Speaker 1: Welcome to Stuff to Blow Your Mind production of iHeartRadio.
Speaker 2: Hey, welcome to Stuff to Blow Your Mind. My name
Speaker 2: is Robert Lamb.
Speaker 3: And I'm Joe McCormick. And in today's episode, we're going
Speaker 3: to begin a series in which we look at a
Speaker 3: phenomenon studied in psychology, economics, and decision theory which is
Speaker 3: called ambiguity aversion. Ambiguity aversion is when we prefer risks
Speaker 3: with known probabilities over risks with unknown probabilities, even if
Speaker 3: you have no reason for thinking that the unknown risks
Speaker 3: will be worse than the known risks. And we'll get
Speaker 3: to some concrete examples and foundational research on this in
Speaker 3: a bit, but to an approximation, a good way to
Speaker 3: think about this is that ambiguity aversion is the sentiment
Speaker 3: expressed in the saying, better the devil you know than
Speaker 3: the devil you don't. This is an aphorism I feel
Speaker 3: like people often quote when they're about to justify making
Speaker 3: a really bad or indefensible decision. And the whole point
Speaker 3: of this saying is that the devil you know is
Speaker 3: already bad. That's usually implied, and there's no indication that
Speaker 3: the devil you don't know will be worse. It could
Speaker 3: well be a kinder, gentler devil with a less pointy pitchfork.
Speaker 3: But still we often find ourselves thinking, I'd just rather
Speaker 3: stick with the one where I know how pointy it
Speaker 3: is upfront.
Speaker 2: Yeah, it's often a form of indecision, like refused to
Speaker 2: do anything about the current devil situation, but you know,
Speaker 2: at least I know this devil. Next devil could be worse.
Speaker 2: I don't want a worst devil, that's right.
Speaker 3: This is another one of those aphorisms. We were talking
Speaker 3: about this just recently in the Saint Swithin episode. It's
Speaker 3: one of these aphorisms that I think is only wisdom
Speaker 3: given certain assumptions or conditions that are not really part
Speaker 3: of the saying, Like as stated, it could be purely
Speaker 3: terrible advice, like what if the devil you know is
Speaker 3: really bad? And what if going with the devil you
Speaker 3: don't know gives you a really good shot at improving
Speaker 3: your stay in hell? But also I think it does
Speaker 3: have a kind of wisdom if you don't think of
Speaker 3: it as advice, but rather as an ironic observation about
Speaker 3: human nature, in which case I think it's sort of
Speaker 3: dead on this This is often how we think, and
Speaker 3: that is the core observation also of the ambiguity aversion literature.
Speaker 2: Yeah yeah, I mean because you can also ask, well,
Speaker 2: what if we just didn't have a devil? Is that
Speaker 2: on the table? Can we just not have a devil?
Speaker 2: Why do we have to worry about the devil we
Speaker 2: have versus the devil we don't have yet it's you know,
Speaker 2: it can be, and I guess it's rather condemning human
Speaker 2: nature in that aspect as well, where the answer is, well,
Speaker 2: you got to have a devil where humans we make
Speaker 2: our own and you've got to have one in play.
Speaker 3: You should have thought of that before you double park Rob.
Speaker 2: Yeah, now you're here in hell with.
Speaker 3: The rest of us.
Speaker 2: There's a rather keen Chinese saying that goes along these
Speaker 2: lines as well. It's a well known idiom that states
Speaker 2: that it's quote easy to dodge the spear in the open,
Speaker 2: hard to avoid a stab in the dark.
Speaker 3: Oh that's interesting, because yeah, that's the same idea. It
Speaker 3: isn't necessarily true in all circumstances, like in the dark,
Speaker 3: the person stabbing at you also can't see you very well,
Speaker 3: so it might be hard to dodge, but it's also
Speaker 3: hard for them to hit you. But in the dark,
Speaker 3: you just don't really know, you don't really know what's
Speaker 3: going on, so it just seems scarier.
Speaker 2: Yeah. Absolutely, And it reminds me a bit of another
Speaker 2: Chinese saying, better to be a dog in times of
Speaker 2: tranquility than a human in times of chaos, And this
Speaker 2: has some of the same sentiments as a fourteenth century
Speaker 2: Islamic saying that is sometimes misattributed as being of Chinese
Speaker 2: origin itself, and that is better a century of tyranny
Speaker 2: than one day of chaos.
