I’m not a social scientist, but I play one on TV. Especially interesting to me are experiments that highlight the human decision-making process. For instance….
“The Ellsberg Paradox” (Daniel Ellsberg) is a little glimpse into the human decision-making process, and our proclivity for choosing the “known” option regardless of whether that happens to be the “best” decision.
Here’s the skinny; You have an urn with 90 balls inside:
- 30 of the balls are Red
- The other 60 balls are either Black or Purple*.
- The balls are well distributed, so there’s a fair chance to draw any color
*"Purple" was utilized instead of Yellow for the purposes of pretty colors on my font. Yellow just doesn't work.
You get the chance to make 2 separate bets on the outcome of drawing a ball from the urn:
- $100 on the first bet – you either choose A. “Red” or B. “Black“
- $100 on the second bet – you either choose C. “Red or Purple” or D. “Black or Purple“
- Both bets occur with the same urn, same distribution of balls.
- The same people (i.e., YOU) are making both bets.
Go ahead, place your bets…..
In the experiment, there was a predominant pattern to the bets. Option A and Option D were the clear choice for those surveyed.
In scientific terms, that’s messed up, Yo. Why?
In the first bet, the people choosing Option A are making a bet knowing they have no better than a 1 in 3 chance of winning. There may be several reasons, but the 2 most telling are this:
- We’d rather take bad odds than take unknown odds.
- We naturally assume the unknown (in this case, the number of Black balls) is designed to deceive us. In other words, if you are asking me to bet “Black”, I’m guessing it’s a trick.
Here’s where it gets good….
In the second bet, Option D was the clear preference, but that doesn’t jibe with the first bet – can you see why?
In the first scenario, we’re taking the “sure” bet of 1 in 3. We’re also stating our belief that there are less Black balls than Purple balls. Remember, you’re trying to trick us.
That would mean Option C, which pays us for either Red or Purple, is the logical bet, but to hell with logic, right? What, exactly, is going on here?
- We’d rather take the “known” quantity (in this case, 60 of the balls are either Black or Purple) rather than the unknown.
- Remember, this is a bet based on the same urn of balls – right after betting in a way that assumes there are more Purple balls than Black, which means Option C would be the logical bet. Humans are fun.
I don’t need to tell you the many applications this little experiment could have in the business setting, but to me there’s one very strong message as it pertains to the human condition ~ we hate ambiguity.
Remember that during times of change – what your employees don’t know, they assume is meant to deceive them.