Would you take this bet?

Look at all these nit ass donkeys

Jezus christ...

Oh c'mon, many people don't know where Germany is and you want them to know how valuable is winning 12$ vs losing 10$ on a coin toss? That's like quantum physics to them.

Also i gotta add: if the 20 dollar bill is red, it's common sense not to want it - it's a fake.


On a serious note: just cause there is a camera, doesn't mean that people think he's legit and it's not some sort of a con. ( at least at first, and they are not gonna say that bluntly, so they say: "i don't know, i just feel like that" etc. )

It's much more than what you guys might think it is, it's not only the risk reward, there are a lot of other factors coming into play as well.

I can elaborate a little further for anyone interested, but I might not explain it all that well.

Our brain has a lot of habits, defaults that aren't always good for us, like "safety" measures, I think the right term for it is fallacies, but I'm not 100% sure if that's what it's called. Some of the major ones that come into play in this scenario;

Like status quo fallacy, we always prefer, and like "the status quo" over alternatives which outcome we're not entirely certain of. It can be something as silly as, a friend comes over, gives everyone a different chocolate bar, and then 5 min later, says they can switch bars with each other. People are pretty inclined to keep the one they got, and put much higher value on it, since "it's theirs".

Same when it comes to selling things with affectionate value, or even small stuff like. You're pretty comfortable, get invitation to come do something that might not be up your alley, more inclined to maintain status quo (and stay at home).

Also our brain in general don't understand or work well with numbers, unless we've learned the concepts. We only think we understand numbers, statistics well, but we don't, we think we do because our brain's pattern recognition, is maybe the strongest attribute (or one of the), it has.

Ahh, I know there's a few more factor coming into play, but as I started writing I forgot lol, there's a few more than comes into play, but I can't remember lol, sorry.

Oh, this isn't "facts" just my own thoughts. I think when people say something out loud, even though the scenario changes a little, people more inclined to stick with what they just said, because they said it. Kinda like when you see people come into arguments, even when proven wrong, people stick to their guns!

Also some might think there's some "trick to it"!


Another thing that i think might come into play, like, when we're talking to new people, strangers, this guy even has a camera filming, we're not thinking that well. Brain mostly using default operating system, which is intuition. And then people don't really think about the spots given, more just going with "what feels" right.

I should really unpause, and see what happens, im just 1min 30 sec in lol

Ohh, and another thing that popped into mind (still have it paused lol, im cooking).

I don't remember exactly, but saw a graph ones of the emotional distress when something "bad" happens compared to something good, and I think it's over twice as "negative" when bad stuff happens, than positive. Like, if ur playing sc2, and ur winning 55%, still feels like we're doing quite shit. Even though we're doing better than average. So to "feel great" we'd have to be winning like 67% of the time or so, to feel pretty good or neutral about it.

Cool, read a chapter about this in 'Thinking Fast, Thinking Slow' by Daniel Kahnenman just yesterday.

Research shows people the threshold point where people take the bet is somewhere between 1.5x and 2.5x the amount they risk.

It might not seem logical, but from a evolutionary standpoint it makes sense - risk averse individuals were more likely to survive.

It's interesting because every person here would accept the bet based on our experience and general understanding of value. However the emotion that is explained as the reason for why these people decline is something that I think every/most poker players share, which is that losses are experienced stronger than winnings. When winning in poker I saw it as standard and it didn't make me feel particularly positive/different. Losing however definitely was associated with negative emotion. Of course this is associated also with the fact that our expected value of playing is positive to begin with. Additionally I imagine they just edited out the people who just said yes to $12 vs $10.

^ I think they just prob assume ppl who are offering +EV coin flips are just like ppl who rig those 3-card monty games and they expect to lose.

On May 01 2015 13:02 RaiNKhAN wrote: ^ I think they just prob assume ppl who are offering +EV coin flips are just like ppl who rig those 3-card monty games and they expect to lose.