Speaker 3: Also, don't know if I actually agree with that.
Speaker 2: Well, I don't know. It's I think about it a
Speaker 2: lot for various reasons, and I do. I do agree
Speaker 2: with the basic sentiment of it. When you find yourself
Speaker 2: dipping into chaos. And I'm not talking about like capital
Speaker 2: C chaos, like absolute chaos, but these little moments of
Speaker 2: chaos and disorder, you can easily line yourself up with
Speaker 2: the idea of like, well, yeah, this is why people,
Speaker 2: you know, fall for tyranny. This is because they have
Speaker 2: these moments of chaos and uncertainty and they're like, well,
Speaker 2: I would just rather have this sort of known top
Speaker 2: down oppression in place rather than some sort of ambiguous
Speaker 2: chaos bubbling up around me.
Speaker 3: Better are something that's definitely bad than something I don't
Speaker 3: understand and can't predict.
Speaker 2: Yeah, Now, ambiguity and chaos, we should note here, are
Speaker 2: not the same thing. Ambiguity is a lack of clarity. Well,
Speaker 2: chaos is a state of disorder, and the former may
Speaker 2: well lead into the other. And chaos may be seen
Speaker 2: as a state of absolute ambiguity and certainty as well.
Speaker 2: So in that respect, it becomes even more difficult when
Speaker 2: we try and weigh chaos and ambiguity in our concerns
Speaker 2: about the future.
Speaker 3: I'm just trying to think of familiar, everyday examples of
Speaker 3: ambiguity aversion, and I think I came across one internally
Speaker 3: in the now commonly acknowledged sentiment of not wanting to
Speaker 3: go out and try anything you know, So, like, do
Speaker 3: you ever find yourself trying to find a way to
Speaker 3: avoid going through an experience that is new and unfamiliar
Speaker 3: and thus unpredictable to you? So it seems like, I
Speaker 3: don't know, it just seems kind of fraught, like a hassle,
Speaker 3: And instead of doing that, choosing to have an experience
Speaker 3: that you pretty much know that you will probably not enjoy.
Speaker 2: Yeah, I think I know what you're saying here. Yeah,
Speaker 2: I mean, I mean life is perpetually a situation where
Speaker 2: it's like, am I going to stick with what's comfortable
Speaker 2: or am I going to say yes to adventure? Am
Speaker 2: I going to try something new? And I often find myself,
Speaker 2: you know, at the crossroads of that moment, because there's
Speaker 2: a huge part of me that doesn't want to try
Speaker 2: new things, and I get anxious about the various experiences
Speaker 2: aligned with those kinds of quests. But on the other hand,
Speaker 2: I have to recognize that like most of the really
Speaker 2: fulfilling things in my life have been because I said
Speaker 2: yes to adventure and because I took a chance on
Speaker 2: something and I went out of my comfort zone. But
Speaker 2: then again, we call it our comfort zone because it
Speaker 2: is comfortable. It is a nice place, it is a
Speaker 2: comforting place. So it's you know, it's given take.
Speaker 3: Yes, I think that's absolutely correct. But I think the
Speaker 3: really weird thing is that sometimes your quote comfort zone
Speaker 3: isn't comfortable. I mean, sometimes we prefer an experience that's
Speaker 3: not even very nice. It's still like something that we
Speaker 3: know we won't like, but it's just it's you know,
Speaker 3: it's familiar. We at least know what we're getting with it,
Speaker 3: over something that is just question marks.
Speaker 2: Right right, will choose a known okayness over a potentially
Speaker 2: amazing experience.
Speaker 3: So one of the most important early writings on ambiguity
Speaker 3: aversion is a classic paper in the Quarterly Journal of
Speaker 3: Economics from nineteen sixty one by the American economist, whistleblower
Speaker 3: and political activist Daniel Ellsberg. The paper was called Risk,
Speaker 3: Ambiguity and the Savage Axioms. That's savage with a capital S.
Speaker 3: That's a person's name. It's not describing the axioms as savage.
