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Dan Ariely poses for a photo outside of Merdacro Medellin, in Mexico City, Sept. 6, 2018. As a teenager in Israel, Ariely suffered third-degree burns to 70% of his body when a flare exploded next to him. He spent three years in and out of hospital, where he began to develop his ideas around human behaviour.

Brett Gundlock

Dan Ariely is everywhere these days. His TED talks have amassed roughly 19 million views. He’s the author of six books and a sought-after speaker and consultant to Fortune 500 companies in the fields of energy, transportation and education. He conducts research for fintech startups and for governments (1) around the world. For many of these interactions, the world’s leading expert in behavioural economics is paid what he has described as ''sums that shock me.''

It's as if Dan Ariely, by day a Duke University professor and head of the Center for Advanced Hindsight, knows the answer to a question we're all asking. As a purely academic matter, the question could be put simply: ''Why are humans so irrational?'' But because it's often businesses who are asking, they attach a follow-up: ''And how can we profit from it?'' Ariely was in Mexico City to meet with the country's incoming government leaders when we reached him by phone.

Would you say this is the golden age of behavioural economics or just the golden age of Dan Ariely?

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Ha. I'm hoping there's more for behavioural economics, but I think this is an unbelievably good time.

Is that because people are more receptive to it?

Yes. I think the higher reception started with the 2007-08 crisis. Up to that point, the financial markets got people to believe that people are perfectly rational, or that perfectly rational institutions can be created. And that belief died with the crisis. Then companies and governments started adopting all kinds of interventions with great success. It’s not just a matter of saying, ''Hey, look, people are irrational.'' Now we have lots of proofs of concept. The real trick is how to integrate behavioural economics in a deeper way. The real questions are about the level of paternalism we’re going to create.

Behavioural economics can be weaponized against us.


You would be the Oppenheimer (2) of that.

Every time we learn something, it can be used for good and for bad. I’m hoping that as we discover new facts, we will find ways to improve the human condition rather than make it worse. But you’re absolutely right--there’s lots of opportunities to take findings from behavioural economics and use them to abuse people. The temptation does exist.

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Where is behavioural economics best employed--in getting people to spend money or in getting people to make it?

If I had to pick the place where behavioural economics is employed in the least moral but most effective way, it would probably be casinos. Casinos are very similar to the cellphone, in terms of the random reinforcement, the addictive properties they have. Casinos are well-oiled machines designed to use our irrationality to separate us from our money.

To what degree have you monetized your own influence?

As a university professor, I give lots of lectures for very little money. When I go to corporations, I give much shorter lectures for much more money. But the thing I like even more is helping companies solve a specific problem. I understand behavioural economics. I know a lot. Sorry for the arrogance. And for a company it's very efficient to get me to come and spend a few hours or a day and help them restart the process in a way that is more in line with behavioural economics.

You often work with startups.

One of the biggest lessons from behavioural economics is that the environment matters. And if we understand people's environment, we can actually get people to behave differently. So I either start or help startups that I think are doing good in the world, and that's one of the most rewarding ways to have an influence.

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How did you become involved with the insurance startup Lemonade?

I met the founders early on. (3) The thing that interested me the most was to think about a financial services company that has no conflicts of interest.

It seems almost impossible for an insurance company not to have conflicts of interest with clients.

That’s right. A regular insurance company is a two-party game: the consumer and the company. The consumer pays and pays. At some point, something bad happens. The consumer wants to get paid, and the insurance company is better off not paying. If the insurance company pays lots of claims, there’s less money to give bonuses. Worse, we as consumers know there are conflicts of interest, and we expect to be mistreated. Therefore, many of us lie or exaggerate. And the insurance companies know that people lie and exaggerate, so they make things much more difficult. Regular insurance companies build on conflicts of interest and mistrust by design. Lemonade is switching it from a two-player game to a three-player game. We have a consumer, we have the insurance company, and we have a charity. You, the consumer, choose a charity that you love. You pay us. Something bad happens, we pay you. We keep a fixed amount--say, 20%. If there’s money in the pool left over at the end of the year, it goes to the charity, not to bonuses. By design, we don’t have a conflict of interest.

You are an expert in human motivation. What’s the motivation for someone to work at a company that doesn’t pay bonuses?

It’s good to work at a company that doesn’t abuse its customers. There’s more pride in it. And I think at the end of the day, there could be more profits in it.

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In the fintech sector, you’ve worked with a company called Qapital. What are you doing there?

We did some studies on spending and realized that if you have a budget for coffee and a budget for beer and a budget for shirts and so on, you won't stick to it. It's miserable. So we said, Let's move to a discretionary budget. Everything you can live without, let's put it in one category and give people a debit card to pay for it. So it's a separate account, and they can control and understand better their discretionary spending.

The next point was to ask, What happens if people get a monthly discretionary budget? It turns out people spend way too much in the beginning. Weekly is better. And if we start on Monday, people save for the weekend, so they end up spending better. So Qapital (4) pre-loads your discretionary spending on Monday and tells you how well you’re doing until the end of the week.

