Wednesday, August 2, 2017

The Possibility Effect

Heuristic #31 describes the possibility effect; "When highly unlikely outcomes are weighted disproportionately more than they deserve we commit the possibility effect heuristic". This reminded me of the powerball lottery drawing in January of 2016. I remembered this drawing specifically because of the extremely high payout which was about $1.5 billion, the largest lottery prize in history. During this time I remembered seeing so many stories on the news about how families spent all of their savings to buy lottery tickets. One specific story I remember was about a father who had spent his life savings on lottery tickets and he did not end up winning. But why would he? When jackpots soar this high the first thing you hear on the news is the chances of you winning. Those chances are 1 in 175 million. Winning the lottery is a highly unlikely outcome but about 145 million people play each year. Why? Because when the top prize is exceedingly large, the odds of winning don't seem to matter anymore.

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