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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

#51

Post by marquis »

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…

You make a good point about the magnitude of numbers they chose to use. I'm not wealthy by any means but I can afford to lose $1500. I would definitely choose to put up this amount if the odds were really 13%. This is assuming that the 'game' (i.e. startup idea) is in my area of specialty, and I felt it was not just a dice throw.

I would never gamble this amount, and I would not put up $15,000 or $150,000 unless I were part of the team. I wonder how my own magnitude levels will change as my personal income increases. I remember as a student saving a few dollars for the weekend for a beer, and now I'll grab a taxi for those few dollars every day without even thinking about it.

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

#52

Post by joshu »

rkosai wrote: post #50
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?

I certainly don't on things I can easily afford to replace.

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

#54

Post by joshu »

dirtyaura wrote: post #45
aristidb wrote: post #31

Earlier quoted context omitted.

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 c…

As I said in another comment, i tested this exact question out on mechanical turk: http://joshua.schachter.org/2008/09/amateur-economist.html

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

#55

Post by moron4hire »

rkosai wrote: post #50
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?

I have car insurance because it is legal mandated. I don't have health or life insurance.

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

#56

Post by gojomo »

rkosai wrote: post #50
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?

Only when it's legally/contractually required (car/financed-house), or comes with negotiated discounts (health), or handles a catastrophic/risk-of-ruin situation (chronic disease/business liability).

Insuring against small losses is a net financial loser, or else the insurance company wouldn't offer it.

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

#57

Post by JoeAltmaier »

zzleeper wrote: post #46
siglesias wrote: post #20

Earlier quoted context omitted.

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..

I abhor gambling - risk assumed for Nothing - except entertainment. Shudder.

I'm a serial lifetime Entrepreneur.

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

#58

Post by bugsy »

The questions are so abstract that they don't say much about me other than if I understand standard economics theory.

In real world situations I always have a measure of difficult to quantify control over the situation, which is completely different than the raw random chance gambling the test checks for.

For example, I would never buy a lottery ticket because that is stupid, but I would definitely spend 3 years of my time working obsessively on something that everyone in the world other than my self says has a one in a billion chance of succeeding, because the fact is that I will succeed.

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

#59

Post by mswen »

I find that I sometimes choose the start-up (pure or within a larger corp.) because it is fundamentally more interesting to make something new or innovative than to do work that would be financially more certain.

It is not that the financial reward for a big hit wouldn't be exciting, but it certainly isn't the only reason I tend to gravitate toward start-ups or start-up like situations.

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

#60

Post by powrtoch »

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.

Then why didn't you answer according to what you think you would actually do? The idea of the test was to gain insight into your personality with regard to risk and reward. If you can't honestly see yourself accepting a (.4 * $1000) loss over a $50 loss, then you answered incorrectly according to what the question was actually asking.

Personally I had the same dilemma, but I found it revelatory to really look inside myself and see if I could do what expected utilities would dictate. It was especially difficult on the loss questions, as I have very little capital to my name.

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