Don’t Believe Everything You See (or Think): Optical Illusions as a window on Intuitive Biases

Don’t Believe Everything You See Or Think 02015.8.31

Nerd Nite East Bay - Paul Sas

Everything is less important than it seems

Everything is less important than it seems

“What you see is all there is” Danny Kahneman

Earn Ten Cents Extra!

How painful isyour choice to

FOREGO

gaining 10 cents?

How motivated can you be by a dime?

Pay for a Dime Bag?

Doesn’t it FEEL different to pay 10 cents?

A loss hurts much more than not getting that same dime

Reference Point Changes a Gain to a Loss

It FEELS much different to avoid a loss than to forego an additional gain

Reference Point Changes a Gain to a Loss

It FEELS much different to avoid a loss than to forego an additional gain

Losses approximately 2X as aversive as comparable gain

What’s killing our farmers?

Out of the 3,141 counties in the US:

Highest kidney cancer rates found in the following counties:

Sparsely populated, primarily rural

Preponderantly Christian, more evangelical

Inland, remote from metropolitan coasts

Midwest, the South, and the West

Explanatory Hypotheses?

What’s saving our farmers?

Out of the 3,141 counties in the US:

Highest kidney cancer rates found in the following counties:

Sparsely populated, primarily rural

Preponderantly Christian, more evangelical

Inland, remote from metropolitan coasts

Midwest, the South, and the West

“The Law of Small Numbers”: often the best explanation, but we’re fooled by randomness

Fools for a Good Story

Michotte The Perception of Causality http://cogweb.ucla.edu/Discourse/Narrative/michotte-demo.swf

Why do extremely smart women often choose less intelligent partners?


Can a great college athlete do anything to deflect the Sports Illustrated curse?



Why did the Gates Foundation invest ~$2 Billion to support smaller class sizes?

Regression to the Mean



Why did the Gates Foundation invest ~$2 Billion to support smaller class sizes?

One Step at a Time

A

B

Side by Side

A

B

Side by Side Comparison

Separate Evaluation vs Joint

Music Dictionary A10,000 entriescondition is like new

Music Dictionary B20,000 entriescover is torn

24 Piece China Setcondition is like new

28 Piece China Set24 Pieces 4 extra saucers, 1 chipped

Separate Evaluation vs Joint

Music Dictionary A10,000 entriescondition is like new

$24

Music Dictionary B20,000 entriescover is torn

$20

24 Piece China Setcondition is like new

28 Piece China Set24 Pieces 4 extra saucers, 1 chipped

>

Presentation Paradox

People will pay more for a 5 ★ Hotel

than they will offer for

5 ★ Hotel that also mentions a 3 ★ Restaurant

How does the endpointaffecta story?

Experiencing vs Remembering Self

Which person suffered more? A or B



Equal Area in Box



Which person more willing to do it again? A or B

Equal Area in Box

Peak-End Rule (Kahneman)Duration Neglect: Difficulty estimating the total amount of suffering

Peak-End: Simple heuristic to recall the worst instant (peak) + the last instant (end)

Cognitive manipulation: Increase total quantity, but make last minutes less intense. Longer period is recalled as less painful

Equal Area in Box

Cognitive Illusions: General features & Patterns

We’re not performing mathematical/logical computations

Heuristics work as quick rules of thumb Law of Small Numbers - patterns w/o sensitivity to sampling

Presentation Paradox - Single composite/gestalt stands for the sequence

Peak-end rule - 2 points replace integrating under curve

Two System Theory

Fast Thinking: intuitive, immediate, unreflective

Perception of patterns comes for free

Slow Thinking: mathematical/logical computations

If a baseball and a bat cost $1.10 together, and the bat costs $1.00 more than the ball, how much does the ball cost?

vs

Fast

Imagine a Game Show where the fastest response wins (almost always)

vs

SlowFast

Imagine a Game Show where the fastest response wins (almost always)

Daniel Kahneman

&

SlowFast

Thinkers

Amos Tversky

General features of Prospect Theory (K&T ’79)

Status quo bias (connected to power of defaults)

Diminishing sensitivity

Losses weigh much heavier than foregone gains

Save More Tomorrow program – Allocate future raises

Risk averse for gains

Risk impulsive for losses

Reference point - SQ


Future gains - relative size makes it feel much less attractive


Future gains - relative size makes it feel much less attractive

Loss / Setback / Backward move: Same amount looms larger

General features of Prospect Theory (K&T ’79)

Status quo bias (connected to power of defaults)

Diminishing sensitivity

Losses weigh much heavier than foregone gains

Save More Tomorrow program – Allocate future raises

Risk averse for gains

Risk impulsive for losses

Zoom into origin region to explore sensitivity to probabilities (0,1)

MAYBE Our Sensitivity to ChanceDependson Perspective




Probability Weights +Certainty Effect

0 0

1 5.5

2 8.1

5 13.2

10 18.6

20 26.1

50 42.1

80 60.1

90 71.2

95 79.3

98 87.1

99 91.2

100 100

WeightProbability


0 0

1 5.5

2 8.1

5 13.2

10 18.6

20 26.1

50 42.1

80 60.1

90 71.2

95 79.3

98 87.1

99 91.2

100 100

WeightProbability

1- Over Sensitive to Low Probabilities


0 0

1 5.5

2 8.1

5 13.2

10 18.6

20 26.1

50 42.1

80 60.1

90 71.2

95 79.3

98 87.1

99 91.2

100 100

WeightProbability


2- Less sensitive to Shifts in the Middle

3- Increasing Sensitivity to Higher


0 0

1 5.5

2 8.1

5 13.2

10 18.6

20 26.1

50 42.1

80 60.1

90 71.2

95 79.3

98 87.1

99 91.2

100 100

WeightProbability


2- Less sensitive to Shifts in the Middle

3- Increasing Sensitivity to Higher

4- Extraordinary weight to certainty

Follow up ReferencesThe ultimate book of optical illusions / Al Seckel. [Any illusions book is worth *a look*]

Predictably irrational : the hidden forces that shape our decisions / Dan Ariely. THE gateway drug to the field. Very witty pleasurable read by one of the leading researchers. Also take 18 minutes to watch at lease one of his superstar TED talks.

The why axis: hidden motives & the undiscovered economics of everyday life / Uri Gneezy Applications to public education, carpooling, sex differences, showing how experiments work to help answer open questions of about the best approach to messy situations

Misbehaving : the making of behavioral economics / Richard H. Thaler Humorous anecdotes trace the origins of the field to original insights into how humans "misbehave."

Thinking, fast and slow / Daniel Kahneman. Comprehensive - clear & concise; a stealth-text book of the entire field by one of its founders.

CHOICE ARCHITECTURE

Option A

Option B

Contextual cues, situational aspects, environmental associations shape/structure perception

Design

Don’t Believe Everything You See (or Think): Optical Illusions as a window on Intuitive Biases