The Undoing Project: A Friendship that Changed the World (181 POCHE)

by Michael Lewis

Now they saw that people reacted differently to different degrees of uncertainty. When you gave them one bet with a 90 percent chance of working out and another with a 10 percent chance of working out, they did not behave as if the first was nine times as likely to work out as the second. They made some internal adjustment, and acted as if a 90 percent chance was actually slightly less than a 90 percent chance, and a 10 percent chance was slightly more than a 10 percent chance. They responded to probabilities not just with reason but with emotion. Whatever that emotion was, it became stronger as the odds became more remote. If you told them that there was a one-in-a-billion chance that they’d win or lose a bunch of money, they behaved as if the odds were not one in a billion but one in ten thousand. They feared a one-in-a-billion chance of loss more than they should and attached more hope to a one-in-a-billion chance of gain than they should. People’s emotional response to extremely long odds led them to reverse their usual taste for risk, and to become risk seeking when pursuing a long-shot gain and risk avoiding when faced with the extremely remote possibility of loss.