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How To Do Exactly the Right Thing at All Possible Times or thing No How To Do Exactly the Right Thing at All Possible Times or thing No ____^ The Idea That Changed the World

E(u | p, X) = x X p(x)u(x) E(u | p, X) = x X p(x)u(x)

E(u | p, X) = x X p(x)u(x) Expected Value = (Odds of Gain) E(u | p, X) = x X 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 If it comes up heads I’ll give you $10. Should you pay $4 to play? s! Ye 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 Errors in Odds Errors in Value Expected Value = (Odds of Gain) X (Value of Gain)

Errors in Odds Errors in Value Expected Value = (Odds of Gain) X (Value 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 Are there more dogs or pigs on leashes in Oxford?

Errors in Odds Are there more 4 -letter English words with R in the Errors in Odds Are there more 4 -letter English words with R in the 3 rd or 1 st place? _ _ R _ R _ _ _ BARE, FORT, PARK. . . RING, RANG, RUNG. . .

Errors in Odds Cause Estimate Actual Tornado 564 90 Fireworks 160 6 Asthma 506 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 Cause Estimate Tornado 564 Fireworks 160 Asthma 506 Drowning 1684 > Errors in Odds Cause Estimate Tornado 564 Fireworks 160 Asthma 506 Drowning 1684 > > Per 200 million US residents per year Actual 90 6 1886 7380

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 Errors in Odds ? • 10 tickets • $1 to play • $20 if you win

Errors in Odds 1/10 X $20 = $2 Errors in Odds 1/10 X $20 = $2

Errors in Odds 1/10 X $20 = $2 Errors in Odds 1/10 X $20 = $2

Errors in Value Errors in Odds Errors in Value Expected Value = (Odds of 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 Errors in Value: Comparing with the Past COMPARING WITH the Past instead of the Possible

Errors in Value: Comparing with the Past $60 K in Year 1 $35 K Errors in Value: Comparing with the Past $60 K in Year 1 $35 K in Year 1 50 $1 $40 K $50 K K 35 $1 $45 K $55 K K in Year 2 in Year 3

Errors in Value: Comparing with the Past A $2000 Hawaiian vacation package is on 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 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 $2000 $1600 $700 es Y No $1500 Errors in Value: Comparing with the Past $2000 $1600 $700 es Y No $1500

Errors in Value: Comparing with the Past You are on your way to theatre. Errors in Value: Comparing with the Past You are on your way to theatre. In your wallet you have a ticket for which you paid $20, and a $20 bill. When you arrive at 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 theatre. Errors in Value: Comparing with the Past You are on your way to theatre. In your wallet you have two $20 bills. When you arrive at theatre you discover that you’ve somehow lost one of the bills. Would you spend your remaining $20 on a ticket? es Y

Errors in Value: Comparing with the Past The Lost Ticket X The Lost Money Errors in Value: Comparing with the Past The Lost Ticket X The Lost Money X

Errors in Value COMPARING WITH the Past instead of the Possible instead of the Errors in Value COMPARING WITH the Past instead of the Possible instead of the Past

Errors in Value: Comparing with the Possible Errors in Value: Comparing with the Possible

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

Errors in Value: Comparing with the Possible $8. 00 $27. 00 $33. 00 $51. Errors in Value: Comparing with the Possible $8. 00 $27. 00 $33. 00 $51. 00

Errors in Value: Comparing with the Possible Errors in Value: Comparing with the Possible

Errors in Value: Comparing with the Possible You want to buy a car stereo. 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)? es Y

Errors in Value: Comparing with the Possible You want to buy a car with 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)? o N

Errors in Value: Comparing with the Possible Errors in Value: Comparing with the Possible

Errors in Value: Comparing with the Possible A B C D Errors in Value: Comparing with the Possible A B C D

Errors in Value: Comparing with the Possible TODAY TOMORROW NEXT WEEK NEXT YEAR Errors in Value: Comparing with the Possible TODAY TOMORROW NEXT WEEK NEXT YEAR

Errors in Value: Comparing with the Possible $60 NOW OR Problem #1 $50 NOW Errors in Value: Comparing with the Possible $60 NOW OR Problem #1 $50 NOW

Errors in Value: Comparing with the Possible • More is better than less $60 Errors in Value: Comparing with the Possible • More is better than less $60 NOW Problem #1 $50 NOW

Errors in Value: Comparing with the Possible $60 NOW $60 OR Problem #2 In Errors in Value: Comparing with the Possible $60 NOW $60 OR Problem #2 In 1 month

Errors in Value: Comparing with the Possible • Now is better than later $60 Errors in Value: Comparing with the Possible • Now is better than later $60 NOW Problem #2 $60 In 1 month

Errors in Value: Comparing with the Possible Now is better than later $50 NOW Errors in Value: Comparing with the Possible Now is better than later $50 NOW BUT More is better than less $60 OR Problem #3 In 1 month

Errors in Value: Comparing with the Possible Now is better than later Impatience $50 Errors in Value: Comparing with the Possible Now is better than later Impatience $50 NOW More is better than less Problem #3 $60 In 1 month

Errors in Value: Comparing with the Possible Now is better than later Impatience $50 Errors in Value: Comparing with the Possible Now is better than later Impatience $50 NOW More is better than less $50 In 12 months $60 In 1 month $60 OR In 13 months

Errors in Value: Comparing with the Possible Now is better than later Impatience $50 Errors in Value: Comparing with the Possible Now is better than later Impatience $50 NOW More is better than less $60 In 1 month $50 Patience $60 In 12 months In 13 months

Errors in Value: Comparing with the Possible Impatience Patience 30 Days Errors in Value: Comparing with the Possible Impatience Patience 30 Days

Errors in Value: Comparing with the Possible Errors in Value: Comparing with the Possible

Errors in Value: Comparing with the Possible Illusions of Spatial Perspective As seen from 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 Errors in Value: Comparing with the Possible Illusions of Spatial Perspective As seen from 1 ft 21 ft 2000 ft 2021 ft 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

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

Conclusion If we’re so stupid, then how did we get to the moon? Conclusion If we’re so stupid, then how did we get to the moon?