Aug 7, 2020
On today’s behavioral economics
foundations episode we are going to be talking about the IKEA
effect as well as the effort heuristic. I’ve loved the IKEA effect
concept since the moment I heard its name. It is such a quirky
title, but so clear for what this concept is all
In its most basic form, we value
things that we put effort into more than things we don’t. I’ll talk
more about the details and nuances as we go through the episode and
there are many more ways to use this concept than assembling your
We take a look at ways the IKEA
effect plays out in our lives as well as our businesses. The
IKEA effect doesn’t just have to be used for product businesses.
The IKEA effect can play a huge role in change management.
Tune in to learn more about the IKEA effect and how it impacts our
lives and businesses.
- [00:58] In its most basic form, the IKEA Effect
is that we value things that we put effort into more than things we
- [03:52] The core of this concept is that when
people have an opportunity to build something themselves and when
they put some effort in, they will value that thing higher than
something they didn’t build.
- [04:30] Some studies have attributed this to
the pride felt when assembling something yourself, and that is part
of it, but it isn’t the whole story.
- [05:19] The endowment
effect is the phenomena in
our brains where simply owning something causes us to find more
worth in it than what other people see in it, or in its stated
- [06:47] It may seem like the IKEA effect is
merely an extension of the endowment effect, but studies have shown
they are different. Even when people built something and were told
they could not keep it, they still valued the item they made higher
than those made by someone else.
- [09:05] This phenomenon makes it clear why
people think their own artwork is worth more than people will pay
for it, or why they ask for a lot more money than their home is
worth if they put a lot of “sweat equity” into creating it. We tend
to think that our effort ties into the direct value and that
something we spent a lot of time on is worth more to everyone else
- [10:12] Humans use effort as a guide for value
even when we are not the ones putting in the work. This is known as
the effort heuristic, which has found that even when we don’t have
direct memory of the work in question (i.e. we didn’t do it
ourselves), we still connect effort and quality
- [12:25] Whichever painting or poem people were
told took more time to complete was the one they tended to like
more and they valued it higher.
- [14:17] When the image being shown is of high
resolution, you can see the quality, and so that can impact the
valuation in addition to the number of hours you were told it took
- [15:22] When the quality can’t be easily
determined by our eyes, other pieces of information will guide the
brain’s determination of value.
- [17:26] The IKEA effect says that we value
things higher when we put effort into them. So, the effort
heuristic is present within our own IKEA effects, but when someone
else is putting in the work, it can trigger the effort heuristic
without being the IKEA effect.
- [18:08] When you are exchanging dollars for
hours, it reduces the effort to each 60-minute
- [21:02] When you are putting a value on your
time, it is really hard to get individual hours to reflect your
expertise and the true effort you have put into your career. The
value you provide is often in the time you are saving
them. Knowing what that is worth is a better way to find what to charge
than your total number of hours put in.
- [21:52] The other side of the IKEA effect is
knowing that people actually like to put in effort for
- [23:37] Humans aren’t the only animals who
value putting in the effort--birds and rats do this too. We are
motivated by feeling like we did something and we earned it
(whatever “it” is).
- [25:28] It is important that you don’t make it
too hard so that the project doesn’t get completed.
- [26:40] The value of the IKEA effect was
completely wiped away once they took the thing apart.
- [27:37] People get to feel like they are smart
and savvy shoppers and get the benefit of feeling like they did
something in assembling their table or bunk beds for the kids or
- [28:09] The research shows it is best to give a
little creativity, along with a lot of guidance, to ensure people
will complete the task, be more satisfied with the end result, and
get the full benefits of the IKEA effect.
- [29:33] Using the IKEA Effect
for Change Management: When you are looking to introduce a change and
just throw it at someone, they have no ownership of it. They didn’t
put any effort in so they don’t value it that much. When they are
able to help build it, it can make all the difference in whether
they are a productive member of the team or a big hindrance you
need to help the team get over.
- [31:08] If there are people on your team who
are particularly resistant to change, look for opportunities to
include them as early as possible in the next project. Though be
warned, if you ask them and don’t include their feedback it could
actually end up worse than if you don’t ask at
- [33:29] It can help your employees look for
opportunities to help bring on change themselves, and be more open
to changes when they come. Fostering a culture of change doesn’t
have to be difficult, and the IKEA effect can make it a little
- [33:58] A glowing testimonial from a recent
attendee of a virtual training on change management I gave to a
Fortune 10 company. Looking for a webinar, training, or consulting?
- [35:22] If you enjoyed this episode on the IKEA
effect and learned something please let me know!
Don’t Forget Your FREE IKEA Effect
Thanks for listening. Don’t
forget to subscribe on
Android. If you like
what you heard, please leave a
review on iTunes
and share what you liked about the
More from The Brainy Business:
Want to join the Twitter game?:
Articles and Past Episodes: