It is intuitive that most people would be less likely to take risks after an unexpected loss. What happens after a surprising win?
It turns out that the very same trend applies, according to Case Western Reserve University psychologist Heath Demaree. In other words, it’s not whether you win or lose, but whether the outcome is expected. People appear to decrease their risk-taking levels after experiencing any surprising outcome – even positive ones. -Case Western Reserve University press release
“For a long time we’ve asked ourselves, ‘How come smart, rational people carry out short-term schemes that in the long-term undoubtedly are going to sink them?’” says author Ramy Elitzur, who holds the Edward J. Kernaghan Professorship in Financial Analysis and is an associate professor of accounting.
“The answer is — we’re not rational. We’re rational only in a limited sense.”
The study bases its findings on a model of the manager-owner relationship over time. The model is also noteworthy for combining principles of game theory — used to predict strategic behaviour — with the idea of bounded rationality — that our decisions are always made within the limits of available time, information, and the human capacity to analyze it. -Science Daily
…overconfidence frequently brings rewards, as long as spoils of conflict are sufficiently large compared with the costs of competing for them. In contrast, people with unbiased, accurate perceptions usually fare worse.
The implications are that, over a long period of time the evolutionary principal of natural selection is likely to have favored a bias towards overconfidence. Therefore people with the mentality of someone like boxer Mohammad Ali would have left more descendents than those with the mindset of film maker Woody Allen.
The evolutionary model also showed that overconfidence becomes greatest in the face of high levels of uncertainty and risk. When we face unfamiliar enemies or new technologies, overconfidence becomes an even better strategy.
Dr Dominic Johnson, reader in Politics and International Relations at the University: ‘The model shows that overconfidence can plausibly evolve in wide range of environments, as well as the situations in which it will fail. The question now is how to channel human overconfidence so we can exploit its benefits while avoiding occasional disasters.’ -Science Daily
The rewards outweigh the risks — when you’re in a group, anyway. A new USC study explains why people take stupid chances when all of their friends are watching that they would never take by themselves. According to the study, the human brain places more value on winning in a social setting than it does on winning when you’re alone.
“These findings suggest that the brain is equipped with the ability to detect and encode social signals, make social signals salient, and then, use these signals to optimize future behavior,” Coricelli said.
As Coricelli explained, in private environments, losing can more easily be life-threatening. With no social support network in place, a bad gamble can spell doom.
In group environments, on the other hand, rewards tend to be winner-takes-all. Nowhere is this more clear than in sexual competition, where — to borrow a phrase from racing legend Dale Earnhardt, Sr. — second place is just first loser.
“Among animals, there are strong incentives for wanting to be at the top of the social ranking,” Coricelli said. “Animals in the dominant position use their status to secure privileged access to resources, such as food and mates.” -Science Daily
For years, psychologists have observed that people routinely overestimate their abilities, said study leader Dominic Johnson, an evolutionary biologist at the University of Edinburgh in Scotland.
Some experts have suggested that overconfidence can be a good thing, perhaps by boosting ambition, resolve, and other traits, creating self-fulfilling prophecies.
But positive self-delusion can also lead to faulty assessments, unrealistic expectations, and hazardous decisions, according to the study—making it a mystery why overconfidence remains a key human trait despite thousands of years of natural selection, which typically weeds out harmful traits over generations.
Now, new computer simulations show that a false sense of optimism, whether when deciding to go to war or investing in a new stock, can often improve your chances of winning. -Christine Dell’Amore, National Geographic News
Photo Credit: Mustafa Khayat on Flickr
The experimental findings, in the paper “Washing Away Your (Good or Bad) Luck: Physical Cleansing Affects Risk-Taking Behavior,” converge with anecdotal reports of superstitious practices, such as an athlete wearing the same unwashed shirt during a winning streak, and show that magical beliefs about luck have behavioral consequences.
