Would You Take This Bet?

I want you to consider this bet. Here's $10; this could be yours if I flip this print in the air. You guys call it in the air. If you're right, I'll give you the $10. If you're wrong, you give me $10.

That's not a good bet for me, I guess. In principle, I don't agree with the idea of betting. Okay, okay. But what if we just use this as like an allegory for life? You know, it's not really about money and betting on a coin; it's more about our approach to risk. My approach to risk is so obviously a lot less than—here's you wouldn't do this bet, huh?

My gut says don't bet. Why is that? Because at the moment, I have ten dollars, and later I might not. So people are passing up the opportunity to win ten dollars of my money. But it kind of makes sense because they have to risk ten dollars of their money, and it's a 50-50 chance. So really, the bet has zero value.

What if I sweeten the deal? What if I put up twelve dollars to your ten? You only stand to lose ten; you stand to gain twelve. How's that sound? I wouldn't—I still wouldn't bet. I feel like I'm better off just leaving it as it is.

I love you fifteen dollars; you only have to put up ten! I'm putting up fifteen! I'm offering you $5! Why not? What about twenty? As high as I'm going today? $20, that is the top! It's two to one.

I just don't like taking that much risk. You don't like risking ten bucks? Sure. Alright, ten dollars I am. But why don't you value my twenty dollars? But you've got a 50% chance of right here if you take—if you accept the bet.

I don't know; I can't tell you. It's not like a—I don't know what the logical reason is for wanting that. I don't know, I can't—I just feel it's not right. Now, this doesn't make sense. I've offered people up to $20, and they're still refusing to take the bet. The bet is objectively in their favor.

I'm in a 50 percent chance of winning 20 plus a 50% chance of losing 10 still gives the bet an overall value of $5. Why is it that you won't— you won't go for this bet? I don't know, because I don't want to lose $10 just because of Daddy's Betty's a week. I know, but you could win $20. Think about the game!

I don't know; I'm thinking more about what I lose than what I win. I think that's exactly the point because we feel losses more than we feel gains. There's an asymmetry in the way people perceive gains and losses. Losses are felt much more intensely. In fact, psychologically, most people weight a loss around twice as heavily as a gain. But this varies from person to person.

What if I go to $30? I said even if you had $50, I would still feel the same way. $50 to $10, that would be reasonable. That's when you would say yes? Possibly. You're gonna have to give me like a hundred! This is known as loss aversion. To avoid risking a loss, people will pass up even very favorable bets.

But is there a way to overcome our over-sensitivity to losses? Let me ask you this: what if I offered to do this ten times in a row? Same deal $20 for your $10 flip in this coin. But then I'd be losing $10 each time.

One, you might be. You'd be risking $10 each time. But you know this is 50/50, and you know that I'm giving you ten chances. Is that a better deal to do it repeatedly? I didn't think so. What about a hundred times? It doesn't get better.

No, if we played enough and I had enough, you know, the stake of $10, then eventually, yes, I would make more money. Yes, what does repeating the same bet change? I don't think there's a rational thought behind it; it's just a feeling that one gets when presented with the opportunity.

I don't know; I think there is a rational reason behind it. Is it? Yeah, because the coin is gonna be 50/50. You don't know one toss; you're only gonna get one outcome. But in a hundred tosses, you know that it's gonna be somewhere between like 45 and 55 times it's gonna go your way—45 to 50 times, 55 times it's gonna go my way, right?

The point is every time it goes your way, you win twice as much as you lose when it goes my way. So the point is doing it a hundred times; you're basically guaranteed to win money. No, no, it's not more chances of winning; it is you are guaranteed to win money.

In fact, the expected value of a hundred of these bets is a win of $500, and there's only a 1 in 2,300 chance of losing any money at all. So even if you weight losses twice as much as gains, a hundred bets is indisputably favorable.

So here's the thing: how do you accept a hundred of these bets if you won't first accept one of those bets? This experiment is not about gambling. It's not to encourage you to go to the casino, where the odds are definitely stacked against you. Instead, it is a metaphor for all the little risks and opportunities that come our way in our lives.

I mean, if you view each one as an independent event, you will often say no to even very good bets because you're afraid of the loss. So if instead you can see each little bet as one of a series of bets, then you realize that if you take that bet every time, you may win and you may lose. But overall, on the aggregate, you will come out ahead.

It's heads! It is! He's just won himself 12 bucks! Whoo-hoo! Tails, the 10 bucks is yours, sir. Ladies, sir, heads! Thank you very much! 120 bucks! See, it pays to take the risk!

Yes, this is unbelievable! My stroke of luck today has been terrible; everyone's won off me anymore. I'm finding myself—okay, that's honestly my money! Really?

Yeah, this video is in fact a bit of a risk for me because I'm giving out all this money, and it's only gonna make money on YouTube if like half a million people see it. So if you like this video, then you should share it with your friends so that this actually turns out to be a positive bet for me.

Okay, I'll do that! Yeah, share it! Share it with your friends! It's Veritasium; it's the name of the website. There, it's Veritasium. So would you take this one-off bet? Let me know in the comments below and tell me how much money I would have to put up in order for you to risk your $10.

Now, this video was inspired by the book Thinking Fast and Slow by Daniel Kahneman, which I've recommended before because it's awesome, and it also inspired me to make these cool videos. So check them out if you haven't already. But since I've recommended this book before, I'm gonna recommend something different today: my friend Phil Plait's book Bad Astronomy, which is all about misconceptions and misuses of astronomy, from astrology through to the moon landing hoaxes.

It is an awesome book, so you should definitely check it out, and in fact, you can download it for free by going to audible.com/veritasium or you can pick any other book of your choosing for a one-month free trial. Audible is a great audiobook website with over 150,000 titles in all areas of literature, including fiction, nonfiction, and periodicals.

So I really want to thank Audible for supporting me, and I want to thank you for watching.