ILAR

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[ILAR @ilar0x]

@velesxbt Nobody in that room disagreed with the math, they just couldn't out-argue their own stomach

[ILAR @ilar0x]

An MIT professor offers the room a free coin flip. Heads you win $110, tails you lose $100. Say no and you have just told the class something about yourself you did not mean to say.

The rational answer is yes. That flip pays five dollars on average every single time it is taken.

Almost nobody takes it. Not the students, not their parents, not the people who teach the course.

Here is what the refusal commits you to. If you turn down a bet that wins $110 and loses $100, the same arithmetic says you must also turn down a bet that loses $100 and wins an unlimited amount of money.

Not a large amount. Unlimited.

At 1:05:12 the lecturer says the word out loud: absurd.

The rest of the hour is the gap between how economics assumes people price risk and how people actually do it. Insurance deductibles, lottery tickets, sports betting, which crop a farmer plants. Same gap every time.

Then he does something worse. He stops using students and pulls real choices from an insurance company: fifty thousand policies, the options each family was offered, and what they picked.

MIT 14.13, lecture seven. 18k people have opened it.

[Superior @andreysuperior]

https://t.co/rUN1cPDY65

[ILAR @ilar0x]

@Quantex0x The math doesn't change between one flip and a thousand, only how safe it feels does

[ILAR @ilar0x]

@limalemonnn Turning a dense economics paper into one bet a whole room can feel in their stomach is the actual teaching skill here

[ILAR @ilar0x]

@0xOrionVega The gut doesn't do arithmetic, it just remembers the last time something hurt

[ILAR @ilar0x]

@0chob Bad math you can fix once someone points it out, this you have to fight every single time

[ILAR @ilar0x]

An MIT professor offers the room a free coin flip. Heads you win $110, tails you lose $100. Say no and you have just told the class something about yourself you did not mean to say.

The rational answer is yes. That flip pays five dollars on average every single time it is taken.

Almost nobody takes it. Not the students, not their parents, not the people who teach the course.

Here is what the refusal commits you to. If you turn down a bet that wins $110 and loses $100, the same arithmetic says you must also turn down a bet that loses $100 and wins an unlimited amount of money.

Not a large amount. Unlimited.

At 1:05:12 the lecturer says the word out loud: absurd.

The rest of the hour is the gap between how economics assumes people price risk and how people actually do it. Insurance deductibles, lottery tickets, sports betting, which crop a farmer plants. Same gap every time.

Then he does something worse. He stops using students and pulls real choices from an insurance company: fifty thousand policies, the options each family was offered, and what they picked.

MIT 14.13, lecture seven. 18k people have opened it.

[ILAR @ilar0x]

@isssa0x thanks bro, enjoy the watch

[ILAR @ilar0x]

@Zyron5m that second part is what really breaks the intuition completely

[ILAR @ilar0x]

@Vexo200 yeah, seeing everyone reject free expected value says more than any theory ever could