They could always just ask to look at the flipping coin/ask to flip it themselves?

just like people look at those 3 cards :D

For those who are wondering, I convinced my interviewees that the bet was not a scam: they could inspect the coin, flip it themselves, use their own coin etc. I explained that the experiment was intended to explore their approach to risk. It was fear of losing $10, not distrust, that led them to decline the bet.

couple concepts from behavioral psychology at work here:
1) endowment effect.
"I don't want to risk to lose MY $10" - like that chick said.
2) Prospect Theory



From the POV of standard economic view, you'd be able to argue you want to allocate some value on the risk associated, and diminishing value of money. No way it's not worth 20% or 50% added value though for such a small amount, nor that the utility gained drops so drastically between -10 and +15. these people (same as vast majority of people for that matter) simply don't act in line with expected utility theory.


There's often a similar case in game shows like e.g. Deal or No Deal where, pure $EV speaking he made the correct decision



But, behavioral economics aside, taking the deal could be the highest EV even from expected utility's point of view, because of diminishing marginal utility of money (e.g. people above certain level of income don't report significantly higher happiness no matter how much more money they get) it could be argued the $84k premium could be worth it in that case

On May 01 2015 12:14 tomson wrote: Cool, read a chapter about this in 'Thinking Fast, Thinking Slow' by Daniel Kahnenman just yesterday. Research shows people the threshold point where people take the bet is somewhere between 1.5x and 2.5x the amount they risk. It might not seem logical, but from a evolutionary standpoint it makes sense - risk averse individuals were more likely to survive.

It's what Marius's posts are based on as well. That book is so genius and hard to perceive fully it hurts my brain.
There are lots of factors that come into play in this situation, but mainly it's the nature of people not being intuitive statisticians and safety.
Plus I think being risk averse and not taking chances when your edge is small is one thing, but not taking chances where you have a huge edge is pretty bad

Deal & No Deal example is kind of off topic, since its about life changing money and while you essentially lose value its not a situation that will happen ever again so taking the deal eventho its about -20% under EV is obviously justified

@Marius about good/bad situations It's just that its in our nature to remember the bad things in the short term, while we remember the good ones long term, we're programmed so randomly, wouldn't be surprised if the ratio is 2:1 good/bad for short term to feel happy though

I can't remember to well, I read the book when it got released, but I was pretty sick back then, and I'm not good enough in English to read it at a fast pace, had to look up so many words. But I think it's from that book as well, how our memory is sto..... Hmm, wait a minute.... No I think it's another one, i think what I'm about to say is from Moonwalking with Einstein, yeah, that's it.

Anyway, our brain doesn't store memories like most people think it does, it neglects, and shooes away everything that's normal, mundane, day to day, and stores highlights, and lows, most of the thing in the middle (most of what happens to us), is lost.

Like, imagine you went on holiday, it was really shit, 2,5 weeks of pure shit, bad weather, diarrhea, you name it. But then, when it's 2 days left, you randomly stumble into a gorgeous blonde, and she just happen to have a life long dream of having sex with a man from Bulgaria!!

Now when you go home, a little time passes, you'll have "amazing" memories from the holiday, even though just 1-2 days were great.


Also like, if you go to get ur rectum checked, even though most of the day was really nice, but if it was super painful, like 2 min of pain around 7,8, then back to normal, then most of the day pretty damn nice.

In the future, the day will be "terrible anus pain".

Ok, you get the gist of it xD

Oh, ps, I don't think we remember when things happened either, we remember last time we were remembering.

Yeah that's why there no such thing as realism, the world's way too complex and we make sense of it using our unconscious ("irrational" brain
Also why 99% of arguments make no sense, both people are right from their understanding of reality and their selective memory

Also why when you fuck up with a girl you just pull away wait until she comes back - means she forgot the mundane fuck ups you did that everyone does and only the exciting highs are left



People just don't and shouldn't behave in accordance to standard economic models, it doesn't mean we are stupid, we just are that way because that's what got us here in the first place, evolutionary speaking - that's why the experiment is not surprising, and similar ones have been replicated hundreds of times with significant samples. Hell I've even tested the Endowment effect in my undergraduate dissertation

Brings back memories though :D
Speaking of not maximizing EV because of evolutionary coding creating frames, selective memory and prejudices:
http://www.liquidpoker.net/poker-forum/963929/Is_this_wrong_.html

omg had to stop watching around the 3:30 mark because I was starting to rage.

