton is that the real challenge, is to constantly figure out ways to execute the rules and plans you have set for yourself. You can’t just keep doing what works one time, because everything around you is always changing. The world will always keep changing. To succeed, you have to stay out in front of that change, which means adaptability is key in a world of ever-changing circumstances.

“The secret lies in motivating kids who aren’t getting educated today to want to put themselves through school, and to make them understand the rewards they can expect when they do.” – Sam Walton

Sam Walton: Made In America

Sam Walton: Made In America

Author:
Tag: Recommended Books
Publisher: Bantam
Publication Year: 1993
ASIN: B008ZPG704
ISBN: 0553562835
Meet a genuine American folk hero cut from the homespun cloth of America's heartland: Sam Walton, who parlayed a single dime store in a hardscrabble cotton town into Wal-Mart, the largest retailer in the world.  The undisputed merchant king of the late twentieth century, Sam never lost the common ...
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Meet a genuine American folk hero cut from the homespun cloth of America’s heartland: Sam Walton, who parlayed a single dime store in a hardscrabble cotton town into Wal-Mart, the largest retailer in the world.  The undisputed merchant king of the late twentieth century, Sam never lost the common touch.  Here, finally, inimitable words.  Genuinely modest, but always sure if his ambitions and achievements.  Sam shares his thinking in a candid, straight-from-the-shoulder style.

In a story rich with anecdotes and the “rules of the road” of both Main Street and Wall Street, Sam Walton chronicles the inspiration, heart, and optimism that propelled him to lasso the American Dream.

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Books

The Alchemist

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The Alchemist is a gripping narrative about a young Andalusian shepherd named Santiago and his journey to find the greatest treasure in the world. This charming story follows Santiago on his journey to Egypt, after having a recurring dream of finding treasure there. Santiago travels across great distances and encounters crazy adventures in his quest for gold. Little does he know that the ultimate treasure is actually found deep within.

“To realize one’s destiny is a person’s only obligation.” – from The Alchemist

This dream was so prophetic that Santiago genuinely believed this was his ultimate goal in life. After deciding to travel to a Romani fortune-teller in a nearby town to discover its meaning, a gypsy woman tells him that there is a treasure in the Pyramids in Egypt.

The Alchemist Physical CoverTowards the beginning of his journey, Santiago meets an old king, named Melchizedek, who advises him to sell his sheep in order to travel to Egypt. He also introduces the idea of a Personal Legend, stating that your Personal Legend, “is what you have always wanted to accomplish. Everyone, when they are young, knows what their Personal Legend is.” 

Along the journey, Santiago meets an Englishman who is in search of an Alchemist and together they continue their search for treasure. As they travel through the Sahara desert, Santiago meets and falls in love with a beautiful Arabian woman named Fatima. After a brief period of time, Santiago asks Fatima to marry him, but she tells him that she will only marry him after he finds his treasures. Perplexed by this, Santiago later learns that true love will not stop one’s Personal Legend, and if it does, it is not true love.

Eventually Santiago meets a lone alchemist who teaches him about Personal Legends. He shares his wisdom that people want to find only the treasure of their Personal Legends but not the Personal Legend itself. The alchemist states,

“Those who don’t understand their Personal Legends will fail to comprehend their teachings.”

If you are looking for a book that will inspire courage, this is the one. No matter what your dream, goals or visions are, the universe will conspire to help you achieve the things you want, regardless of how insurmountable the task seems. You must live the life you truly desire to its fullest extent if you want to look back on a life having worth lived.

The essential message is that treasure is more worthy than gold.

The Alchemist

The Alchemist

Author:
Tag: Recommended Books
Publisher: HarperOne
Publication Year: 2014
ASIN: 0062315005
ISBN: 0062315005
A special 25th anniversary edition of the extraordinary international bestseller, including a new Foreword by Paulo Coelho.Combining magic, mysticism, wisdom and wonder into an inspiring tale of self-discovery, The Alchemist has become a modern classic, selling millions of copies around the world an...
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About the Book

A special 25th anniversary edition of the extraordinary international bestseller, including a new Foreword by Paulo Coelho.