'One of the biggest lessons from behavioural economics is that the environment matters,' Ariely says.

Brett Gundlock

Why do human beings need help to do what’s good for them?

There are many reasons, but I’ll give you two. One is that we are really not good with long-term thinking. Living until we are 80, it’s kind of a new thing. From an evolutionary perspective, the system wants to optimize now. After reproduction, who cares? So we are really good at short-term thinking. We are not good at later.

The second reason is about money. We’re not designed to think about money; it’s a relatively new invention. (5) Every time you buy a cup of coffee, you should be thinking, Is there another way to use this money now or in the future that would be better? What a complex thought! And if I give you a credit card and student loans and a mortgage and a car payment, and I ask you the consequence of buying a coffee, you have no idea. Money is an amazing invention, but it’s also humanly impossible to think about it the right way.

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You said earlier that a lot of people lie to insurance companies. You’ve studied dishonesty. What’s at the root of it?

Dishonesty usually comes from a conflict between different goals. You get the question, ''Honey, how do I look in that dress?'' You care about honesty, but you also don’t want to offend your significant other, and you want to have a good evening. Those three goals are not compatible, and you have to decide which one wins. You do your expense report for work and you want them to pay for this extra beer, but it’s dishonest because the extra beer had nothing to do with work. We have lots of human values, and it’s not the case that honesty always wins. I don’t know whether you want me to get into politics...

I was going to ask you about Donald Trump and the rise of dishonesty in the public sphere. (6)

The last election was very ideological. People on the left wanted things against global warming. People on the right wanted Obamacare abolished. And what was troubling is that people on both the right and the left were willing to give up honesty for their policies. So what happened is that in the last election, honesty lost its priority in the hierarchy of values, and the danger is that once honesty lost, it’s very hard to put it back up there.

Are certain ideologies more likely to be dishonest?

We haven't found that. But I will say that ideology is very problematic from a dishonesty perspective, because an ideology makes you try to bend reality. ''Here is what I want to find.'' And then you are able to find it. That's a very dangerous thing.

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What about economic forces? Is the free market inherently honest or dishonest?

The free market is an ideology that can very quickly undermine honesty. If you have as your main value a free market, you’re going to be able to justify a lot in the name of free markets. We did a study in which we made people the CEO of a virtual bank, and the CEO got paid proportional to how well the bank’s stock was doing. Then we had consultants propose ways to squeeze more money from customers. In the professional language, it’s called ''revenue enhancement.'' The question was, would the CEO take these enhancements? Would they treat their customers worse to increase the profit of the bank? And in some conditions, we said, ''Your motto is ‘maximizing shareholder value.'’' The moment that was the motto, the CEOs were much more likely to adopt these revenueenhancing methods. They had a conflict of interest between being good to their customers and being good to themselves. The ideology of maximizing shareholder value released them from moral obligation. In many ways, I think people’s view of the economy is a biased view designed to justify being selfish.

You have said that being an expert in behavioural science makes your day-to-day interactions more difficult. How so?

I have a ton of requests to do things. A lot of them are incredibly interesting. And a lot of them I also feel some responsibility to do. This field is getting lots of attention. People want to use it. People want to think about how to use it. Can I feel morally okay about saying no? So I end up drinking lots of coffee and trying to stay awake many hours and working a lot.

It strikes me that your work on how human minds are influenced makes us look rather stupid. How dim is your view of humanity?

I have a two-part answer. First, standard economics says that people are wonderful, capable and always make the right decisions. Behavioural economics says we are myopic, vindictive, emotional, don’t know how to decide, don’t think about the future, get confused and so on. However, I also look at the world and say, if the standard economics was right and this world is the result of eight billion rational people, that’s a really sad outcome. But if the world is a combination of eight billion irrational people, it means we can do much better. So it’s true that I have a dim view of our individual capacity. But I do believe that we can build much better systems. Can we fix human nature? Absolutely not. But could we get a system that would take human nature into account and therefore get better results? Absolutely yes.


1. Ariely has consulted with Canadian governments about pensions and retirement issues, and with at least one provincial agency to design bills and information flyers that would help reduce peak electricity consumption.

2. The American theoretical physicist led the development of the atomic bomb. He later argued in favour of arms control.

3. Lemonade is a property and casualty insurer based in New York and available solely to U.S. customers. It’s backed by Alphabet, Sequoia and Softbank.

4. Before creating the app, the founder’s family had 17 savings accounts for various purposes to help track their spending.

5. The Kingdom of Lydia (located in modern-day Turkey) minted the first official currency around 600 B.C.

6. In his first year in office, President Trump made 2,140 “false claims” (otherwise known as lies), according to the Washington Post’s Fact Checker column.

Trevor Cole is the award-winning author of five books, including The Whisky King, a non-fiction account of Canada’s most infamous mobster bootlegger.

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