The Psychology in Figuring Out Odds

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How do we decide between purchasing a lottery ticket or using the money for another purpose? Dan Gilbert is a Harvard psychologist that discusses how we tend to make decisions and make errors when figuring out odds. He begins by referencing a Swiss mathematician named, Daniel Bernoulli that came up with a formula for calculating how people should behave by multiplying the odds of what we gain by the value of what we get out of it. The problem with the calculation is that it is dependent on what a human values, which invites room for error. Gilbert takes a psychological view on this and breaks down the ways we make errors in judgment. He says we typically assume that the odds of something are greater because they are easier to remember. Things that are memorable and easy to retrieve that stand out are things that aren’t common at all. We see news stories that follow subject matter that make headlines because they aren’t an everyday occurrence. This can be compared to playing the lotto in that we only hear about the winners so we do not calculate the millions of losers when we decide to play. If we were to see a 30 second clip showing each loser it would take 9 years of our time. We wouldn't assume that it is more common to lose and therefore our odds of winning our slim to none. When it is easier to see the real facts in terms of odds its more likely people would not play. Even though it seems to be tricky estimating odds, trying to estimate value is even worse. Figuring out the value in things is determined in many different ways and similar to the errors in odds when our human behavior causes diversions. Figuring out the value in something should include a variation of corresponding factors. Instead of comparing the value to other similar items or situations we quickly compare to what we already are used to doing or paying in the past. What
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