Combining magic, mysticism, wisdom and wonder into an inspiring tale of self-discovery, The Alchemist has become a modern classic, selling millions of copies around the world and transforming the lives of countless readers across generations.

Paulo Coelho’s masterpiece tells the mystical story of Santiago, an Andalusian shepherd boy who yearns to travel in search of a worldly treasure. His quest will lead him to riches far different—and far more satisfying—than he ever imagined. Santiago’s journey teaches us about the essential wisdom of listening to our hearts, of recognizing opportunity and learning to read the omens strewn along life’s path, and, most importantly, to follow our dreams.

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Books

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich

The 4 Hour Workweek Header

A Handbook On Lifestyle Design

Accomplish more, in less time. To many starting a business to make extra money often symbolizes more work and more effort. Instead of working long hours, stacking your day with never ending to-do lists and generally feeling like you’re not accomplishing anything, consider working less. With tools and technologies available today, it is possible to create a luxury lifestyle even in unpredictable economic times. The 4-Hour Workweek has made me rethink my perspective on time and the goal of money – which is ultimately a means to freedom.

Cover of The 4-Hour Workweek by Timothy Ferriss

The 4-Hour Workweek by Timothy Ferriss is a life hacking approach for anyone who wants to live life on their own terms. Life hacking refers to any method that increases productivity and efficiency, in all walks of life.

What Kind Of Lifestyle Do You Want To Live?

Time and attention are the most important resources that we have. Phones, tablets, computers and e-mail are all competing night and day to suck up your valuable attention. In addition, by participating in a job where you are paid by the hour or salary rather than actual value creation, one actually has multiple reasons to not work and instead spend their time doing trivial things. You are getting paid either way, right?

The bureaucracy of a corporate workforce oftentimes means that most time is actually spent in meetings, lunch breaks and commutes rather than value adding activities while hierarchal red tape limits power and slows down progress for hardworking employees. The person who benefits the most from working a job is the owner of the business. There is no incentive for a salaried or pay-by-the-hour worker to work harder. Why not finish the most important tasks related to your job, call it a day and leave early? You can’t, and therein lies the issue with a 9 to 5 .

Create a business for yourself (or a “muse” as Tim likes to call it), and the result (read: money) is a direct correlation of the work you put in. This passive income creates free time which can be redirected towards experiences such as learning languages, traveling the world, becoming an expert in martial arts, dance and even deep sea diving. Whatever it is you truly want to do.

Lifestyle Design

The 4-Hour Workweek Methodology

  • Definition – Taking a holistic approach to time, money and happiness
  • Elimination – Strategies for selectively choosing the information you allow into your life
  • Automation – The meat and bones of how to create an automated business
  • Liberation – Hacking your way into the lifestyle you desire

Most business books focus solely on a system towards accumulation of wealth. With The 4-Hour Workweek, Timothy Ferriss takes a comprehensive approach to transforming work and life. After defining the problem, eliminating extra unnecessary activities and automating your “muse” business, Mr. Ferriss takes it one step further by introducing “liberation” as a step towards creating a personalized and fulfilling lifestyle.

The book begins by challenging old business concepts head-on and introduces the approach of the New Rich. The New Rich challenge the status quo by looking at business differently. Goal setting is pivotal. Fear is merely not having a plan.

Eliminate And Join The New Rich

Elimination is probably my favorite concept introduced. Concepts such as Parkinson’s Law defines the ability to accomplish a task as a direct correlation of time allotted and complexity. For example, if a term paper was given a month long deadline as opposed to a 24 hour deadline, it is more likely that it would suffer in quality. Pareto’s Principle is the 20/80 rule in effect, which states that 20% of the work you accomplish actually drives 80% of the results.