But should he have switched cases?

edit: The more I think about it the more I come to the conclusion that you had a 1/26 chance of picking both the $1 and $1mil case at the start? So switching would be irrelevant. But because there's 7 $1mil cases in that special episode (I think), would it be more +ev to switch?

Intuitively I'd say yes, but I can't rationally explain it and i don't think Monty Hall experiment is valid in this case

On May 01 2015 11:28 MadeInPolanD wrote: On a serious note: just cause there is a camera, doesn't mean that people think he's legit and it's not some sort of a con. ( at least at first, and they are not gonna say that bluntly, so they say: "i don't know, i just feel like that" etc. )

This

If some random dude on the street offered me to flip 10$ for 12$ i would tell him to fuck off thinking hes a scammer.

I don't get this Trav - the probability's still the same.

It's like in poker on the turn 6max to river a specific card on the river when you are on T, there's 36 cards in the deck left, but the probability to hit a specific one is still out of 46 cards - you just don't know what people folded.

guess in poker you can weighted discount some cards by guessing + weighting preflop ranges of ppl that folded+villain's range (i.e. OTT with a low fd in BvB scenario villain has likely a lot of fd combos in his range as well, so you can safely guess that there will be on average less that "9 cards" left if you know what I mean) , but in this case it's completely random since people never had the information in the first place. Switching should be completely irrelevant.

On May 01 2015 21:11 Floofy wrote: Show nested quote + On May 01 2015 11:28 MadeInPolanD wrote: On a serious note: just cause there is a camera, doesn't mean that people think he's legit and it's not some sort of a con. ( at least at first, and they are not gonna say that bluntly, so they say: "i don't know, i just feel like that" etc. ) This If some random dude on the street offered me to flip 10$ for 12$ i would tell him to fuck off thinking hes a scammer.

This has been replicated under academic conditions, adjusted for error etc. not sure if exactly $10 and $12 but exactly the same principle with the same result.

Thank god the world is full of these people (but we're wired to be more short term oriented, so we can't feel as much sadness for ourselves as we should watching the video)

On May 01 2015 21:10 Spitfiree wrote: Intuitively I'd say yes, but I can't rationally explain it and i don't think Monty Hall experiment is valid in this case

Let's say theres 8 cases, with 7 1M and 1 1$

If you pick one, then the guys of the show remove 6 cases which all contains 1M, its pretty obvious you should NOT be switching. You have 7/8 to have 1M.

But now, this scenario is actually different. When you open one case, the probability that your case is the 1$ actually INCREASES if you open a 1M case. Once you opened 6 cases, your case is now 50% to be 1$.

That's why I said switching should be completely irrelevant Lemon . But I guess I see your point, even with more $1mil cases, it's irrelevant. I just think that it's pretty clear the monty hall problem doesn't apply here. The logic for that is you have 1/26 chance of picking the $1mil case. So with 2 cases left. $1mil and $1. You have a 25/26 chance you didn't pick the $1mil case so you should switch. BUT, the logic can be reversed because having a goal of $1mil in mind doesn't change the fact that you started with 1/26 to pick ANY case at the start. So even with 2 cases left both being $1 and $1mil the probability of having the $1 and $1mil case is the same so switching is irrelevant. I think I might be over explaining this as Im drunk. But whatever. Maybe Im not even making sense.

Also pure $ev like you said is 500k, and they offered him 400k so taking no deal is +ev but you're never going to be in the situation agian probably so it might actually be +ev to take the 400k deal and lose 100k in equity?

