Using Relative Thinking to Make Better Decisions

Let’s say you’re planning a vacation. You’ve narrowed your destination down to your two favorite cities and, after some searching, find three travel packages to consider:

  1. City A (free breakfast)
  2. City B (free breakfast)
  3. City B (no free breakfast)

Which would you choose? Option 2 seems like the most obvious choice, doesn’t it? In fact, you probably didn’t even consider option 1, even though it’s still for a city you love! That’s because options 2 and 3 are easier to compare, since they’re in the same city. However, relative to option 2, option 3 is clearly inferior. Option 3 is serving as a decoy to make option 2 look more appealing. In behavioral economics, this is called The Decoy Effect.

In his book Predictably Irrational, founder of Duke University’s Center for Advanced Hindsight Dan Ariely tries to explain a lot of the seemingly illogical parts of human behavior. One of the things he covers is relative thinking, comparing things in our immediate surroundings to fuel our opinions and decisions, and he argues that, while comparisons can make choices easier for us, they might not always make things better.

We compare everything… for better or worse

Truthfully, we know very little about the worth of things. Because it’s hard to know or guess an item’s value, we use comparisons to help us make decisions. Humans are hard-wired for comparisons; we compare everything around us, whether we should or not.

For example, when MIT students were asked to write down the last two digits of their Social Security numbers, then bid on items like rare bottles of wine or boxes of chocolates, the students with higher numbers (80-99) bid over 2-3 times more than students with lower numbers. The Social Security numbers were entirely irrelevant to the prices of the items, but it didn’t stop students from unconsciously making that association.

Marketing experts know and exploit this all the time. When Williams-Sonoma’s new bread machines weren’t selling as well as expected, they did something that seems counterproductive: They released a second “Deluxe” bread machine that was virtually identical the original but cost 50% more. Suddenly, the original bread machines started flying off the shelves! Once consumers had a basis for comparison, they “realized” that the original bread machine was a better deal, and suddenly everyone wanted one.

Making comparisons as a form of decision-making can cause more problems than it solves. For an example of this, just think of the last time you wanted to watch a movie or TV show: How much time did you spend browsing for something to watch versus actually watching it? Comparing all those choices takes time and energy, two things our brain hates to waste. So, we become paralyzed with indecision.

We also compare ourselves to others, which makes us miserable. We envy what others have or feel inferior if our standard of living is different from someone else’s. Comparison always makes us hungry for more. Even if our standard of living does improve, it’ll only be a matter of time before we start working toward an even higher standard.

Using relative thinking for easy decision-making

Dan Ariely writes in Predictably Irrational that “The more we have, the more we want. And the only cure is to break the cycle of relativity.” Many of the comparisons we make are arbitrary at best and outright deceptive at worst. Relative thinking makes us overspend on products, underthink our choices, and undervalue ourselves.

However, knowing about relative thinking is half the battle. Here are some ways you can use it in everyday life:

Limit your choices to make decisions easier. Instead of browsing through Netflix for half an hour while trying to decide what to watch, limit yourself to three or fewer choices. If you really want to take advantage of relative thinking, make one of the choices mediocre compared to the other two!

Guide people to your preferred choices. When you know that people make decisions based on context, you can use that knowledge to control the context in your favor. For example, the next time you have to decide what to eat with someone, offer two suggestions. If you make one choice clearly better, they’ll most likely choose that option!

Stop comparing altogether. While it may be easier said than done, we know that comparisons we make can do more harm than good. Stepping away from the relativity of choices available to us can offer us clarity. This can, in turn, lead to better decisions than what we might make when letting context influence us.

Has relative thinking influenced any decisions you’ve made recently? How can you use relative thinking to make more informed choices in the future?

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