Combine these two laws in every decision you make and watch productivity escalate. Work smarter, not harder.

Tim refers to email as the ultimate time-waster as he strives to eliminate all the drama it brings. You will find the email autoresponder and voicemail templates to be equally as hilarious as they are effective.

“Being busy is a form of laziness–lazy thinking and indiscriminate action”

Automation And Outsourcing

Automation And Outsourcing

In introducing automation, Tim highlights outsourcing as a new age concept. With services like YourManInIndiaelance and odesk (now Upwork), it is possible to outsource everything from research, email reading, forum posting, transcription to even Indian cuisine.

Then he guides the reader step-by-step with choosing a niche, building a product, testing and creating an automated virtual architecture. There is even a simple flow chart which highlights the entire logistical and monetization blueprint of his business. I found these maps to be a goldmine of information. The usage of the Internet to reach and serve millions of people is real. Since the release of this book in 2007, it is evident that it has inspired and spawned thousands, possibly millions, of similar passive businesses all over the world wide web.

Liberation is how you disconnect from the world and do what makes you happy. Telling your boss you want to work remotely overseas and increase productivity? Check. First class traveling on a budget? Check. Mastering cultural skills such as language, dance, music and sport? Simple and fun. These are all possibilities of lifestyles people work their whole lives towards, but in reality can be achieved with a bit of strategic maneuvering. Humorously, Tim even has a template for telling your boss off and quitting your job.

Conclusion

There are a few criticisms. The first is that Tim’s business is, in essence, one giant case study for how he built his business. While the use of virtual assistants is a pivotal part of his business model, it may not be the most effective method for your business. There are merits to outsourcing business tasks, however unless your business is completely automated and devoid of physical service then the majority of his methods probably aren’t completely applicable to most business models.

Overall, The 4 Hour Work Week is an inspiring, engaging handbook that will almost definitely lead you to take action.

Also, check out tools from the book on Tim’s blog.

(UPDATE: Tim has a new book! Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers is now available)

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich

Author:
Tag: Recommended Books
Publisher: Harmony
Publication Year: 2009
ASIN: 0307465357
ISBN: 9780307465351
More than 100 pages of new, cutting-edge content. Forget the old concept of retirement and the rest of the deferred-life plan–there is no need to wait and every reason not to, especially in unpredictable economic times. Whether your dream is escaping the rat race, experiencing high-end world trave...
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More than 100 pages of new, cutting-edge content.

Forget the old concept of retirement and the rest of the deferred-life plan–there is no need to wait and every reason not to, especially in unpredictable economic times. Whether your dream is escaping the rat race, experiencing high-end world travel, earning a monthly five-figure income with zero management, or just living more and working less, The 4-Hour Workweek is the blueprint.

This step-by-step guide to luxury lifestyle design teaches:
•How Tim went from $40,000 per year and 80 hours per week to $40,000 per month and 4 hours per week
•How to outsource your life to overseas virtual assistants for $5 per hour and do whatever you want
•How blue-chip escape artists travel the world without quitting their jobs
•How to eliminate 50% of your work in 48 hours using the principles of a forgotten Italian economist
•How to trade a long-haul career for short work bursts and frequent “mini-retirements”

The new expanded edition of Tim Ferriss’ The 4-Hour Workweek includes:
•More than 50 practical tips and case studies from readers (including families) who have doubled income, overcome common sticking points, and reinvented themselves using the original book as a starting point
•Real-world templates you can copy for eliminating e-mail, negotiating with bosses and clients, or getting a private chef for less than $8 a meal
•How Lifestyle Design principles can be suited to unpredictable economic times
•The latest tools and tricks, as well as high-tech shortcuts, for living like a diplomat or millionaire without being either

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If you enjoyed this review of The 4-Hour Workweek, consider picking up a copy of the book on Amazon today.

>> Click here to view The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich (Expanded and Updated) by Tim Ferriss <<

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