Emotions & Risk
In a simple experiment, volunteers were told to imagine being called to the doctor's office for an urgent medical matter. Another group was not burdened with imagining such a stressful event. Both groups were then asked to pick between a relatively safe 60 percent chance of winning five dollars or a riskier 30 percent chance of winning ten dollars. The anxiety-induced people were much more likely to take the safe bet.[i] This simple experiment illustrates how we fail to understand that our emotional response from one event can affect our ability to make decisions regarding an unrelated event.
The anxiety factor can be even more complex. In another study, men were asked to think of either three or eight factors increasing their chances of heart disease. Those who named only three factors rated their overall risk of heart disease higher than those who were forced to think of eight.
Experimenters concluded that men forced to think of eight had to work much harder. (Try coming up with eight yourself!) They subconsciously thought, If it's that hard to think of eight reasons, my risk must not be that great! Conversely, those who had to think of only three found the short list easier to recall, making the risk seem more real.[ii] Herein we find a serious problem with assessing risk: the easier to call to mind, the more real the risk seems.
This "ease to call to mind" is influenced by other factors.
"Recency," as discussed earlier, is one.
But even more powerful is how vivid the event seems. For example, people pay twice as much for hospitalization insurance for a specific disease than for a policy that covers any medical issue. "Any issue" is vague but "cancer" is vivid.[iii]
Likewise, people fear an attack, clear the beach, and even stay away from the ocean altogether at the slightest mention of, "Shark!"
But the odds of being killed in a shark attack are 1 in 3,943,110! Compare that to the odds of dying in a motor vehicle accident: 1 in 88! But we don't think twice about climbing into our cars every day. Thanks to movies like Jaws we can envision those ferocious shark teeth. We can easily recall the image and trigger an anxious response, coloring our perception of probability.
[i] Jason Zweig, Your Money and Your Brain, 130.
[ii] Ibid., 131.
[iii] Ibid., 157.