Why we make bad decisions | Dan Gilbert
TED・33 minutes read
People struggle with accurate estimation of odds and value, impacting decision-making in areas like gambling, lottery purchases, and job choices. Comparing past experiences affects how people assign value, leading to irrational decisions and influencing purchasing choices.
Insights
- People's decisions are often skewed by inaccurate estimations of odds and value, leading to errors in judgment, such as overestimating dramatic events and underestimating common causes of harm.
- Comparisons with past experiences heavily influence decision-making, affecting how individuals perceive value, make choices, and prioritize immediate rewards over delayed outcomes, highlighting the evolutionary roots of our decision-making processes and the need for informed, rational choices.
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Recent questions
How does the mind perceive probability?
The mind tends to recall more common occurrences, which can skew perceptions of probability. For example, people may overestimate the likelihood of dramatic events like tornadoes while underestimating more common causes like drowning. This tendency affects decision-making by influencing how individuals assess risks and make choices based on these skewed perceptions.
Why do people struggle with estimating odds accurately?
People often struggle with estimating odds accurately due to the mind's tendency to recall more common occurrences, leading to skewed perceptions of probability. This can result in errors in decision-making, such as overestimating the likelihood of dramatic events and underestimating more common causes. These inaccuracies in assessing risks can impact the choices individuals make in various situations.
How does comparison influence decision-making?
Comparison plays a significant role in influencing decision-making processes. People often make decisions based on comparing current situations to past experiences, which can lead to irrational choices. Retailers strategically use comparison to influence purchasing decisions by placing items strategically and manipulating perceived value. Understanding the impact of comparison is crucial for making informed decisions and avoiding flawed decision-making processes.
Why do people struggle with making rational decisions?
People's inability to accurately estimate value and odds is attributed to evolutionary brain development. Our brains are not well-suited for the modern world, leading to poor decision-making. The evolutionary inclination to fear new threats more than familiar dangers, like terrorism, can result in irrational choices. Making rational decisions is crucial for our survival as a species, highlighting the importance of understanding the impact of comparisons and making informed choices.
How does anticipation affect decision-making?
Anticipation plays a significant role in decision-making processes, influencing how individuals assess risks and make choices. For example, buying lottery tickets is not solely about winning but also about the anticipation and serotonin release it provides. Understanding the impact of anticipation on decision-making can help persuade people to act on long-term issues by vividly imagining the future, equalizing decision-making between near and far future scenarios. Anticipation can shape how individuals perceive value and make choices based on these future expectations.
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Summary
00:00
"Flawed Decision-Making: Past Influences on Value"
- In 1738, Dutch polymath Daniel Bernoulli introduced a concept that the expected value of an action is the product of the odds of gaining something and the value of that gain.
- Bernoulli's equation simplifies decision-making by estimating the odds and value of actions to determine behavior accurately.
- People often struggle to estimate odds accurately, leading to errors in decision-making, such as in gambling where Americans lose more money than on all other entertainment combined.
- The mind's tendency to recall more common occurrences, like dogs on leashes over pigs, can skew perceptions of probability, affecting decision-making.
- Americans frequently overestimate the likelihood of dramatic events like tornadoes and fireworks deaths while underestimating more common causes like drowning and asthma.
- The lottery serves as an example of people's inability to compute probabilities accurately, with economists dubbing it a "stupidity tax" due to the low odds of winning.
- People's perception of value is often influenced by past experiences, leading to errors like preferring a job with declining wages over one with increasing wages despite lower overall pay.
- Comparing prices to past costs can lead to irrational decisions, as seen in scenarios where a higher-priced item on sale is perceived as a better deal than a lower-priced item that increased in cost.
- People's decisions are influenced by comparing current situations to past experiences, as shown in examples like reluctance to repurchase a lost theater ticket at a higher price due to the initial cost.
- Behavioral economists and psychologists highlight the impact of comparing with the past on people's ability to assign value accurately, leading to flawed decision-making processes.
12:41
"Comparisons Influence Decisions and Value Perception"
- Comparison changes how we evaluate things; retailers use this to influence purchasing decisions.
- Retailers strategically place items to influence perceived value; middle-priced items are often chosen.
- People's enjoyment of items can be influenced by comparisons; predictions don't always match actual experiences.
- People make decisions based on comparisons, which can lead to irrational choices.
- People struggle with decisions involving time differences; they often prefer immediate rewards over delayed ones.
- Changing the timing of rewards can alter people's preferences, showing the impact of comparisons on decision-making.
- People's inability to accurately estimate value and odds is due to evolutionary brain development.
- Our brains are not suited for the modern world, leading to poor decision-making.
- The ability to make rational decisions is crucial for our survival as a species.
- Understanding the impact of comparisons and making informed decisions is essential for our future well-being.
25:33
Media amplifies terrorism, fear is irrational.
- Terrorism is often an outsized response, with the media playing a significant role in amplifying its impact.
- Israel's response to terrorism involves continuing with daily life events like weddings to not let terrorists win.
- The fear of terrorism is often irrational, with the anticipation of future attacks causing more distress than the actual threat.
- Poverty, despite causing more deaths, does not receive the same level of attention or concern as terrorism.
- Evolutionarily, humans are inclined to fear new and novel threats, like terrorist attacks, more than familiar dangers.
- Buying lottery tickets is not solely about winning but also about the anticipation and serotonin release it provides.
- To persuade people to act on long-term issues like aging, vividly imagining the future can help equalize decision-making between near and far future scenarios.
