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How To Do Exactly the Right Thing at All Possible Times or

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## How To Do Exactly the Right Thing at All Possible Times or

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**How To Do Exactly the Right Thing at All Possible Times**or Nothing ____ ^ The Idea That Changed the World**E(u | p, X) = xX p(x)u(x)**Expected Value = (Odds of Gain) X (Value of Gain)**If it comes up heads I’ll give you $10. Should you pay $4**to play? Yes! Expected Value = (Odds of Gain) X (Value of Gain) 1/2 X$10 = $5**Errors in Odds**Errors in Value Expected Value = (Odds of Gain) X (Value of Gain)**Errors in Odds**Errors in Odds Errors in Value Expected Value = (Odds of Gain) X (Value of Gain)**Errors in Odds**Are there more dogs or pigs on leashes in Oxford?**Errors in Odds**Errors in Odds Are there more 4-letter English words with R in the 3rd or 1st place? _ _ R _R _ _ _ RING, RANG, RUNG... BARE, FORT, PARK...**Errors in Odds**Errors in Odds 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 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**Errors in Odds**Errors in Odds**Errors in Odds**Errors in Odds**Errors in Odds**Errors in Odds**Errors in Odds**Errors in Odds ? • 10 tickets • $1 to play • $20 if you win**Errors in Odds**Errors in Odds 1/10 X $20 = $2**Errors in Odds**Errors in Odds 1/10 X $20 = $2**Errors in Value**Errors in Odds Errors in Value Expected Value = (Odds of Gain) X (Value of Gain) Is this Big Mac worth $25?**Errors in Value: Comparing with the Past**COMPARING WITH the Past instead of the Possible**Errors in Value: Comparing with the Past**$150K $60K in Year 1 $50K in Year 2 $40K in Year 3 $135K $35K in Year 1 $45K in Year 2 $55K in Year 3**Errors in Value: Comparing with the Past**A $2000 Hawaiian vacation package is on sale for $1600. Would you buy it?**Errors in Value: Comparing with the Past**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?**Errors in Value: Comparing with the Past**Yes $2000 $1600 No $2000 $700 $1500**Errors in Value: Comparing with the Past**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**Errors in Value: Comparing with the Past**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**Errors in Value: Comparing with the Past**The Lost Ticket The Lost Money X X**Errors in Value**COMPARING WITH the Past instead of the Possible COMPARING WITH the Possible instead of the Past**Errors in Value: Comparing with the Possible**$8.00 $27.00 $33.00**Errors in Value: Comparing with the Possible**$8.00 $27.00 $33.00 $51.00**Errors in Value: Comparing with the Possible**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**Errors in Value: Comparing with the Possible**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**Errors in Value: Comparing with the Possible**TODAY TOMORROW NEXT WEEK NEXT YEAR**Errors in Value: Comparing with the Possible**$60 NOW $50 NOW OR Problem #1**Errors in Value: Comparing with the Possible**• More is better than less $60 NOW $50 NOW Problem #1**Errors in Value: Comparing with the Possible**$60 In 1 month $60 NOW OR Problem #2**Errors in Value: Comparing with the Possible**• Now is better than later $60 In 1 month $60 NOW Problem #2**Errors in Value: Comparing with the Possible**Now is better than later More is better than less BUT $60 In 1 month $50 NOW OR Problem #3**Errors in Value: Comparing with the Possible**Now is better than later More is better than less $60 In 1 month $50 NOW Impatience Problem #3**Errors in Value: Comparing with the Possible**Now is better than later More is better than less $60 In 1 month $50 NOW Impatience $50 In 12 months $60 In 13 months OR**Errors in Value: Comparing with the Possible**Now is better than later More is better than less $60 In 1 month $50 NOW Impatience $50 In 12 months $60 In 13 months Patience**Errors in Value: Comparing with the Possible**Impatience Patience 30 Days 30 Days**Errors in Value: Comparing with the Possible**Illusions of Spatial Perspective As seen from 1 ft 21 ft 2000 ft 2021 ft**Errors in Value: Comparing with the Possible**Illusions of Spatial Perspective As seen from 1 ft 21 ft 2000 ft 2021 ft 20 Feet 20 Feet**Errors in Value: Comparing with the Possible**Illusions of Temporal Perspective As seen from**Errors in Value: Comparing with the Possible**Illusions of Temporal Perspective As seen from 30 Days 30 Days