Sway: The Irresistible Pull of Irrational Behavior

If anyone knows about having a lot on the line, it’s Jordan Walters of the Silicon Valley branch of the investment house Smith Barney. Jordan is exactly the kind of person you’d look for in a financial planner: he’s calm, he’s thoughtful, and he always takes the time to listen. As we sat down in his office and sipped from the minibar-sized can of a

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Professor Daniel Putler, a former researcher at the U.S. Department of Agriculture, has spent more time thinking about eggs in a year than the rest of us spend in a lifetime. He carefully tracked and studied every aspect of egg sales in southern California. Looking at the data, he found some interesting patterns. Egg sales, for instance, were typic

As Columbia Business School professor Eric Johnson explained to us, the more meaningful a potential loss is, the more loss averse we become. In other words, the more there is on the line, the easier it is to get swept into an irrational decision.

When you think of car dealers: “The Effects of Supplier Fairness on Vulnerable Resellers” was written by Nirmalya Kumar, Lisa Scheer, and Jan-Benedict Steenkamp. It was published in the Journal of Marketing Research 32 (1995): 54–65.

Sensing that money was starting to slip through his fingers, the client developed an aversion to loss that was strikingly similar to Van Zanten’s. Like the captain who was preoccupied with getting back on schedule, the investor was blindly focused on getting back to even. Jordan realized that his client was so eager to make up for a loss that he wa

workplace, read “Determinants of Perceived Fairness of Performance Evaluations,” by Jerald Greenberg, published in the Journal of Applied Psychology 71 (1986): 340–42. You can also read “Effects of Procedural and Distributive Justice on Reactions to Pay Raise Decisions,” by Robert Folger and Mary Konovsky, published in the Academy of Management Jou

Sitting in their plush offices, venture capitalists: The venture capitalist study, titled “Procedural Justice in Entrepreneur-Investor Relations,” is by Harry Sapienza and M. Audrey Korsgaard. It was published in the Academy of Management Journal 39 (1996): 544–74.

It’s precisely because of the compounding effect of these two forces that students in Max Bazerman’s negotiations class at Harvard Business School would do well to hold on to their wallets when he introduces his “twenty-dollar auction.” They say it’s easy to take candy from a baby; Professor Bazerman has found that it’s just as easy to take money f

In Asch’s study: Solomon Asch’s classic study about the pressure to conform to a group was published in Groups, Leadership, and Men, edited by Harold Guetzkow (Pittsburgh: Carnegie Press, 1951). Asch’s chapter, titled “Effects of Group Pressure upon the Modification and Distortion of Judgment,” appears on pages 177–90.