Assignment #2
October 2nd, 2009 at 19:58This week’s Dan Ariely’s talk was interesting for me. I was first hooked on the “aggregation of mistakes”. Part of the last week’s assignment was discussing the economic collapse of the past 24 months. As one irrational act between agents led to others, I find that viewpoint might indeed be the simplest way of all to “sum” up the the causes of the crisis.
I also enjoyed reading the piece on Prospect Theory. Especially the psuedocertainty effect. In using my own experiences as a baseline, I can see when even after compiling all of the necessary data to make an informed decision on choice, something internally would rise/fall given the amount of money/risk/outcome involved. In going back to question 3 of our previous assignment, I look upon the past 24 months of transactions/news within the global financial network and wonder if the the same observations were even thought of by the agents contributed to these disastrous financial times. Now, I might be biased because I have spent a good portion of my career financing risk, however, I do believe if more aversion were baked into the over capitalist psyche to help understand the downside, our recent financial history would have been brief and lacked its ferocity.
I view myself as a calculated risk taker. I pride myself on taking the necessary information, variables in consideration before determining whether or not I spend money/take a trip/apply for a job/volunteer for a new opportunity/etc. That said, while I would be affected more, financially and mentally, at the thought of losing $100 instead of gaining $100, if the information was deemed perfect enough for me to make an educated decision, nine times out of ten I would still make the same choice.
I do not know if I have ever been overwhelmed by the abundance of choices presented to me in my life. I feel that those choices are what make this life truly worth living. Granted, we living in the 21st century have more choices and situations to deal with then any generation before us, I feel its that uncertainty that makes it all exciting. The lack of well defined preferences is one that I think affects many of us in our daily lives. The Economist subscription example was also very surprising.
I do, however, find myself overwhelmed in how my own internal decision process works. I have conditioned myself to process information in a certain way, and even if “human” emotion kicks in, somehow that conditioning takes over. I think that is why framing is a subject that is growing more and more interesting to me. Taking into account the years of mental/physical experiences and crafting a system of beliefs is remarkable to me. And although remarkable, it also a bit disconcerting to me. To think that a person entering their early 30′s is affected by situations and choices made when they were entering their teenage years. While knowing there is no reversing years of human conditioning, I use the financial meltdown as my simply model, I wonder if those agents who chose to “defraud” millions out of there nest eggs had those “seeds” developed/placed at any early age.
October 4th, 2009 at 9:09 pm
I’m still not sure about this rational/irrational thing, but weren’t the bankers acting rationally because they were looking out only for their own interests and everyone else be damned? Even the people borrowing money that they couldn’t actually afford were trying to maximize their own interests (get as much as I can, they told me I can afford it) but were acting on bad information.
Like you, i wouldn’t say that I necessarily feel overwhelmed by too many choices. I do think I get impatient about it with other people, though. I used to eat lunch with a coworker and we’d frequent the same restaurant. Regardless of the number of times we’d been there–and our inevitable familiarity with the menu–it would take her at least 15 minutes to consider the menu (a good portion of a reasonable lunch period on a normal workday here in the USA). And get this: she always ordered the same meal each time we went there! There are other plausible explanations, so maybe it wasn’t the number of choices, and maybe she took so long because she was just slow, but it is possible she landed on this particular salad because there were too many options to deal with. For me, I will get overwhelmed if I feel that my emotions have taken over and I can’t properly think through a situation because I am too close to it or too emotionally involved in it. I’m not sure that is the same thing as being overwhelmed by too many choices, but the feeling is probably the same and the outcome might be–I might throw in the towel and make a willy-nilly decision just to be done with it. That is not hard to imagine, but fortunately I cannot think of an example, so I hope that means it is a rare occurrence for me!