I’m here to deliver the bad news. You won’t do it - you don’t have the courage.
Let’s look at the behaviour of contestants on Channel Nine’s Who Wants To Be A Millionaire quiz show...
Until Sydney’s Rob Fulton took the prize in 2005 not an single contestant in a decade of shows had had the courage. Nine had been offered a chance to answer the million-dollar question. All nine had baulked, preferred to walk away with half that rather than risk it.
British economist Ian Walker examined the behaviour of UK contestants in a study entitled "Who Really Wants to be a Millionaire?"
He found that most of the 500 contestants he studied quit while they were ahead. Almost all quit when their winnings reached £125,000 (about $300,000).
Away from the pokies are notoriously and unreasonably cautious when we are offered even small gambles.
If I offer you a 50-50 bet: heads you win $200; tails you lose $150 – you should accept. It’s a brilliant deal. But most people won’t.
A few years back economist Baba Shiv and a team from Iowa University gave a roomful of locals $20 each and offered them 20 chances to bet with it on the toss of a coin, risking $1 each time but knowing they would make more than $1 each time it came up heads.
Another brilliant deal. But the locals accepted only half of the time.
Then he did something bizarre. He performed the same test on a group of Iowa residents who had either suffered a stroke or survived brain surgery. What they had in common was a damaged prefrontal cortex, the part of the brain that processes emotions.
The brain-damaged individuals turned out to be much better investors than the Iowa residents with brains intact. Given $US20 each and the same 20 chances to accept the attractive bet, they accepted more than 80 per cent of the time. They did better than their counterparts with undamaged brains.
When the study was published in the journal Psychological Science the newspaper reports were sensational. One asked: "Are successful investors emotionally brain damaged”.
But that’s not the point.
The point is that there is something about our emotions that makes us cautious when it comes to risking our winnings – too cautious from a coldly calculating point of view.
That’s why neither of us will ever be really rich.
References:
Hartley, Roger & Lanot, Gauthier & Walker, Ian, 2006. "Who really wants to be a millionaire? Estimates of risk aversion from gameshow data," The Warwick Economics Research Paper Series 747, University of Warwick, Department of Economics.
Shiv B, Loewenstein G, Bechara A, Damasio H, Damasio AR: Investment behavior and the negative side of emotion. Psychological Science Volume 16—Number 6