Speaker 3: And just to go ahead and mention it now because
Speaker 3: I also use this as a source in writing about
Speaker 3: Elsberg and this paper's impact. It was also reading a
Speaker 3: paper called Ambiguity and Ambiguity Aversion in the Handbook of
Speaker 3: the Economics of Risk and Uncertainty. This is by Mark J.
Speaker 3: Maschina and Marciano Cinneskalchi, published by north Holland in twenty fourteen.
Speaker 3: This is a sort of general overview of the concept
Speaker 3: of ambiguity aversion and a survey of a bunch of
Speaker 3: different models of it. Now, before we get into the
Speaker 3: idea that Elsburg explored in this very important paper, robbed it.
Speaker 3: You had a bit of bio in Elsburg, didn't you.
Speaker 2: Yeah. Yeah. Daniel Ellsberg quite an interesting fellow of nineteen
Speaker 2: thirty one through twenty twenty three. In addition to Elsberg's paradox,
Speaker 2: which we're getting into here, is he's also famous, perhaps
Speaker 2: more so in a general sense, as the Rand Corporation
Speaker 2: employee who photocopied and released what would come to be
Speaker 2: known as the Pentagon Papers. This is a United States
Speaker 2: Department of Defense history of the US's political and military
Speaker 2: involvement in Vietnam from nineteen forty five through nineteen sixty eight.
Speaker 3: The key point being that Ellsberg believed that getting these
Speaker 3: papers out there was important in informing the public about
Speaker 3: things that they didn't know about how the Vietnam War
Speaker 3: being prosecuted and represented right right.
Speaker 2: It was very much a whistle blowing act on Ellsberg's part,
Speaker 2: and these papers were published by the New York Times
Speaker 2: in nineteen seventy one. This would be a decade after
Speaker 2: the publication regarding the Elsberg paradox. And yeah, they detailed
Speaker 2: secret developments about the scope of the US military efforts
Speaker 2: in Vietnam, the real sticking points being the deception involving
Speaker 2: the Gulf of Tonkin incident, unreported expansion of the war,
Speaker 2: the true objective of the war post nineteen sixty five,
Speaker 2: which basically was more about containing China and preventing a
Speaker 2: humiliating US defeat rather than any specific objectives to help
Speaker 2: the people of Vietnam, and the lack of a clear
Speaker 2: plan for victory as well. So I mentioned a lot
Speaker 2: of you have at least heard of the Pentagon papers,
Speaker 2: even if you're not familiar with the full story, because
Speaker 2: this incident this led to conspiracy and espionage charges against
Speaker 2: Ellsberg that were then later dismissed, greatly fueled the anti
Speaker 2: war movement as well as distrust in the government at
Speaker 2: the time, and led to the Nixon Whitehouse's use of
Speaker 2: the infamous White House Plumbers to discredit Elsberg. And of course,
Speaker 2: all of this ends up feeding into the Watergate scandal,
Speaker 2: which is another one of those major historical touchstones from
Speaker 2: the time period that again, if you're not super familiar
Speaker 2: with Watergate, you've at least heard of Watergate, and you've
Speaker 2: heard about the other different gates out there that allude
Speaker 2: back to what a scandal it was.
Speaker 3: Now everything gets a gate, suffix.
Speaker 2: Right, no matter how deserve, any or undeserved now. Elsberg
Speaker 2: remained an outspoken activist and whistleblower throughout his life, particularly
Speaker 2: regarding the US's military actions under multiple presidents, including the
Speaker 2: current one, the Russian invasion of Ukraine, and also in
Speaker 2: support of various other whistle blowers. He was a vocal
Speaker 2: opponent of the use and the threat of nuclear weapons
Speaker 2: and the rhetoric around their use, and he is sometimes
Speaker 2: described as a nuclear war planner turned nuclear war activists,
Speaker 2: and his work at the Rand Corporation did involve such contemplations. Yeah.
Speaker 3: I think a big part of his pitch in his
Speaker 3: anti war and anti nuclear weapons activism was like, look,
Speaker 3: I've been there where the power players are executing you know,
Speaker 3: global military and nuclear strategy. You should be worried. This
Speaker 3: is things are not okay.
Speaker 2: Yeah. One of his major overarching criticisms of nuclear weapons,
Speaker 2: and I feel like we're probably preaching to the choir
Speaker 2: on this one. I can't imagine we have any big
Speaker 2: nuclear war fans out there, was that their use is
Speaker 2: a deterrent one of the major positive spins that are
Speaker 2: often given about having a vast nuclear arsenal. This idea
Speaker 2: of the nuclear deterrent was itself highly unreliable and unstable.
