The Myth of Fair Value (and How to Take Advantage of It)

[Amazon Link]

I'm pretty sure I heard good things about this book at some point in the recent past, which caused me to plunk it on my get-at-library list. I was slightly disappointed.

The author, William Poundstone, has a mission accurately summed up in his subtitle: prices are a shared illusion, easily manipulated by dinking with the all-too-human psychology of buyers and sellers. The book has 57 chapters, some only a couple of pages. Each purports to draw lessons from psychological studies. Poundstone is especially (and deservedly) reverent toward the groundbreaking research carried out by Daniel Kahneman and Amos Tversky.

The main problem stems from the book's age: published in 2010. So the author is not exactly breaking fresh ground. Daniel Kahneman's own book, Thinking Fast and Slow, came out in 2011. And if you've read that (as I have), then you'll have already seen a lot of stuff that's discussed in Priceless.

But it's worse than just being old. Poundstone assumes that all those studies he quotes are reliable. That was a reasonable position to take in 2010, but not so much today. For example, the work on "priming": where exposure to an idea, a suggestion, an image … whatever, causes our unconscious mind to make it more likely to raise future occurrences to our mental attention. Sounds nice, plausible, … but the research that purported to demonstrate it turned out out to be irreproducible.

Since I, as a 2021 reader, knew that already, it cast a cloud over the dozens of studies Poundstone cites to bolster his thesis. I kept wondering has anyone tried reproducing this? This guy seems to think a lot of the other research in social psychology is bunk.

I'm not one to judge. (But it does help my cognitive bias a lot, I get to auto-dismiss research when I don't like the results.) So I recommend reading Poundstone's book with a lot of healthy skepticism.

But (hey) he could be right. So next time you enter into a price negotiation, try his "anchoring" strategy: be the first one to mention a price, set it "too high" if you're the seller, "too low" if you're the buyer. You won't get what you want, but what you get will be more in your favor. Allegedly.

Last Modified 2021-06-24 10:39 AM EDT