The advantage of this technique is that it converts something potentially very abstract into something that is very tangible. Everyone in a modern society has a personalized intuition about money, the common medium of exchange. No one’s intuition is wrong because it’s completely personal and completely subjective. The correct question to ask in this situation is not “am I right or wrong?” but “does this intuition help or hurt me?”
It allows you to compare your level of certainty or confidence about one thing versus another, on a common scale.
The exact amount you might bet is not important – different people have different bankrolls and risk tolerances. A six year old might bet a few dollars in allowance money where a high roller would bet a million on the same question. Neither your bet nor anyone else’s is “right” or “wrong” or “too big” or “too small” – the important thing is that it helps in your decision-making process
Even the same person will change their level of risk tolerance in response to their inner feelings, mood, and physical state. (A real-world example – why do you think casinos provide alcohol at the gaming tables?)
I recommend using this technique frequently. It’s a great “gut check” when you have a decision to make. It scales from the smallest (“which cafe should we go to for coffee?”) to the largest decisions (“should I take this $10B offer for my company or hold out for more?”).
Certainty, uncertainty, and emotional engagement
Some things are near absolute certainties. For example, I’d be willing to wager almost any amount of money – perhaps hundreds of billions of dollars – that the sun will rise tomorrow. For that matter, if the sun does not rise tomorrow, it’s probably safe to say that we will be facing larger problems than money could solve. This also assumes that someone else is foolish enough to take the opposite side of that bet – which is the exact reason why no one ever bets on the sun rising. Everyone agrees, no uncertainty and hence no disagreement to be resolved through a wager.
Other things are reasonably guaranteed but don’t fall into that “absolutely certain” category. I’d be willing to wager a few thousand dollars that I could drive from Boston to New York in ten hours. It feels like a pretty safe bet because there’s enough time for a Plan B and even a Plan C if things go wrong. (Three hours, not so much.)
Then there are the true gambles, where the outcome really could go either way – if not exactly 50/50, at least close enough to it to be interesting. Research suggests that the greatest excitement and emotional involvement comes from the greatest uncertainty. The psychologist Robert Sapolsky discusses this in a brief video.
In football, if it’s the fourth quarter with ten seconds left and one team is ahead 43-7, the outcome is certain. In those situations, fans in the stands are emotionally disconnected, people start to leave to get ahead of the traffic, and for all practical purposes, the game is “over”.
On the other hand, if the score is 14-17, and the losing team is in position for a touchdown with only a few yards to go, the outcome is much less certain. The players, coaches, and fans are certain to be much more focused in the second case.
Motivation and behavior change
We can think up lots of situations in our human lives where a person has a fairly high degree of control in the big picture, but somehow manages to drop the ball in the day-to-day decisions that ultimately add up to the big picture. Examples include retirement savings, healthy eating and weight loss, smoking, and many more.
In these situations, even though people “know” that their short-term decisions may be bad ones, they play a variety of mind games with themselves to keep negative habits going. It’s not a question of intelligence or information. Intelligent and well-informed people may even be at a disadvantage since they can cobble together more complex rationalizations that are supported by more facts (or “facts”).
In these cases, hacking your own mind through actual – not hypothetical – gambling can be a highly effective solution. Making bets with friends that you can gain 10 pounds of muscle or drop 10 pounds of fat is a great way to create tangible stakes beyond the abstractions of “look better” or “feel better”. This also brings in the forces of social and peer pressure, as well as peoples’ powerful desire to be consistent and accountable, in order to activate their personal power to create change.
Gambling and decision making
So there you have it. Using the power of uncertainty, and our natural excitement about gambling, we can help ourselves make better decisions in both the short term and the long term. By making intelligent bets with ourselves, and with trusted peers, we can take charge of our minds and go for the best possible long-term outcomes. Happy gambling!
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