Neglect of Probability
We all know the odds are against us when we gamble in Las Vegas. So why do millions of people lay down their money anyway? It’s because most people use intuition to calculate the odds, not their analytical brain. If a decision “feels” right, we tend to go with it. This is a powerful cognitive bias called “neglect of probability.”
If you drive to the store to buy a Powerball ticket, you’re more likely to die in a car crash than you are to win the lottery. Rationally, we all know the odds of winning are crazy bad. So why don’t we heed the simple math skills we all learned as children?
It’s because math is a crazy new invention for humans. Our decision-making skills were honed out on the African savannah during evolutionary times. Our ancient caveman ancestors never bothered with things like written language or complex math. There just wasn’t a need. They made pretty much all of their decisions based on instinct, not formal calculations.
Unfortunately, evolution has not had time to update our brain to understand newfangled institutions like lotteries, banking, and pretty much all modern risk problems. We have a powerful inclination to make risk calculations just like our caveman ancestors, by trusting our gut reactions.
Scientists don’t “go with their gut” when calculating rocket trajectories. Bankers don’t calculate your account balance “on a hunch.” And it is vital that you do the same thing when you’re calculating risk in your own life.
Research shows that our brains are really lousy at intuitively calculating probability. Don’t do the math in your head. Input the numbers into a spreadsheet, then double-check your answer. Always remember that when it comes to risk, your brain is crazy lazy.