Here’s a game you can play this week and then compare your results to the majority of the population:
In a game you receive $1,000. In addition, you have a choice between a certain gain of $500 OR a 50% chance of winning an additional $1,000 and a 50% chance of winning nothing. Which do you choose?
In a game you receive $2,000. In addition, you have a choice between a certain loss of $500 OR a 50% risk of losing $1,000 and a 50% chance of losing nothing. Which do you choose?
Before you read on, please do make your choice.
These are the situations that Kahneman and Tversky (1982) presented to hundreds of subjects. Situation A and B are 100% identical, but most people choose differently in each situation because of the framing. In both situations, you are deciding whether you want $1,500 guaranteed, or have a 50/50 chance of ending up with either $1,000 or $2,000.
How do most people respond?
In Situation A:
- 84% of people choose the certain $1,500 (the first option); and
- Only 16% gamble at the 50/50 chance of ending up with $1,000 or $2,000
In Situation B:
- 31% of people choose the certain $1,500 (the first option); and
- A full 69% were willing to gamble at the 50/50 chance of ending up with either $1,000 or $2,000.
Question: Examine the two frames (situations) carefully. What is the difference between the frames, and why do you think people choose the way they do? How might you utilize your hypotheses in your own interactions? (This will be discussed at length in Volume 4 of The Science of Influence CD program.)
Here are a few lessons we learn from research that examines Frames and Choices:
Lesson A: People do not necessarily decide what is best for them, they decide what PRESENTATION of facts is more attractive, and the unconscious mind has part in this.
The unconscious mind doesn’t think or make decisions. By definition, it can’t and never will. It has no capacity to come up with alternatives. It reacts in the way it immediately sees the environment and avoids the greatest fear and pain as it is instantly “evaluated”. The unconscious mind is the dominant force in almost every human being’s life and, remember, the unconscious mind doesn’t even think! It’s been programmed through genes and through the environment.
Lesson B: Because we all succumb to the presentation of facts (and fallacies) and not to reality itself, we all need to look at any important decision from all points of view!
Lesson C: People will lock in a sure gain in favor of any risk in the future, but they will let their losses run. (Example: People hold a stock today at 10 that they bought at 70 because they have so much in the stock. This is one of the stupidest things people do. They should take the money and invest in the instrument that holds the highest probability of appreciation and theoretical gain.)
Now, let’s turn the page and move this to a more real world scenario and see how the way people think causes them to make bad decisions, and how you can influence them to do what is in their best interest once they blow it…