The Undoing Project is a recent book by Michael Lewis (author of Moneyball, Liar’s Poker, and The Blind Side, among others). It follows the careers of two Israeli psychologists, Daniel Kahneman and Amos Tversky, as they break new ground and basically invent the field of Behavioral Economics. I’ve written about these guys before and one man they greatly inspired — Dan Ariely.
Today I want to talk about the Undoing Project itself and the psychology of regret. Had I understood these concepts better many years ago, I would have never written a particular article that I now intend to revise.
When somebody wants to “undo” something, they usually think about relatively easy ways it could be accomplished. For example, Andy is driving and reaches an intersection just at the point where it’s a very close call whether to speed up and go through the intersection when the signal is orange or slow to a stop and wait for the next green. Andy’s decision may be the same or different from yours, but all drivers have occasionally experienced this sort of thing.
Regardless of whether Andy sped up or slowed down, let’s assume that at the next intersection, his car was sideswiped by another car which caused considerable damage, although thankfully Andy came out okay.
If Andy wanted to think about how this could have been undone, his mind would naturally go back to the speed-up-or-slow-down decision he had just made and conclude that if he had done the opposite, he would never have been sideswiped. He would not, typically, think that if the other driver had been killed the week before in a drive by shooting, then Andy would have avoided the accident. People just don’t think that way — but frankly, either “solution” would have kept Andy’s car from being crumpled.
When I read about this, I thought back to an article I had written perhaps 20 years ago. Seems like I was playing $1 10-7 Double Bonus at the Orleans and a woman sitting nearby commented, “I’m glad I didn’t hit it.” She was playing only four coins and had been dealt A♠ K♠ Q♠ J♠ 7♦. She threw the 7 away and ended up with a worthless 6♥.
I commented that if she had hit the royal, it would have been worth $1,000 rather than the nothing she received. I thought she was basically an idiot for preferring $0 to $1,000.
The thing is, though, that if she had hit the royal, she would have felt terrible that she hadn’t been playing max coins at that time. She would have seen it as a $3,000 loss rather than a $1,000 gain. The pain of losing $3,000 (even though it’s all in her mind) was bigger than the pleasure of actually winning $1,000.
Since I had studied economics before Kahneman and Tversky came along, I “knew” that having $1,000 was better than having $0. There was just no other way to look at it insofar as I was concerned. This woman was being very foolish.
Now, I realize that this woman isn’t alone in her thought processes. When she wished to “undo” the results of a “mere” $1,000 jackpot, she normally would think that, “I should have been playing five coins.” She “knew better” and now was being punished for only playing four coins. The pain she would feel would be very real to her.
I, of course, would have recommended she play one coin or five — depending on bankroll considerations, but never four. Still, that ship had sailed and she bet four coins. Although I still feel betting four coins per hand was foolish, I have more empathy for her “I’m glad I didn’t hit it” statement.
Kahneman and Tversky showed, with clever empirical research, that humans, contrary to classical economic thinking, are not rational actors. One of the ways this manifests itself is irrational risk aversion. Also, “framing” can skew the choices made in one direction or the other even when those choices are mathematically equal (and therefore, a rational actor should be indifferent to the choice).
It’s hard to get away from this even when you realize it’s occurring. You bring $1000 session bankroll, you get down to $40, then you miraculously recover and get back to even. The next day, you work that same $1000 up to $1960, but saying that you’ll quit when you reach $2000, you go into a death spiral and fall back to $1000. I’ll bet you felt a LOT better the first day than the second. Yet, the outcomes were the same!
The trick, of course, is to be dispassionate and treat your entire life as one long session. But it’s hard to take a half-royal single session loss with equanimity, as it is hard to not get euphoric when you hit three royals in a week. It’s also hard, for that matter, to draw one card to AKQJ of spades and just think that the hand is worth +19 bets (or whatever) and not be affected by the actual outcome.
Empathy is always a fine response, but factoring a psychological cost here may do a disservice to the player. Future action bears consideration.