Speaker 2: There were simply too many variables human, technological, situational that
Speaker 2: could lead to not only catastrophic but existential unintended consequences.
Speaker 3: Yeah, too many ways for it to go wrong, and
Speaker 3: if it does go wrong, the consequences are too great.
Speaker 2: By the way Elsberg has been portrayed, I believe twice
Speaker 2: in major motion pictures, once by James Spader and once
Speaker 2: by Matthew Reese.
Speaker 3: So coming back to the Elsberg paper from nineteen sixty one, again,
Speaker 3: that's risk ambiguity in the Savage axioms. This is the
Speaker 3: really important one. I'd look it up. I think it
Speaker 3: had like, I don't know, like tens of thousands of citations.
Speaker 3: It's like a very, very famous and influential economics paper.
Speaker 3: In this paper he illustrates the idea of ambiguity a
Speaker 3: version with a number of thought experiments, and this is
Speaker 3: one of them. So this is the three color urn.
Speaker 3: Imagine that there's an urn like a jar that is
Speaker 3: filled with ninety little ping pong balls that are a
Speaker 3: mix of different colors. You cannot see inside the urn,
Speaker 3: it's opaque, But you're going to play a game where
Speaker 3: you reach into the urn and you pull out one
Speaker 3: ball at a time, and you can win prizes based
Speaker 3: on the color of the ball that you pull out.
Speaker 3: You know that thirty of the balls inside the urn
Speaker 3: are red, So since thirty out of ninety are red,
Speaker 3: there's a one in three chance that a random ball
Speaker 3: is going to be red. The odds there are pretty clear.
Speaker 3: The other sixty balls, however, are a mix of yellow
Speaker 3: and black. And here's the really important part. You don't
Speaker 3: know the composition of that group. So those sixty balls
Speaker 3: could be thirty yellow and thirty black. It could be
Speaker 3: sixty yellow and zero black. It could be sixty black
Speaker 3: and zero yellow, or any mix in between. Since you
Speaker 3: don't know the mix, you don't know the probability of
Speaker 3: drawing a yellow ball or a black ball ahead of time.
Speaker 3: For red, it's one in three. For either yellow or black,
Speaker 3: it's anywhere between zero and two out of three. Now,
Speaker 3: imagine it is your turn to draw a ball out
Speaker 3: of the urn, and you can take one of two bets.
Speaker 3: Bet a you get one hundred dollars if your ball
Speaker 3: is red, So if you pick this option, your chance
Speaker 3: of winning one hundred dollars is one in three. In
Speaker 3: bet B you get one hundred dollars if your ball
Speaker 3: is black. Since you don't know the mix of yellow
Speaker 3: and black, you don't know your odds of winning, but
Speaker 3: they are somewhere between zero and two out of three,
Speaker 3: with the midpoint being one out of three, which is
Speaker 3: the same as the odds on red. Which one do
Speaker 3: you pick?
Speaker 2: Well, it sounds like bet A is the suer thing, right.
Speaker 3: If somebody offered me this game, I would probably pick
Speaker 3: bet A. Yeah, it just seems safer. It's like, okay,
Speaker 3: I know what I'm dealing with. There one in three
Speaker 3: the other option. Your odds could be better than one
Speaker 3: in three, but you you just don't know.
Speaker 2: They could be worse.
Speaker 3: It could be zero, They could be worse, could be better.
Speaker 3: You have no way of knowing either way, Ellsberg suggested,
Speaker 3: and later experiments would empirically demonstrate that most people would
Speaker 3: bet on red instead of black, even though there is
Speaker 3: no objective reason to think that red is a better bet.
Speaker 3: Following the pick red strategy will not necessarily earn you
Speaker 3: more money in this game, But people really do, in fact,
Speaker 3: just like it better to pick red. It feels right,
Speaker 3: that's just what we think we should do. That in
Speaker 3: itself is kind of weird and interesting, like why do
Speaker 3: we prefer to avoid ambiguity even when there is no
Speaker 3: clear advantage in doing so. Then there's a really interesting wrinkle.