Magical beliefs are exhibited, for example, by having confidence in one’s ability to predict the outcome of a random event beyond the known probabilities if one can exert irrelevant control on the situation. For example, research has shown people are more confident they will have a winning scratch-off lottery ticket if they pick the ticket instead of being given one by a clerk.
Debriefing conversations with participants suggest that people remain unaware of these influences, as has also been observed in other studies. Although participants are familiar with the underlying metaphors and related superstitious practices, they do not realize that this knowledge is applicable to the experiment and, needless to say, insist that they would never be influenced by such a thing. -Science Daily
Studying compulsive gamblers who were seeking treatment at the National Problem Gambling Clinic, the researchers found that those gamblers with higher levels of impulsivity were much more susceptible to errors in reasoning associated with gambling, such as superstitious rituals (e.g. carrying a lucky charm) and explaining away recent losses (e.g. on bad luck or ‘cold’ machines). -Science Daily
I am crazy about mountaineering stories. It started when a friend of my father’s left Into Thin Air by John Krakauer with him after visiting. My father handed it to me, saying “It’s not really my thing.” Well, it wasn’t really my thing either, but I read it anyway. That book was like crack cocaine for me. I loved it, and I wanted more. More stories about tragedies at high elevation. More stories about people who survived when left for dead. More stories about the triumph of people who are blind or have no legs or have a serious medical condition making it up the mountain against all odds. More stories about teenagers who aren’t old enough to drive climbing the world’s highest peaks alongside their parents.
I want more!
As a writer, nowhere else do I find characters so clearly drawn as they are in mountaineering stories. Climbers are frequently flamboyant, bigger-than-life characters, on or off the mountains. As they ascend, their worst and best traits become ever more salient – narcissism and heroism shining together in a mix that is at once inspiring and repulsive.
I want more!
For today’s writing prompt, I’m sharing a quote from Savage Summit, the story of the women who have summitted K2. While K2 is the second highest mountain on Earth, the mortality rate is much higher than on the highest peak, Mount Everest. It’s a more technical mountain, which means that climbers need to have excellent skills in order to get up and down it. There is no circus-like base camp, no guided expeditions, no sherpas to help the climbers carry equipment, break trail, or set up camps. This is a serious mountain for serious climbers only.
Only 6 women have summitted K2, and 3 of them died during their descent. Five others have died trying to reach the summit. The stories in Savage Summit are full of pathos, courage, and inspiration. Here’s the quote:
“You don’t appreciate the full flavor of life until you risk losing it. The perils of climbing fascinated me because they released so much joy and delight in simple things, like the feel of the wind, the scent of rock warmed by the sun, the sudden relaxation of tension, or the hot tea in the cup. By the end of my very first day’s climbing, I knew that it surpassed anything I had ever experienced. The mountains have become the inner force of my life. There is no escape from a passion like climbing, even though it may be the path to death.” -Wanda Rutkiewicz, first female to successfully summit K2 (1986)
Writing Prompt: Write a character sketch or a scene about someone who comes alive in the face of death.
Journaling Prompt: How do you feel when you take a big risk?
Art Prompt: Risking it all
Nonfiction / Speech Writing Prompt:Tell a story about someone who faced death and lived to share the experience.
Here are some of my favorite mountaineering stories:
Into Thin Air: A Personal Account of the Mt. Everest Disaster by John Krakauer
High Crimes: The Fate of Everest in an Age of Greed by Michael Kodas
Savage Summit: The Life and Death of the First Women of K2 by Jennifer Jordan
Lost on Everest: The Search for Mallory and Irvine by P. L. Firstbrook
You can also follow the climbing news, often in the climbers’ own words at EverestNews
Footnote: One additional female climber claims to have summited K2, but the picture verifying the summit has been challenged. Officially, she is not recognized as a K2 summiter. (If you like controversy, google Oh Eun-Sun and settle back for some interesting reading.)
Illustration Credit: Illustration from HikingArtist.com on Flicker
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