Humans are irrational – here’s why your business should be too

If you’re a car rental company in bankruptcy, would buying 100,000 Teslas make any sense? Anyone would find it to be completely irrational and totally reckless. Yet Hertz made this decision as part of its bigger vision, which in turn led to a remarkable turnaround for the company in just over a year.

Like something straight out of a science fiction movie, Hertz now owns the largest fleet of autonomous vehicles. Thanks to a $4.2bn investment, Hertz has managed to propel itself ahead of the pack in a race to transform the car rental industry.

Hertz’s recent move shows that decisions that may seem irrational on the surface can often pay off. So, why do the rest of us judge irrationality as a flaw in human behavior? Irrationality in our professional lives is often exactly what’s needed to unlock the next million-dollar idea.

To be irrational is to be human

Running your business on rationality alone assumes that the people you serve are also rational. Humans make tens of thousands of decisions each day – most of which are not driven by logic at all. It’s our gut instinct that gives us the ability to quickly assess how we feel about the many choices that cross our paths.

That’s not to say rational considerations such as affordability don’t matter. For example, if someone needs a pair of shoes, they might select the $24.99 pair over the $25.99 one. It’s only a dollar less, but they could rationalize cost savings as the motivator. What about choosing a pair of shoes priced at $100 more? Emotion becomes the motivating factor in making that purchase. This is where behavioral science and psychology shed some light.

The four fundamental human needs – belonging, appeal, security and exploration – are a helpful lens for interpreting the motivation behind certain behaviors. When seen through this perspective, splurging $100+ on a pair of shoes starts to make sense; it just follows a different set of motivations. For example, this pair of shoes might unlock a consumer’s need to be a part of a community (belonging) or improve their confidence (appeal). Perhaps they find security in paying a little more for a brand they trust (security). Maybe they’re drawn to an innovative design that promises to boost performance (exploration). This is where an otherwise thrifty customer might be tempted to replace a functional need with a pair of high-end kicks.

Humans simply are not rational beings, so it makes little sense to appeal to consumers through rational means alone. It takes tapping into unconscious and emotional needs – irrational needs – to change behavior and benefit brands. By embracing irrational thinking, we expand what is possible in the process of designing products, services and experiences for our customers and employees.

Irrationality belongs in business – especially during a recession

Some of today’s most successful brands were built on once irrational concepts. And in fact, we’ve seen how times of uncertainty can provide the best opportunity to take that calculated leap. Airbnb is one such success story.

During the Great Recession of 2008, the brand got its start by tactically driving consumers to do something we’ve all grown up being told not to – enter a stranger’s home. Since then, Airbnb has not only been successful in effectively changing the industry and our cities, but also consumer minds and habits.

Behavioral science and psychology help brands, such as Airbnb and Hertz, decode ‘irrational’ consumer behaviors and provide context for the human experience: why we say one thing and do another is irrational, but when applied to business, it expands innovative thinking.

Here’s a formula for escaping this rut and bringing structure to the process:

• See the world devoid of constants. Get into the required headspace for irrational thinking. Set aside all assumptions about ‘absolute truths’ and give yourself room to play in a world without limits

• Create an irrational vision statement. Create a vision to be your North Star. Identify your role and purpose and what you want to achieve in this ideal and limitless world. If a decision doesn’t move you in the desired direction, then don’t do it

• Stay the course with one-degree decisions. This is how you complete the equation, taking the small steps that will get you closer to making your irrational vision a reality

Returning to the example of Airbnb, we could imagine a world where it’s possible for people to truly feel at home everywhere. Through this perspective, we can see how Airbnb’s vision of belonging was born. It’s simple, compelling and deliciously irrational (you can’t really belong everywhere, can you?). But it comes to life through a series of one-degree decisions: services and features executed through design and technology that deliver on one of the most fundamental of human needs – community.

Reaping the benefits of irrationality will require more than an exercise in creative thinking. Brands need to commit to embracing irrationality before they have proof of what can be achieved. When brands move past the status quo and champion deep human understanding, they’ll find themselves among the most influential companies of tomorrow.

Collette Eccleston, senior vice-president, behavioral science, and Ben Gaddis, executive vice-president, digital products and experience at Material.

For more, sign up for The Drum’s daily US newsletter here.