Say you’ve got an important presentation on Monday that could make the difference in whether a project gets green-lit or not. Would you spend a few extra hours prepping for it over the weekend to make sure it goes well, or blow it off and go out with friends? Now say the presentation has a low chance for success anyway—would that change your willingness to put in the hours?
If you’re like most people, it would, according to new research by Haas Associate Professor Ellen Evers, doctoral student William Ryan, and Stephen Baum, PhD 23, of the Olin School of Business (Ryan and Baum served as co-lead authors). They found that in all kinds of different situations, people underinvest time and resources to improve their chances when success is already unlikely, and yet overinvest in situations where that are likely going to be successful anyway.
“We make these improvement decisions on a daily basis,” Evers says. “Passing or failing a test, making sure we get a job, making a new friend. When you think about it, they are everywhere.”
Weighing chances of success
On a more consequential level, a doctor might have to decide how much time to invest in saving a dying patient, or a government official could face a decision on how much money to invest in preventing a terrorist attack. “There’s always a trade off between how much we’re willing to invest to maximize our chances for success.”
On a strict percentage basis, the initial chances for success shouldn’t factor into one’s decision on investing extra resources. Whether increasing from a 10 to 20% chance of success or an 80 to 90% chance, you still improve your chances by 10%. The researchers chalk up the disconnect to an emotional response: the fear of future regret. “If you already have a small chance of succeeding and you fail, then it’s easy to say, it wouldn’t have mattered anyway,” Evers says. “But if you had a 95% chance and you don’t make it, you’re going to be like, wow, it’s really my fault.”
The results point to the importance of taking the power of emotions into account when considering a decision, and—counterintuitively perhaps—putting emotions aside the most when stakes are highest.
In the first set of experiments in the paper, forthcoming in Psychological Science, the researchers asked people in the lab and online how much they would pay to increase their chances in a lottery of winning $10 by 10%. In all circumstances, the correct answer should be $1. And yet, they found systematically that people would pay as little as 50 cents when their initial chances were only 10%, and as much as $3 when starting with 80%.
Focus on the gain
Interestingly, the researchers could make this effect go away entirely by framing the situation to focus on the gain rather than the loss. After all, if you start with 10% and increase to 20%, you are doubling your chances to win; whereas if you increase from 80% to 90% you are only increasing your chance to win by 1/8. “It shows that people naturally focus on how much of the loss is their fault,” Evers says.
On the other hand, they could increase people’s willingness to overinvest in these decisions by ratcheting up the emotional intensity. In another experiment, they presented people with the option to buy a pill that could reduce their risk of getting a seasonal cold, once again offering situations in which the initial likelihood of getting the cold was high or low. Once again, they found that people were more willing to pay for the medicine when chances of getting the cold were already low—around $15 compared to $10.
But they also found people were willing to pay a premium when symptoms of the theoretical cold were more intense. Again, the researchers say, the finding emphasizes the power of regret, since if you get sick for a week, the consequences are higher than if you get sick for a day, causing people to invest more heavily. While that might make sense from an emotional standpoint, Ryan notes, it means people are more likely to make mistakes in valuing probability when the consequences are highest. “Sometimes we think people make mistakes because they don’t care enough and are not paying attention,” he says. “But this is just the opposite of that—they actually care too much.”
Experts do no better
Nor are people better at making these decisions when they have more expertise. In another experiment they asked actual doctors whether they would be more willing to invest time to improve a patient’s chance for survival from 10 to 20% or from 80 to 89%. Even though the first scenario was objectively better—representing a 10% increase compared to 9%—they found that more than half the doctors chose the second. Even when the researchers skewed the scenario more heavily, 45% of doctors still preferred improving the 2nd patient’s chances of survival by just 5% (from 80% to 85%) instead of improving the first patient’s chances of survival by 10%.
“It’s really important that doctors as a group are good at making these kinds of decisions,” says Ryan, the lead author on the paper. “If every doctor in the healthcare system did this, then fewer patients would survive overall.” At the same time, they speculate, the emotional costs of losing a patient are so high, doctors repeatedly learn the wrong lesson. “If they have a 10% chance of survival and pass away anyway, you never know if helping them more would have mattered,” Evers says. “But if a patient had a high chance of survival and they pass away, you are going to carry that for the rest of your life.”
One way of getting around that kind of distorted thinking is to think of these decisions in the aggregate—for example, investing in extra effort to save 10 extra patients for every 100, rather than increasing one patient’s chances for survival by 10%. Another strategy is to try and remove emotions from the situation as much as you can to minimize distortions. “If you want people to make better investments, then the worst thing you can do is say, ‘This is really important,’” Evers says. Since we all win some and lose some, reminding ourselves that it’s not all our fault can help lessen feelings of regret when things don’t work out—and help us achieve better rates of success over time.