Speaker 3: Imagine you're playing the same game. You are drawing a
Speaker 3: ball out of an urn, and this time you're given
Speaker 3: assurance that the mix of the balls is the same
Speaker 3: as it was the first time. So whatever was the
Speaker 3: case with the mix of yellow and black in there,
Speaker 3: it's going to be the same as it was with
Speaker 3: your last draw. And you get a chance to make
Speaker 3: a second bet. You can take either bet C, where
Speaker 3: you get one hundred dollars if the ball drawn out
Speaker 3: is either yellow or red, and this one has an
Speaker 3: unknown chance of winning, because of course you don't know
Speaker 3: how many yellow or black balls there are. You know
Speaker 3: that your chance of winning is somewhere between one and
Speaker 3: three if there are you know, the thirty red balls
Speaker 3: and zero yellow balls, or one hundred percent if there
Speaker 3: are sixty yellow balls, Or you can take bet D
Speaker 3: where you get one hundred dollars. If the ball is
Speaker 3: either yellow or black, this one has a guaranteed two
Speaker 3: thirds chance to win, because we know that together yellow
Speaker 3: and black make sixty of the ninety balls that we
Speaker 3: don't know what the mix is. In this second trial,
Speaker 3: people will tend to pick bet D once again, because
Speaker 3: the probabilities are known. With D, it's a guaranteed two
Speaker 3: thirds chance to win. With bets C, it's somewhere between
Speaker 3: one one in three and one hundred percent. Picking bet
Speaker 3: D allows them to avoid placing bets C, which, again,
Speaker 3: which has ambiguous chances. Here's the really interesting thing that
Speaker 3: Elsberg pointed out. There's actually a contradiction in people's behavior
Speaker 3: between the first and second round of this game. Assuming
Speaker 3: you are actually doing your best to win the money.
Speaker 3: In round one, if you bet on red instead of black,
Speaker 3: that implies you believe that less than thirty of the
Speaker 3: unknown sixty balls are black. Right, That makes you it
Speaker 3: implies that red has a better chance of winning, so
Speaker 3: less than half of them have to be black. However,
Speaker 3: in the second round, if you take the second option
Speaker 3: picking yellow and black, it implies that you think that
Speaker 3: more than thirty of the unknown balls are black. Otherwise
Speaker 3: the red and yellow combination option would have the better
Speaker 3: chance of winning. Right, These two bets in combination make
Speaker 3: no sense because they imply self contradictory beliefs. It says
Speaker 3: that I believe that more balls are black and less
Speaker 3: balls are black at the same time. Obviously that can't
Speaker 3: really be the case. But there could be another issue
Speaker 3: driving this behavior, which is simply that people don't like ambiguity,
Speaker 3: and they will pay up for known odds, even if
Speaker 3: doing so implies mutually exclusive assumptions. I was trying to think,
Speaker 3: you know, as I said a minute ago, I think
Speaker 3: I would probably pick red if given the option to
Speaker 3: play this game. Obviously, I sort of already knew the
Speaker 3: deal here, so I can't know what I would do
Speaker 3: going into it blind like most people, but I think
Speaker 3: I would, for no rational reason, prefer the uncertainty reducing options.
Speaker 3: I think the most likely reason for that is even
Speaker 3: if I were given assurances that this game was on
Speaker 3: the up and up, I would suspect some kind of trick,
Speaker 3: Like if I'm being asked to bet on uncertainty, There's
Speaker 3: some part of me that just kind of rises up
Speaker 3: and says, uh, there's a scam here that you are
Speaker 3: not seeing.
Speaker 2: Yeah, yeah, I mean you kind of expect that within
Speaker 2: the constraints of a testing environment, and you definitely expect
Speaker 2: that out of the world. You know, whatever form this
Speaker 2: was taking, you'd assume that somebody had a vested interest
Speaker 2: in manipulating how you were going to behave to the
Speaker 2: how you're going to respond to the two possibilities.
Speaker 3: Yeah. Elsberg also in this paper, by the way, he
Speaker 3: came up with a second illustration of the same principle.
Speaker 3: So if you go reading about this, you'll read about
Speaker 3: the three color urn and then the two urn experiment.
Speaker 3: The second illustration used two eurns instead of one, because
Speaker 3: it made the contradiction between the different bets even clearer.
