The full text is about 2500 words, and it will take about 7 minutes to read.

Suppose you take part in a competition and win a prize, there are two kinds of rewards:

Rule number one: You must get 800 yuan.

The second type: 80% probability to get 1000 yuan, 20% probability to get nothing.

Which one would you choose? Why?

Suppose you fail in a competition, you need to choose one of the following two punishments:

Article 1: 800 yuan must pay compensation.

The second type: 80% probability loss 1000 yuan, 20% probability no loss.

What would you choose? Why?

0 1

Steady or risky?

Economists and psychologists have done an experiment on people's risk tolerance with the above two questions. Before the results are announced, let's calculate the expected values of the two methods.

In the first question, the expected value of the first scheme is +800(800 1), and the expected value of the second scheme is+800 (1000 0.8+0 * 0.2 = 800); For the second question, if calculated in the same way, it can be concluded that the expected values of the two schemes are the same, both of which are -800.

Let's go back to the last question.

Rule number one: You must get 800 yuan.

The second type: 80% probability to get 1000 yuan, 20% probability to get nothing.

In this question, I guess you chose the first one with the same topic as you.

Article 1: 800 yuan must pay compensation.

The second type: 80% probability loss 1000 yuan, 20% probability no loss.

And in the above questions, everyone chose the second plan. You should be one of them, right?

Why is this happening?

Maybe you think that the expectations of the two schemes are the same, and there is a certain randomness. Then I'll show you two more cases.

Case 1:

Option 1: You can definitely get 3000 yuan.

Option 2: 80% probability to get 4000 yuan, 20% probability to get nothing.

Case 2:

Option 1: it will definitely lose 3000 yuan.

Option 2: 80% probability of losing 4000 yuan, 20% probability of not losing.

Through calculation, you will find that in the case of 1, the expected return of scheme 1 is less than that of scheme 2 (+3000

You are naive if you think that people will rationally choose the scheme with more benefits and less losses. The experimental results show that people still "foolishly" let themselves lose money. Why is this happening?

Faced with certain and uncertain benefits, people are more inclined to choose certain benefits, although the benefits may be less; Faced with certain and uncertain losses, people are more inclined to take chances and choose uncertain losses, although the losses may be greater.

I use two story examples to try to make you understand these two sentences.

Suppose you are now in the ancient times of slash and burn, people are often hungry, and you are no exception. You are worried about your next meal now. Fortunately, you met a wishing bottle, which can help you realize your wish.

One is to let you eat a full meal at once, and the other is to let you eat two full meals with a 50% chance, but there is also a 50% chance that the wishing bottle will disappear immediately, which means nothing will be given to you. What would you choose?

What can be certain is the imprint left by our ancestors on our genes through "natural selection", which is difficult for us to get rid of.

Think about it. When you browse the web, if you see something like "get it right away …" or "reduce it …", your brain will instantly become sensitive and drive your little hand to click to see what it is.

Compared with those two attractive contents, "get it in five days …" or "get it with a 50% probability" are all dwarfed.

The second story is a bit cruel. Good luck won't be with you forever. As soon as you have eaten your fill, you will find yourself being stared at by the wild animals nearby. At stake, what can I do? You found a poisonous snake sleeping next to you. There are two roads in front of you at this time.

First, if you fight with the wild animals next to you, you will be injured. In the second way, you catch the snake next to you and throw it at the beast. You have an 80% chance of being attacked by snakes and beasts, and you have a 20% chance of letting snakes and beasts fight, so you can get away safely.

As long as there is an opportunity, we will fight for it desperately, even if the cost of failure will be even worse.

The aversion to loss is actually something engraved in our bones. Therefore, when there is little difference between the two schemes, as long as the risk probability of one scheme is not 100% (in other words, there is a chance that it is safe), people will tend to choose it.

Therefore, the pain of losing 800 yuan is more intense than the 80% probability of losing 1000 yuan.

02

Loss aversion and endowment effect

If there are activities, you have a 50% chance of losing 100 yuan, and you also have a 50% chance of getting 120 yuan. Will you attend? Why?

People's natural aversion to loss is much stronger than their feelings of gain. According to research, the former's emotional intensity is about twice that of the latter, and this coefficient is called "loss aversion coefficient". In other words, the loss of 100 is almost the same as the feeling of getting 200 yuan.

This situation is particularly common in the stock market. Many people's stocks or funds have gone up 1%, and they feel nothing. When they go down 1%, their hearts ache.

At the same time, when the expected loss risk increases, the loss aversion coefficient also increases gradually.

For example, you have a 50% chance of losing 100 yuan, and you may have a 50% chance of "drawing" with 200 yuan; And if the situation becomes a 50% probability loss 1000 yuan, then you may need to get a 50% probability of 2500 yuan to match it.

A psychological term related to "loss aversion" is called "endowment effect"

Endowment effect means that when you (believe) have something, our psychology will change. Its value in our hearts will increase. Remember the sentence "You believe you have it".

What does it have to do with aversion to loss?

Let's look at a simple example first. The words "50% probability loss 100 yuan" are a classic example of your aversion to loss because of "endowment effect".

Because this 100 yuan is your own, its value in your heart is far more than 100 yuan, and it may become "200 yuan". Therefore, faced with "50% chance to lose 100 yuan, 50% chance to win 120 yuan", many people are reluctant to participate.

An interesting phenomenon is that when the "endowment effect" disappears, people are more rational and less easily influenced by "loss aversion".

So under what circumstances will the "endowment effect" disappear?

Let's look at this sentence again: "When you (believe) have something, our psychology will change." Its value in our hearts will increase. "

Pay attention to the scarlet letter. Only when you believe that you have something will the endowment effect come into play. As long as you don't believe in what you have, the endowment effect will gradually disappear.

When will you not believe it? There is a simple situation that the decision-making situation does not involve your interests. For example, if you participate in the discussion as a third party, or if you use other people's money, you will easily become rational and more likely to "speak through data".

In the second case, the smaller the proportion of decision-making needs to occupy your interests, the less likely you are to be affected by the "endowment effect".

For example, if you have 10000000 yuan in hand, you will be more rational when you face the situation that 100 yuan loses 50% and 120 yuan gains 50%. Because this money won't affect you.

And if you only have 100 yuan left in your hand, when you face the same problem, you are likely to give up participating, because once you fail, you will have nothing.

(Reading notes for this part)

This is what I learned and shared today. I'm Dong Run. We grew up together.

References:

1. Daniel Kahneman's Thinking, Fast and Slow.