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

by Michael Lewis

One day, toward the end of 1974, as they looked over the gambles they had put to their subjects, Amos asked, “What if we flipped the signs?” Till that point, the gambles had all involved choices between gains. Would you rather have $500 for sure or a 50-50 shot at $1,000? Now Amos asked, “What about losses?” As in: Which of the following do you prefer? Gift A: A lottery ticket that offers a 50 percent chance of losing $1,000 Gift B: A certain loss of $500 It was instantly obvious to them that if you stuck minus signs in front of all these hypothetical gambles and asked people to reconsider them, they behaved very differently than they had when faced with nothing but possible gains. “It was a eureka moment,” said Danny. “We immediately felt like fools for not thinking of that question earlier.” When you gave a person a choice between a gift of $500 and a 50-50 shot at winning $1,000, he picked the sure thing. Give that same person a choice between losing $500 for sure and a 50-50 risk of losing $1,000, and he took the bet. He became a risk seeker.