Speaker 3: And this contradictory self contradictory behavior is now called the
Speaker 3: Elsberg paradox. Elsberg himself didn't call it that, that's what
Speaker 3: other people they put his name on it. Anyway, Elsberg's
Speaker 3: paper about ambiguity aversion was not just about observing a
Speaker 3: weird little quirk of human behavior. It was especially of
Speaker 3: interest to the fields of economics and decision theory modeling
Speaker 3: how people make decisions, because it sought to undermine some
Speaker 3: of the major underpinnings of the fields, specifically providing evidence
Speaker 3: against some of the tenets of a framework called subjective
Speaker 3: expected utility theory or savage as axioms, named after the
Speaker 3: American mathematician Leonard Savage who formulated them. Subjective expected utility
Speaker 3: theory or SEU theory is a way of modeling how
Speaker 3: people make decisions when we don't have perfect or complete information, which,
Speaker 3: of course in life we rarely do. Right, So, you
Speaker 3: know this is going to be relevant in understanding how
Speaker 3: people behave in most real world situations. Most situations in
Speaker 3: life are not a casino table game where you have
Speaker 3: no odds of winning.
Speaker 2: Or you know, or you know, you can easily imagine
Speaker 2: to a situation where you're playing some sort of a game,
Speaker 2: be it a tabletop role playing game or some sort
Speaker 2: of like, you know, video game, and you're given a
Speaker 2: choice between two items for your character. Right, you have
Speaker 2: the stats of those items right there. Yeah, you know
Speaker 2: what kind of enemies you go up against in the game.
Speaker 2: Maybe you've played through the game before. You have something
Speaker 2: at least approaching perfect knowledge of the simplified world, and
Speaker 2: our real world is not so simplified and there's so
Speaker 2: many variables to it.
Speaker 3: That's exactly right. So the real world, we're constantly dealing
Speaker 3: with uncertainty ambiguous situations where we don't have all the
Speaker 3: information to judge what outcomes are most likely, and yet
Speaker 3: somehow we navigate this world making decisions all the time.
Speaker 3: The question being addressed here is how do people make
Speaker 3: those decisions when they don't actually know what the relative
Speaker 3: likelihood of different outcomes are. Subjective expected utility theory has
Speaker 3: several rules, but a simplified version is that it says,
Speaker 3: and then when people don't know the objective likelihood of
Speaker 3: an outcome, they form beliefs about how likely that outcome is,
Speaker 3: and then they act consistently with those beliefs in order
Speaker 3: to maximize their personal benefit. I came across a passage
Speaker 3: by the American economist Frank Knight which I think summarizes
Speaker 3: this idea well. Night writes, quote, we must observe at
Speaker 3: the outset that when an individual instance i e. A
Speaker 3: one time event only is at issue, there is no
Speaker 3: difference for conduct between a measurable risk and an unmeasurable uncertainty.
Speaker 3: The individual, as already observed, throws his estimate of the
Speaker 3: value of an opinion into the probability form of a
Speaker 3: successes in B trials a slash B being a proper fraction,
Speaker 3: and feels toward it as toward any other probability situation.
Speaker 3: So we essentially we form a belief for a feeling
Speaker 3: about how likely something is, and then we act as
Speaker 3: if that was like you know that we know the
Speaker 3: odds of a coin flip coming up heads are one
Speaker 3: in two, whether or not we're actually right about those
Speaker 3: feelings or beliefs. Elsberg used the principle of ambiguity aversion
Speaker 3: to say, actually, no, people do not always behave as
Speaker 3: if they have consistent beliefs about what is more or
Speaker 3: less likely to happen. And you can prove this because
Speaker 3: they make bets that would imply self contradictory beliefs in
Speaker 3: the same situation, meaning they either don't actually have or
Speaker 3: act on consistent beliefs about a situation, or they don't
Speaker 3: always act to maximize their own monetary benefit. Elsberg's point
Speaker 3: here was that we can have obscure previously unacknowledged motivations
Speaker 3: like the desire to avoid dealing with ambiguity, and that
Speaker 3: particular desire is so strong in some cases that it overrides.
