Year in Reflection 2018
Suppose I offer you a bet based on a coin toss: you win $150
if the coin lands on heads, but you lose $100 if the coin lands on tails. Will you take the bet? Think for a second before reading on.
If you think this through objectively, of course you should
take the bet. There’s a 50% chance you
will win $150 and a 50% chance you will lose $100 – the “expected value” of taking
the bet is that you’ll be ahead by $25.
(Here’s the math: 0.50*150 + 0.50*(-100) = 75 – 50 = 25).
Yet the reality is that most people (maybe you too?) will
decline. Most people consider the hurt
of a $100 loss to be more severe than the pleasure of a $150 win – a phenomenon
behavioral economists call “loss aversion.” The pain from loss is greater than the
pleasure from gain. Many people wouldn’t
accept the bet I just offered unless there is at least a $200 potential gain
against the risk of a $100 loss.
I just finished reading Annie Duke’s bestselling book “Thinking in Bets: Making Smart Decisions When You Don’t Have All the Facts.” Ms. Duke, who left graduate school to become one of the world’s top poker players, argues that nearly all life’s decisions are bets. The word “bet” goes way beyond card games or casinos; the Miriam-Webster dictionary defines “bet” as
“a choice made by thinking about what will
probably happen”,“to risk losing (something) when you try to do
or achieve ...
Source: NIH Extramural Nexus - Category: Research Authors: Mike Lauer Tags: Open Mike 2018 Source Type: funding
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