A child, approaching a pan fresh out of the oven with cookies is more effectively made wary of touching the pan through a one-time burn than repeated warnings by his/her mother. In the circumstances you outline, the player will continue to regard 4-coin play rational until she suffers the “burn” of a short coin-royal.
While the player may not immediately acknowledge it, that pain will ultimately be compensated by higher EV in her play. I trust in player rationality; once a lesson is learned, they’ll ultimately highly value the associated benefit.
Harry said: “I trust in player rationality; once a lesson is learned, they’ll ultimately highly value the associated benefit.”
You’re a more trusting soul than I am. If player rationality could be counted on, you’d never see casinos with, say, both 8/5 and 7/5 Bonus Poker for the same denomination — and both games getting play. You’d never see 6/5 and 3/2 Blackjack in the same place. You’d never see machines with autohold recommend holding two pair from KK442 with players time-after-time “unholding” the fours and just holding the kings.
Players are creatures of habit and they will do what they do. 46 times out of 47 when they draw one card to a suited AKQJ while being short-handed they will be “rewarded” for playing short coin. One time in 47 they will get burned. Thinking that getting burned once or twice will “cure” them is, in my opinion, very naive.
I’ll expand on what Bob just said. If players/people in general were rational, no one would play any casino games at all, except for those ones that offer a player advantage. No one would play roulette, for example, knowing that putting $100 on Red is the functional equivalent of setting fire to a $5 bill. So casinos wouldn’t exist if people were actually smarter than a tub of cottage cheese. And all of us AP types would have to make a living in some less socially pointless way.
You can also posit that good casino games (with low -EV) wouldn’t exist if people played them well. Craps probably wouldn’t exist if people stuck to the pass line and took full odds. VP wouldn’t exist if everyone played it well. And for a long time, good BJ existed only because a given number of people hit hard 14s when the dealer was showing a 6. So hooray for morons, I say.
I consider myself a very rational person. I teach undergraduate statistics and would rather play $25 3/2 blackjack than $5 6/5 blackjack. I would also not play without knowing basic strategy. I also know that realistically I am losing about $.13 per hand at the $25 table and only $.10 per hand at the $5 table. If someone only has a $100 – $200 bankroll to have some fun with, would not the rational play be to sit at the 6/5 table?
I have friends with season tickets for the redskins. These tickets cost thousands of dollars. I can’t rationalize this expenditure, but most people think they are living the American dream. I love pai gow poker. I can drink and socialize with what tends to be an older but very fun and happy go lucky crowd. If I sit there for 4-5 hours drinking more than I should, but not getting sloppy, laughing the night away for $200 – $250 ( it is not rational to think you will come out ahead over that timeframe with a house edge of about 2.72%, but at $20 per hand @ 20 hands per hour the mean is only $55 down over 5 hours) I feel I have had a fantastic and economical evening. I just spent less than my Redskin friends, less than someone who went to see Cher in good seats for perhaps 90 minutes. I think I made a very rational decision, and I know I now have a nice comped diner waiting for me that will extend my great time by another hour.
Recreational players know very well what the house edge means and accept this as the cost of entertainment. I hold every True AP player in the highest regard. I would just have to quit my job to become one and I love teaching too much to do that. I will cut the house edge where I can and Mr. Dancer got me interested in VP. I play JoB very well now and it has expanded my fun during my yearly Vegas visits. I happen to be a winning holdem player at the $1/2nl level at well over the min. Wage level over the past 15 years, but that just is not as fun as it used to be and I will not drink while playing any true strategy game, Pai Gow does not really count because the strategy is just too basic.
Please don’t think something is irrational just because you can’t rationalize it. Sometimes there is very sound logic behind it.
I agree with the ‘hooray for morons’ reply. If it weren’t for morons, we’d have only 85% return games.
If someone asks me a question, I’ll answer to the best of my ability. Otherwise my mouth remains shut.