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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

#41

Post by orangecat »

TWAndrews wrote: post #17
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…

Without a doubt. For instance, I will always take a $50 loss over any chance of a $1000 loss, because $50 one way or the other barely has in impact on my day, let alone my life. $1000, on the other hand is significant. If however, the questions had been about $500 vs. $10,000, I'd have to think a bit more carefully.

For instance, I will always take a $50 loss over any chance of a $1000 loss

That's almost certainly not true. 0.1%?

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

#43

Post by samd »

Creating a successful startup confers more than just financial rewards. There are a myriad of other rewards like recognition and professional freedom that factor into the risk calculation. Depending on how much people value those non-monetary things it could be perfectly rational to take the option with a lower expected monetary value.

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

#44

Post by JoeAltmaier »

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.

There was no beta attached to the time-value of money - so it was no way to measure the risk.

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

#45

Post by dirtyaura »

aristidb wrote: post #31
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.

Behaving on expected value is not rational.

Exactly.

Choosing between

a) 100% chance of $10 vs 10% chance of $100

is very different question than choosing between

b) 100% chance of $100K vs 10% chance of $1M.

or

c) 100% chance of $1M vs 10% chance of $10M.

I think many people will choose 10%/$100 combo of a) just for the thrill.

The latter two are of course dependent your financial situation, but hit an interesting sweet spot for YC crowd.

What would be your choices?

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

#46

Post by zzleeper »

siglesias wrote: post #20
herf wrote: post #16

The experimental setup isn't great: the HN population almost certainly has an elevated level of education in areas like math and statistics. I don't think you should ever compare subjects who can compute "expected value" with ones who can't. Personally, I don't believe I can give great answers for this, because I'm conscious there's an experiment going on.

Here's a question: how does this assertion sync with Arrington's claim that entrepreneurs would choose low-to-negative expected value projects simply for the thrill of gambling, as it were? What's going on here?

Hi Samuel,

I think entrepreneurs are not so enthused over gambling as you would believe (gambling as in casinos & slots, or an online questionnaire).

I think that what matters more is the intrinsic value of building something, but I'm not sure about how to measure it..

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

#47

Post by Natsu »

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.

I'm glad to see that I'm not the only one who calculated EVs.

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

#48

Post by Natsu »

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…

That just means that your utility curve isn't flat. In other words, you value very large sums more than smaller ones.

And people who honestly can't afford the certain $50 penalty might be forced to take a chance of a $1000 loss even when it doesn't make sense (assuming a flat utility curve), etc.

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

#50

Post by rkosai »

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.

Based on all these "rational actor" responses, I take it none of you purchase insurance?
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