Human perception of value and probability

Posted by stephen on Wednesday, 21st June, 2006 @ 23:09

Daniel Gilbert, a Professor of Psychology at Harvard, recently gave a presentation entitled "How to Do Precisely the Right Thing at All Possible Times" at this year's South By Southwest festival. It provides an incredibly enlightening, and surprising obvious and simple explanation of how, in general, humans attribute value and determine probability (in a non-scientific manner) and usually do so incredibly badly!

You can take a listen. (22.65Mb MP3)

It's a long listen, but I definitely recommend it if you're considering spending money on anything or are sat crouched under your table in case of terrorist attacks! Here's a little summary of a couple of the points that really stuck with me...

• You're at a supermarket checkout, having attempted to choose the shortest queue. Yet someone in the next line who joined *after* you is already paying and out before you've even got your goods on the line. This always seems to happen!
  Except no, it doesn't, it only happens every now and again. But the times you pass through without issue don't stick in your memory. Therefore it seems most probable to you that you'll end up in a queue that'll ultimately frustrate you, because those are the incidents you remember most clearly.
• There's a lottery to win £10,000. For some strange reason there are only 10 tickets being sold, and for only £1 each. What a great deal. You've got a 1/10 chance of winning 10 grand! Then you discover that the 9 other tickets were all bought by one person, George Smith.
  Apparently in this situation most people would decline purchasing the remaining ticket, feeling that the odds are stacked against them and the Mr Smith is bound to win. But the odds didn't change at all, it's still 1/10. The perception that it's not a fair game distorts reality.