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Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

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Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#21

Post by mdda »

nkurz wrote: post #8

I just went through it, choosing almost exclusively certainties. I'm definitely an entrepreneur, although currently a very struggling one. I fear the survey is going to be incredibly influenced by income level and current financial security. If you had changed the magnitudes of the numbers, my answers would have been completely different. I can do the math, but I also know that my immediate financial needs are unmet…

It seems to me that they should first ask how much of a fine would you be able to pay without having to check on your checking account (for instance). That way they could scale the questions a little.

There's obviously an emotional point at which the questions stop being a mathematical puzzle, and make one reflect on one's appetite for risk : that's really what they mean to be investigating.

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#22

Post by cookiecaper »

I didn't like this test very much. The financial questions are highly dependent. I guess I was relating to a hypothetical situation rather than the one I'm in now, but I don't think the choices here have anything to do with entrepreneurship; they're all circumstantial.

As all entrepreneurs know, things can fluctuate quickly; there are times when $50 today, little as it is, is more important than the potential of $5000 in the distant future, there are times when you need all the fumes you can get to keep things running. Then there are times when there is a lot of cushion available and $50 today is almost so worthless it's not worth considering -- in that case, of course it's better to take the gamble.

This test has very little to do with entrepreneurship. I ruined it for everyone and just chose random things.

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#23

Post by siglesias »

llimllib wrote: post #13

I'm sure that my behavior does not reflect my answers on this test. Given the numbers, I calculate expected value and answer rationally. In real life, a) the values and percentages are much less clear and b) even if they weren't I know I don't follow them as rationally.

This is the point that I'm trying to get at. For Arrington to assert that entrepreneurs are "different" because they like risk, adventure, he is claiming that they knowingly choose bad deals. He is saying that these bad deals are compensated for not by money, reward, but the thrill of doing a startup. Hmm.

We get a thrill from gambling sometimes even though we know that the odds are stacked against us. Arrington is drawing the same analogy for entrepreneurs, and that's a bad analogy. It's a romantic notion, but I don't think the monetary valuation of an entrpreneurial venture is negative in the minds of entrepreneurs.

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#24

Post by mian2zi3 »

llimllib wrote: post #13

I'm sure that my behavior does not reflect my answers on this test. Given the numbers, I calculate expected value and answer rationally. In real life, a) the values and percentages are much less clear and b) even if they weren't I know I don't follow them as rationally.

Same here. The only "interesting" choice was when the safe/risky options had the same expected value.

The percentages are much less clear, as are the payoffs. I was attracted less by the monetary payoff of the entrepreneurial life than the other, less tangible benefits: responsibility, control, independence, learning opportunities, challenge, etc. I'm not attracted to safety, I'm afraid of boredom.

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#25

Post by bambax »

I'm really not sure it means much to say that people are "risk-adverse" or not; humans (and monkeys! see http://www.ted.com/talks/laurie_santos.html) are BOTH: they prefer to play it safe when they expect a gain, and prefer risk when they expect a loss.

For example, people (in general) prefer $500 now than a 50% chance of $1000, but the same people prefer to take a 50% chance of losing $1000 than losing $500 now with certainty.

Behaviorists call this "irrational" because the two cases are the same: whatever you prefer, you should prefer the same, that is:

- if you're "risk adverse", you should prefer the certain outcome in both cases

- if you have a preference for risk, you should take the chance every time.

But it's not what happens; to repeat, the same individual usually prefers the outcome that is certain when the expected outcome is a gain, and usually prefers to take a chance when the expected outcome is a loss, even when those options are mathematically identical.

So, if one wants to show that entrepreneurs are different from ordinary people as regards to risk, they should study at least those two dimensions: gain/loss. And since most people prefer risk when confronted with a possible loss, then entrepreneurs would have to either

- prefer risk always when confronted with a possible loss

- prefer risk more often when confronted with a possible gain.

- - -

If there actually is a difference between "entrepreneurs" and other people, it may be that entrepreneurs have a higher confidence in their own capacities, so that they think that they can influence the future in a good way.

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#26

Post by groby_b »

llimllib wrote: post #13

I'm sure that my behavior does not reflect my answers on this test. Given the numbers, I calculate expected value and answer rationally. In real life, a) the values and percentages are much less clear and b) even if they weren't I know I don't follow them as rationally.

Well, I think that's true for pretty much all surveys. If you are reasonably intelligent, it is actually hard to not figure out what is really asked and give answers based on how you would react instead of how you should react.

I've never seen a survey that wasn't easily manipulatable. So I guess we have to rely on people to try to be honest...

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#27

Post by groby_b »

bambax wrote: post #25

I'm really not sure it means much to say that people are "risk-adverse" or not; humans (and monkeys! see http://www.ted.com/talks/laurie_santos.html ) are BOTH: they prefer to play it safe when they expect a gain, and prefer risk when they expect a loss. For example, people (in general) prefer $500 now than a 50% chance of $1000, but the same people prefer to take a 50% chance of losing $1000 than losing $500 now wit…

That's a rather important point. Loss and gain are not symmetrical in most cases. I actually wonder if there's a study that looks at that in relation to actual wealth - it's easier to risk a loss if it doesn't materially affect you.

HN, anybody know of something like that?

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#28

Post by dfranke »

You should have asked some questions with larger amounts of money at stake, and also asked our current net worth, income, and savings rate. I have enough savings now that my preference for certain outcomes over $2500 intervals is pretty small. If I were living paycheck-to-paycheck I would have given very different answers.

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#29

Post by JoshCole »

llimllib wrote: post #13

I'm sure that my behavior does not reflect my answers on this test. Given the numbers, I calculate expected value and answer rationally. In real life, a) the values and percentages are much less clear and b) even if they weren't I know I don't follow them as rationally.

Completely agree, this felt more like a test of basic math skills than a test of behaviour. In real life it tends to be a lot harder to be able to calculate expected value, with some exceptions especially with card games.

Re: Are Entrepreneurs Pirates? 4min Test for HN by Behavioral Economist Dan Ariely

#30

Post by crocowhile »

These tests are flawed because the absolute value of the money we're dealing with is too much of a variable between subjects. $1500 is not much for subject A to lose or gain but it is for subject B.

A test should account for that if we want results to be comparable across subjects.

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