AMBIGUITY AVERSION

FreeImages.com/Abdulaziz Almansour

YOUR LIZARD BRAIN, AND PICKING FROM THE SUCKER’S BOX.

Let’s start with a thought experiment, quickly. Visualize two boxes.

In box A there are 50 red balls and 50 black balls (100 in total). In Box B there are 100 balls, however, the % of red balls vs black balls is unknown (but assume that every ratio is as likely as the other). I want you to pick a red ball (with your eyes closed, of course) from either Box A or Box B. Which box will you pick from?

This thought experiment is a modified version of the Ellsberg Paradox experiment carried out in the 60s, a classic evidence for ambiguity aversion.

You see, if you from pick Box A. You might just be human after all. Research has shown (incessantly) an overwhelming choice of box A. We have a preference for risk (probability known) over uncertainty (probability unknown). In this context, a preference for Box A over Box B. That’s how we are ‘wired’ evolutionary.

So, what makes this a paradox? Without getting into the esoteric probabilistic jargons, here is why:

The probability that you pick a red ball from Box A is 0.5 (1/2) right? Good. Straight forward

How about box B? You see ... The key word is, every ratio is as likely as the other.

And this simply means the following combinations are possible for box B:

1red balls and 99 black balls is as likely as 2 red balls and 98 black balls;

2red balls and 98black balls is as likely as 3 red balls and 97 black balls

...                             

98red balls and 2black balls is as likely 99red balls and 1 black balls

... blah blah blah (you get the point)

With this simple analysis it’s obvious that the probability of picking a red ball in both boxes is identical (i.e 0.5) as such, we should pick from box A as often as from box B, but that does not happen in reality.

We continually pick from box A because we are averse to ambiguity. A literary interpretation will be “Better the devil you know than the devil you don't know”.

Scientists have identified the portion of the brain that allow for this bias, it’s the lizard brain (for clarity it’s the portion of your brain you share with lizards) Imbued with fear, picking from box A can’t be easier.

This explains why we settle for less and aim low. Think about it: we are literally giving up a chance of picking a red ball from a box B that looks like this {100 red balls; 0 black balls} for box A with just 50 red balls. It’s probably the fastest way to be a sucker. (Sucker’s box will therefore be a perfect memento for box A)

And we all do this:

Each time you decide to stick to your low-paying-boring job instead of starting the business you had constantly dreamt about, you are picking from the sucker’s box.

Biases are at the core of humanity, and recognizing various biases (and managing to escape it) leads the path to a better decision. Ambiguity aversion is a cognitive bias, that is of course heuristic driven.

...

(To save you the psychological ‘rendition’), just remember, the next time you are settling for less: you are picking from the sucker’s box.

FALLIBILITY OF YOUR RISK ASSESSMENT

FreeImages.com/thomas gray

When it comes to risk assessment, it turns out that our rationality is often compromised – seriously.

This formula (attributed to Peter Sandman): Risk = Hazard + Outrage will expose most (if not all) of our risk irrationality.

Research prior the 80s (I think) found the correlation between the hazard of a risk and upsetting nature of the risk to be incredibly low, on average the correlation was about 0.2 and with a percentage of variance – 0.04 ... blah blah blah

In a more colloquial term, the conclusion was: the risk that kill people is very different from the risk that get them really perturbed.

In some other words: when outrage is high, even though hazard is low, we overestimate risk. Same way, when outrage is low, and hazard is high, we underestimate risk.

Few examples to clarify:   

If you have an option to donate to a charity that: a) Caters for cardiac patients or b) Caters for terrorism victims. I assume that there will be an overwhelming skew of funds directed to the terrorism victims. So the question is – why?

Let’s answer with a question. How will you feel when you hear the news of ‘someone’ who dies of heart disease versus a terrorist attack? Which one get you most upset? That’s the outrage factor in play.

The less the familiar, the more the outrage; likewise the more the familiar, the lower the outrage (The probability that someone dies of heart disease down your street is way too high, compare to that of terrorist attack. [With very few exceptions – the northeastern part of my home country will be a notorious exception]

It turns out cardiovascular disease is the top cause of death worldwide and the number of terrorism death victims terribly pales in comparison. (Just google)

I covered a United Nations Foundation event on clean cook stove last year summerat Washington DC as a science journalist, and I found out that “there are about 4.3 million deaths annually as a result of exposure to smoke from traditional cook stoves and open fire worldwide, which implies that a life would be claimed by cook stove smoke in 8 seconds. This mortality rate surpasses the death from malaria, HIV and tuberculosis combined” Isn’t that astounding!

On pure statistics ground, your money should go to a cardiac center or a clean cookstove non-profit. However, this argument might be faulted from a moralistic point of view, but never with numbers.

You feel more in control while driving, but in flight you are scared off (after all, you don’t even have an idea what the pilot looks like) The outrage is high, consequently perceived risk shoots up. Even though the data shows that more people die of car accidents than plane crashes.

Another question: do you really bother about global warming? or does global warming bothers you? Be brutally honest. My best guess is No(for both questions); why? Because outrage goes up when you think something bad is going to happen to you (I guess we are hardwired to be selfish); and when you think is going to happen now rather than later, it’s even worse. In the case of global warming, outrage is low even though hazard is high, so to ‘most of us’ there isn’t any risk.

This is generally called the perception gap: The distance between what the facts say and how much fear you feel. The bigger the gap the messier it could get.

To wrap this up I think your money should go to terrorism victims charities just as for cardiac patients (terrorist threat should be diminished), workout to prevent heart disease (at least do you best), be careful when you drive, remember the data on your next flight (Visualize a cool handsome (or beautiful) pilot if that helps) and yes Global warming is real! 

ON JUDGEMENT: “IT TAKES TWO TO TANGO”

Kindly consider this: 2+2.

I can bet what comes to your mind. Four right?

Question: Did you think before the number [four] came to mind? No, I guess. Guess what?: that’s your unconscious in action and Nobel prize winner Daniel Kahnemen refer to this as the system 1 (fast thinking).

However, if I ask you to consider this: 754*53. You probably know how to handle this but you have to go through your systems 2 (slow thinking) and dish me the answer.

If there is anything I learnt from Blink by Malcom Gladwell, it’s the ability to trust my instinctive judgement better. Some people tend to trust their conscious decision and are completely uneasy with the system 1, it turns out that there are several occasions where the unconscious judgement is far superior to the rational judgement.

Have you ever spotted a lady (or a guy) and the within a split second you knew “she (he) was just right” Have you considered why? When we meet someone, we don’t run through the list of desired qualities [our conscious mind comes up with], on the other hand, the system 1 takes over. In fact, a body of research has shown that – for the most part – It turns out that: “our conscious explanations regarding our ideal romantic partner have very little connection to whom we really end up liking”.

Or the story of a firefighter who ‘felt’ something was wrong and told his co-workers to evacuate the building. The next minute the whole building collapsed. He couldn’t give any reason when he made that decision (thanks to system 1!) only to invent rational explanations for the decision later: he gave some weird description of the dynamics of the fire that wasn’t just right.

It seems the unconscious come to our aid when we don’t have luxury of time (and vice versa)

Also, our impressions are generated by our experiences and of course – social learning.

You are probably not a firefighter. If you assume the position of the firefighter above, how will you have fared? Probably, pretty bad. Why? Your unconscious wouldn’t be able to help, because your repository of experience as a firefighter is completely void.

...

So which is the best? I do think, for the most part, the ideal best-decison-maker-in-the-world will not exclude the intuitive judgement nor its rational counterpart. Afterall “It takes two to tango”