how to do exactly the right thing at all possible times or

How To Do Exactly the Right Thing at All Possible Times

or

The Idea That Changed the WorldNothing

^____

E(u | p, X) = x X p(x)u(x)

Expected Value =

(Odds of Gain) X (Value of Gain)

E(u | p, X) = x X p(x)u(x)

1/2 X $10

If it comes up heads I’ll give you $10. Should you pay $4 to play?

= $5

Expected Value =


Yes!

Errors in Odds Errors in Value

Expected Value =


Expected Value =


Errors in ValueErrors in Odds

Errors in Odds

Are there more dogs or pigs on leashes in Oxford?

Errors in Odds

_ _ R _ R _ _ _

BARE, FORT, PARK...

Are there more 4-letter English words with R in the 3rd or 1st place?

Errors in OddsErrors in Odds

RING, RANG, RUNG...

Cause Estimate Actual

Tornado 564 90

Fireworks 160 6

Asthma 506 1886

Drowning 1684 7380

Per 200 million US residents per year


Cause Estimate Actual

Tornado 564 90

Fireworks 160 6

Asthma 506 1886

Drowning 1684 7380

Per 200 million US residents per year


>>>

>

Errors in Odds

?Errors in Odds

• 10 tickets

• $1 to play

• $20 if you win


1/10 X $20 = $2

Expected Value =


Errors in Odds Errors in Value

Errors in Value

Is this Big Mac worth $25?

Errors in Value: Comparing with the Past

COMPARING WITH

the Past instead of the Possible

$60K in Year 1

$50K in Year 2

$40Kin Year 3

$35Kin Year 1

$45Kin Year 2

$55Kin Year 3

$15

0K

$13

5K


A $2000 Hawaiian vacation package is on sale for $1600. Would you buy it?


A $2000 Hawaiian vacation package is on sale for $700. You think it over for a week, and by the time you get to the ticket agency, the best fares are gone and the package will now cost you $1500. Would you buy it?


$2000 $1600


$2000 $700 $1500

Yes

No

You are on your way to the theatre. In your wallet you have a ticket for which you paid $20, and a $20 bill. When you arrive at the theatre you discover that you’ve somehow lost the ticket.

Would you spend your remaining $20 on a ticket?


No

You are on your way to the theatre. In your wallet you have two $20 bills. When you arrive at the theatre you discover that you’ve somehow lost one of the bills.

Would you spend your remaining $20 on a ticket?


Yes

The Lost MoneyThe Lost Ticket

X X


Errors in Value

COMPARING WITH

the Possible instead of the Past

COMPARING WITH

the Past instead of the Possible

Errors in Value: Comparing with the Possible

$8.00 $27.00 $33.00


$8.00 $27.00 $33.00 $51.00


http://www.kultur-und-wein.de/redirect.php?vart=38xxx1381538




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P r e d i c t i o n E x p e r i e n c e

C h o c o la t eS p a m

L i k i n g o f C h ip s

You want to buy a car stereo. The dealer near your house sells it for $200, but if you drive across town, you can get it for $100. Would you drive to get 50% off (saving $100)?


Yes

You want to buy a car with a stereo. The dealer near your house sells it for $31,000, but if you drive across town, you can get it for $30,900. Would you drive to get .003% off (saving $100)?


No

A B C D


TODAY TOMORROW NEXT WEEK NEXT YEAR


$60 NOW

$50 NOW


OR

Problem #1

• More is better than less


$60 NOW

$50 NOW

Problem #1

$60NOW


OR

Problem #2

$60 In 1

month

$60NOW


• Now is better than later

Problem #2

$60 In 1

month

$50NOW


Now is better than later

More is better than less

OR

BUT

Problem #3

$60 In 1

month

$50NOW Impatience




Problem #3

$60 In 1

month

$50NOW Impatience




OR

$50 In 12

months

$60 In 13

months

$60 In 1

month

$50NOW

$50 In 12

months

$60 In 13

months

Impatience

Patience




$60 In 1

month

$60

$60

$60

$60

$60

$50

$50

$50

$50 $50

NOW 1 MONTH 12 MONTHS 13 MONTHS

SU

BJE

CTI

VE

VA

LUE

30 Days 30 Days


Impatience

Patience

Illusions of Spatial Perspective


1 ft 21 ft 2000 ft 2021 ftAs seen from

Illusions of Spatial Perspective


1 ft 21 ft 2000 ft 2021 ft

20 Feet 20 Feet

As seen from

$60

$60

$60 $60

$60

$50

$50 $50

$50

$50

NOW 1 MONTH 12 MONTHS 13 MONTHS 2O YEARS

SU

BJE

CTI

VE

VA

LUE

Illusions of Temporal Perspective


As seen from

$60

$60

$60

$60

$60

$50

$50

$50

$50 $50

NOW 1 MONTH 12 MONTHS 13 MONTHS

SU

BJE

CTI

VE

VA

LUE

Illusions of Temporal Perspective

30 Days 30 Days


As seen from

If we’re so stupid, then how did we get to the moon?

Conclusion

how to do exactly the right thing at all possible times or

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