The brain works in mysterious ways.
In one experiment, a researcher offered subjects a dollar if, in a blind draw, they picked a red jelly bean out of a bowl of mostly white jelly beans. The subjects could choose between two bowls. One bowl contained nine white jelly beans and one red one. The other contained 92 white and eight red ones. Thirty to 40 per cent of the test subjects chose to draw from the larger bowl, even though most understood that an eight per cent chance of winning was worse than a 10 per cent chance. The visual allure of the extra red jelly beans overcame their understanding of the odds.Finally, try this quiz. Apparently more than 80 per cent of people answer this question incorrectly.
Or consider this problem. There’s a disease outbreak expected to kill 600 people if no action is taken. There are two treatment options. Option A will save 200 people. Option B gives a one-third probability that 600 people will be saved, and a two-thirds probability that no one will be saved. Most people choose A. It’s better to guarantee that 200 people be saved than to risk everyone dying.
But ask the question this way – Option A means 400 people will die. Option B gives a one-third probability that no one will die and two-thirds probability that 600 will die – and most people choose B. They’ll risk killing everyone on the lesser chance of saving everyone.
The trouble, from a rational standpoint, is that the two scenarios are identical. All that’s different is that the question is restated to emphasize the 400 certain deaths from Option A, rather than the 200 lives saved. This is called the “framing effect.” It shows that how a question is asked dramatically affects the answer, and can even lead to a contradictory answer.
Then there’s the “anchoring effect.” In one experiment, researchers spun a wheel that was rigged to stop at either number 10 or 65. When the wheel stopped, the researchers asked their subjects if the percentage of African countries in the United Nations is higher or lower than that number. Then the researchers asked the subjects to estimate the actual percentage of African countries in the UN. The people who saw the larger number guessed significantly higher than those who saw the lower number. The number “anchored” their answers, even though they thought the number was completely arbitrary and meaningless.
Jack is looking at Anne, but Anne is looking at George. Jack is married but George is not. Is a married person looking at an unmarried person?
A) Yes
B) No
C) Cannot be determined
Vote in the poll. Answer in 10 days.
2 comments:
Nice article Cassini. I've been reading for the last month or so and always look to see if my picks are included in your picks.
You got me thinking today.
If 80% of people get it wrong and know this stat in advance, they have a greater probability of getting it right if they guess/draw out of a hat
I love that question and it's intriguing to see that most people have fallen into the trap of answering that it cannot be determined. It shows that very clearly that the human mind is easily tricked. It is almost a genius type of question to be posing on a trading blog as it highlights the fact that to do well in this business you do need to think outside the box and not follow the herd. I would say that a majority of traders/punters are herd creatures who get sucked into prices that are driving down (say after a goal in football or a break of serve in tennis) when as you have mentioned a majority of the time the real value is to oppose.
The answer is simple when you look at Anne. If she’s married, then the answer is YES because Anne is looking at George. If Anne is not married, then the answer is YES because Jack is looking at her.
Simples!
I do have a blog myself but I'm rubbish at updating it and wish I could have more time to dedicate. Congratulations on maintaining such dedication to blogging every day and keeping it interesting.
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