How to make better decisions
Posted by andyB on February 11 2008, 14:53 » Uploaded 11/02/08 15:10

How to make better decisions

By Garth Sundem

With Valentine's Day around the corner, don't trust your instincts when it comes to selecting a mate. Human decision making is seriously flawed - but it can be fixed with a few simple sums.

Be warned: this article deals primarily with shark attacks, the lottery, beer, and how to get a date using mathematics. Is it a good decision to keep reading? Unfortunately, the answer is "you need to keep reading to find out."

Sound irrational? Good - your massively irrational mind should have no problem with it, then.

Consider this: every year in the United States, when the Discovery Channel broadcasts "Shark Week" visits to Florida beaches decline. Presumably, the network's programming makes the waters no less safe (assuming sharks are not, if fact, empowered by cable television).

Should you invest £2 a day or use it to buy lottery tickets? Maths makes the decision obvious
Garth Sundem
However, after watching a week of kicking legs seen from below, the idea of shark attack is refreshed in our minds and we choose not to offer ourselves as bait. This phenomenon is known as an availability heuristic - our rationality is subverted by easily available sensationalist images.

On the sunnier side of the availability heuristic is the lottery. Should you invest £2 a day or use it to buy lottery tickets?

Maths makes the decision obvious. Suppose you invest two quid every day at the reasonable rate of 10%. It will take you almost exactly 50 years to accumulate £1m. To earn this same £1m in the National Lottery, you would (on average) have to match five numbers and a bonus ball, at odds of 2,330,635-to-1.

If you spent two quid a day for 50 years you would total just over 36,500 tickets and would thus have only a 1-in-63 chance of making that million pounds. However, the available image of immediate wealth subverts this rationality.

Beer rating secret

Alphabetically, the availability heuristic is only the first in a long line of psychological mechanisms that lead us into bad decisions. Imagine - if you will - beer. See, wasn't that nice?

Beer bottles
Which beer do you like best? The most expensive (and least dusty)
At your local pub, you have many beers to choose from. Which is best? If you are like most human beings, the answer is "the most expensive one." A number of studies have shown that by switching price tags, you can switch preferences (for obvious reasons, this is a favourite experiment among university psychology students).

And what about the power of suggestion?

Imagine I handed you a cup of hot coffee and then asked your opinion about a person whom you had recently met; now suppose I instead handed you a cup of ice-cold soda. Experiments show that your opinion of this person would be different because you have been primed to feel warmth or coldness.

Add to the list...

* framing (how you present data is as important as the data itself)
* impact bias (overestimation of possible outcomes),
* confirmation bias (recognising only data that supports your hypothesis)
* loss aversion (we stand to gain more than we would lose, but our fear of loss prevents us)
* selective perception (seeing what you want to see),and
* rosy retrospection (integral to the repeated experience of family Christmas)

...and you seem doomed to blunder through life led by your brain's clumsy irrationality.

Is there any hope for the human race? In the example of the lottery, mathematics offered incontrovertible rationality. Might we be able to apply mathematics to other situations, as well?

Errol Brown
The secret to Errol's smile? A hot cup of tea
A rudimentary attempt at this is the list of plusses and minuses, in which one lists the positive aspects of a decision on one side of a chart and the negative aspects on the other, and then weighs these against each other as if on a scale (the heavier side wins).

To add a layer of mathematics, if one factor on the list is more important than the others, we might multiply it by two. If it is very important, we could even square or cube it.

Suppose you were sitting in the aforementioned pub, drinking the aforementioned beer (perhaps while holding the aforementioned lottery ticket and worrying about the aforementioned shark), while sneaking peeks at a beautiful woman sitting at the bar. What do you think would influence your chance of success with this woman?

It will certainly help if you are attractive - especially in comparison to her (you might say your chances increase in direct proportion to your looks/her looks); it will also help if you are a witty conversationalist and willing to pursue the interaction aggressively, and hurt your chances drastically if she already has a boyfriend (esp a large one).

Putting this into an equation, we could come up with the following (W=Witty, G=Aggressive, Ay=Your Attractiveness, AH=Her Attractiveness, R=Her "Amount" of Current Relationship; all variables from 1-10 with 10 being high):

Equation

You would, of course, have to evaluate the results on some type of scale, like the one here:

* If ASK is less than zero you should lower your standards
* If ASK is between zero and 1, you have exactly a snowball's chance in hell with her
* If ASK is between 1 and 10, game on!
* If ASK is greater than 10, consider her more attractive friend instead

In practice, using this equation (and equations in general) to make decisions can have an interesting secondary effect. As described by the Heisenberg Uncertainty Principle, by introducing tools to measure a situation, we can affect the situation itself.

To whit: one of my university students decided to apply this equation to calculate his chances with Girl X Of His Dreams. Alas, the equation predicted little hope.

However, Girl X Of His Dreams was flattered that said student had cared enough to calculate his chances (an endearing display of vulnerability, perhaps?), and they ended up having dinner.

Beware, though - as described by the Uncertainty Principle, the introduction of this tool could easily have had negative consequences, turning a calculated sure thing into no chance at all (if the girl had decided that anyone who uses an equation to determine their chances at love was decidedly creepy). The moral is, perhaps equations can help you make decisions, as long as no one sees you doing it.

Garth Sundem is an American professor and author of the book Geek Logik: 50 Foolproof Equations for Everyday Life. He demonstrates his ideas in Horizon on BBC Two at 2100GMT on Tuesday 12 February.

How to make better decisions

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