Speaker 3: It's our consistent thinking and a simple dollar value understanding
Speaker 3: of rational self interest. And by the way, the technical
Speaker 3: name of the savage axiom that Elsberg was attacking here
Speaker 3: was it's called the sure thing principle. Another thing to
Speaker 3: understand about Elsberg's paper was that he was arguing that
Speaker 3: we need to make a stronger distinction between two different concepts.
Speaker 3: Those are risk and ambiguity. Elsberg gives the definition that
Speaker 3: risk is when we have a stake in an outcome
Speaker 3: and we know the theoretical likelihood of that outcome. So
Speaker 3: this is like the casino games or a coin toss.
Speaker 3: You know, a fair coin toss is fifty to fifty.
Speaker 3: We know what the outcome likelihood is, and we can
Speaker 3: take a risk. A fair die roll is one in
Speaker 3: six to get a particular number. Ambiguity is when we
Speaker 3: don't have an objective way of knowing what the probability
Speaker 3: of our desired outcome is. To Elsberg, ambiguity was quote
Speaker 3: the the nature of one's information concerning the relative likelihood
Speaker 3: of events, a quality depending on the amount, type, reliability,
Speaker 3: and unanimity of information, giving rise to one's degree of
Speaker 3: confidence in an estimation of relative likelihoods. And so it's
Speaker 3: worth noting that you can have confidence or even what
Speaker 3: feels like certainty, or act as if you have confidence
Speaker 3: or certainty without actually being correct. You can go through
Speaker 3: life having high confidence in objectively low probability things. One
Speaker 3: of the actually really useful things about SEU theories, the
Speaker 3: subjective expected utility theory, was that it made things simple
Speaker 3: and easier to understand because it treated risk and ambiguity
Speaker 3: the same. So a person making bets on a die
Speaker 3: roll will know that the probability of rolling a specific
Speaker 3: number is one in six, and they will behave accordingly.
Speaker 3: And a person who has a stake in an outcome
Speaker 3: with an unknown probability will, according to Savage's axioms, mentally
Speaker 3: even subconsciously form an internal belief about the probability of
Speaker 3: that outcome. So example is you imagine there is a
Speaker 3: one in four chance it's going to reign today. That
Speaker 3: might not have anything to do with reality, but you
Speaker 3: just take that belief on and you behave as if
Speaker 3: that is that you make all of your decisions based
Speaker 3: on that belief. They will act according to that belief
Speaker 3: the same way they would act to knowing that a
Speaker 3: coin flip is fifty to fifty, and Elsberg argued, no,
Speaker 3: that is not how we make decisions. SEU theory with
Speaker 3: savagees axioms failed to account for other complexities in human behavior,
Speaker 3: for example, our deep desire to get away from ambiguity,
Speaker 3: Like we don't like ambiguity so strongly we will make
Speaker 3: decisions that imply self contradictory beliefs just to avoid it. Now,
Speaker 3: there have been a lot of arguments over the years
Speaker 3: about how to interpret ambiguity aversion. Is it actually rational
Speaker 3: in ways that were not previously recognized, or is it
Speaker 3: more like some kind of systematic error or cognitive bias.
Speaker 3: We might come back and revisit that debate in a
Speaker 3: subsequent part of this series, but we've got a couple
Speaker 3: other things we wanted to talk about today. First, Rob,
Speaker 3: I know you have a really interesting place you want
Speaker 3: to take this, but first I wanted to mention the
Speaker 3: idea just of experimental confirmation, because one important thing to
Speaker 3: understand is that Ellsberg's original paper did not have an
Speaker 3: experimental component. It was a thought experiment, and he realized
Speaker 3: the phenomenon needed to be tested with real human subjects.
Speaker 3: In the decades since his paper, it has been tested many,
Speaker 3: many times, many different ways, and generally it has proved robust.
