Certainty Trap

Prospect theory suggests that humans have a natural inclination to choose certainty over uncertainty, even if it’s not utility maximizing or logical, thus over-valuing certainty. They use an example for a lottery to illustrate this, where people are more willing to earn a dollar over entering a lottery for $10, with 20% chance that they’ll win.

I understand decision making to be a combination of intuitive and strategic components. While our natural instinct is to over-value certainty, could we bank on doing the same for more important, bigger, strategic matters we face? It’s definitely not the logical thing to do but it comes down to whether we can face the 80% risk that we might lose? May be then it’s time to reevaluate all else we’re banking on?

So, if settling is not an option, how much risk is too much risk?


2 thoughts on “Certainty Trap

  1. This is really good. Good though provoking. We def need to be willing to take more risk, not irresponsible risk, but risk that gets us outside our comfort zone.

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