I'd snap take the 415k in that situation because it's such a large amount of money for me and although our EV is 500k it's not like I can expect to ever be in that situation again i.e. I can't repeat it. I could do a lot with 415k and while a million would be sick, $1 would hurt and taking 85k off is like saying your flipping between $830k and $1 and you'll run exactly on EV. Would flip $10 with 0 edge happily but I think there I'd pretend I wouldn't to get a more +ev flip. It's 0EV and basically entertainment.

I would be skeptical if some stranger on the street with a camera following him offered me this kind of game, esp when he starts offering better odds. Feels very much like a husstle

On May 02 2015 04:59 Trav94 wrote: That's why I said switching should be completely irrelevant Lemon . But I guess I see your point, even with more $1mil cases, it's irrelevant. I just think that it's pretty clear the monty hall problem doesn't apply here. The logic for that is you have 1/26 chance of picking the $1mil case. So with 2 cases left. $1mil and $1. You have a 25/26 chance you didn't pick the $1mil case so you should switch. BUT, the logic can be reversed because having a goal of $1mil in mind doesn't change the fact that you started with 1/26 to pick ANY case at the start. So even with 2 cases left both being $1 and $1mil the probability of having the $1 and $1mil case is the same so switching is irrelevant. I think I might be over explaining this as Im drunk. But whatever. Maybe Im not even making sense. Also pure $ev like you said is 500k, and they offered him 400k so taking no deal is +ev but you're never going to be in the situation agian probably so it might actually be +ev to take the 400k deal and lose 100k in equity?

$ =/= $ in that case

basically the larger the amount compared to your income, the less is the last dollar worth the first one in terms of utility you get out of it.

It's called diminishing marginal diminishing utility, what ggplz was explaining

On May 02 2015 13:37 TalentedTom wrote: I would be skeptical if some stranger on the street with a camera following him offered me this kind of game, esp when he starts offering better odds. Feels very much like a husstle

Fair point but as he explained (tomson's post#12) you could rest assured it was a legit coin toss. I doubt he'd mind if you insisted on your own coin or something either If he does, then yea... run.

On May 01 2015 21:19 LemOn[5thF] wrote: This has been replicated under academic conditions, adjusted for error etc. not sure if exactly $10 and $12 but exactly the same principle with the same result.

Yup, and if anyone is a broke college student at the moment I highly recommend looking into participating in this type of study. Its just straight extra cash for playing economic "games", and they'll probably pay you even if you don't bet.

from the comments on youtube:

+Veritasium Is there any reason why the people you interview of the course of many of your videos tend to be less intelligent ?

rofl

On May 01 2015 12:19 Nazgul wrote: It's interesting because every person here would accept the bet based on our experience and general understanding of value. However the emotion that is explained as the reason for why these people decline is something that I think every/most poker players share, which is that losses are experienced stronger than winnings. When winning in poker I saw it as standard and it didn't make me feel particularly positive/different. Losing however definitely was associated with negative emotion. Of course this is associated also with the fact that our expected value of playing is positive to begin with. Additionally I imagine they just edited out the people who just said yes to $12 vs $10.

very well said. agree

I would suspect some clever scam too

For those who are wondering, I convinced my interviewees that the bet was not a scam: they could inspect the coin, flip it themselves, use their own coin etc. I explained that the experiment was intended to explore their approach to risk. It was fear of losing $10, not distrust, that led them to decline the bet.

Great psychological experiment, explaining exactly what you are measuring :D

On May 03 2015 07:29 MadeInPolanD wrote: Show nested quote + For those who are wondering, I convinced my interviewees that the bet was not a scam: they could inspect the coin, flip it themselves, use their own coin etc. I explained that the experiment was intended to explore their approach to risk. It was fear of losing $10, not distrust, that led them to decline the bet. Great psychological experiment, explaining exactly what you are measuring :D

If you think about it as an economics experiment, then explaining the experiment to them in detail, including telling that you are exploring their approach to risk, may be required (depending on what you are trying to measure).