Speaker 3: There are some nuances and exceptions, but generally people behave
Speaker 3: the way Elsberg predicted. They would a majority of people
Speaker 3: structure their choices to void ambiguity, even when there's no
Speaker 3: clear objective benefit to doing so, and they even make
Speaker 3: bets that would imply against self contradictory beliefs. According to
Speaker 3: SEU theory, if those bets can get them out of
Speaker 3: dealing with ambiguous probabilities, so I don't have to mess
Speaker 3: with that. Regarding those experiments, my main source here is
Speaker 3: again that survey article by Machina and Siniskalchi. Again that's
Speaker 3: ambiguity and ambiguity of version from twenty fourteen. The authors
Speaker 3: here list a whole bunch of experiments where people carried
Speaker 3: out versions of like the three color urn or this
Speaker 3: other experiment that Delsberg described, the two urn experiment. They
Speaker 3: list Felner in nineteen sixty one, which found that people
Speaker 3: would rather take fifty to fifty odds than unknown odds,
Speaker 3: which could be better or worse. They also cite Becker
Speaker 3: and Brownson sixty four, m. Kremen sixty eight, Slovak and
Speaker 3: Taverski from nineteen seventy four, Curly and Yate from eighty nine,
Speaker 3: among others, all generally finding confirmation of Elsberg's predictions about
Speaker 3: ambiguity aversion quote. Although most of these experiments used students
Speaker 3: as subjects. Researchers such as McCrimmon sixty five, Hogarth and
Speaker 3: Kunruther eighty nine, Einhorn and Hogarth eighty six, Viscusi and
Speaker 3: Chessen ninety nine, hoe Keller and Celtica two thousand and two,
Speaker 3: and Mafioletti and Sentori two thousand and five have examined
Speaker 3: the ambiguity preferences of business owners, trade union leaders, actuaries, managers,
Speaker 3: and executives with the same overall findings, so it appears
Speaker 3: quite robust. The authors here also report some interesting findings
Speaker 3: of McCrimmon and Larsen from seventy nine which they looked
Speaker 3: into it, and they found that while the majority of
Speaker 3: people did try to avoid ambiguity, some minority of people
Speaker 3: did not and even just chose to embrace it. They
Speaker 3: also found, as you might expect, that our relative tolerance
Speaker 3: for ambiguity went up or down depending on how good
Speaker 3: the known odds were in the known odds bet condition. So,
Speaker 3: for example, if you do this three color earn experiment,
Speaker 3: if you take the number of red balls that's the
Speaker 3: ones where you know how many there are, If you
Speaker 3: take that down to zero or even just down to
Speaker 3: five or ten, most people will take the gamble with
Speaker 3: the unknown odds on yellow and black because the odds
Speaker 3: on red are clearly very bad. If you make the
Speaker 3: odds on red really good, even more people will stick
Speaker 3: with the no nods, and ambiguity of version becomes even stronger.
Speaker 3: So that shouldn't be all that surprising. But yeah, in
Speaker 3: the middle category, where the odds on red are somewhere
Speaker 3: in between good and bad, you're just kind of like,
Speaker 3: I don't know, But still people tend to go for
Speaker 3: the known odds rather than the unknown odds. However, the
Speaker 3: authors also found that even when the idea of subjective
Speaker 3: expected utility and choice consistent see was explained to the
Speaker 3: people doing this experiment explained to the subjects, or even
Speaker 3: in cases where the known odds were bad, some subjects
Speaker 3: just stubbornly stuck to red and avoided betting on any
Speaker 3: ambiguous conditions. So most of us seem to dislike ambiguity
Speaker 3: in the majority of cases, and some of us just
Speaker 3: don't like it at all and will not tolerate it. Now,
Speaker 3: as is often the case with stuff and decision theory
Speaker 3: and economics and stuff, you start off playing these little
Speaker 3: like gambling games with like balls in a jar or
Speaker 3: something like that, and so it seems like, well, how
Speaker 3: consequential could this really be? But actually, I think you
Speaker 3: can take the idea of ambiguity aversion to number one.
Speaker 3: It has been applied to very consequential situations in real life,
Speaker 3: and thus understanding it can have major consequences not only
Speaker 3: for people's individual lives, but for world events.
Speaker 2: That's right, And that brings us back to Ellsberg, who, again,
Speaker 2: and in addition to crafting this highly influential paper, was
Speaker 2: also a highly vocal critic of nuclear weapons and again
Speaker 2: the rhetoric surrounding nuclear weapons. And I was reading a
Speaker 2: good bit from his book The Doomsday Machine, which came
Speaker 2: out in twenty twelve, which is quite a good read
Speaker 2: if you want to much deeper dive into his thoughts
Speaker 2: on all of this. But you know, in that book
Speaker 2: the subject of ambiguous data comes up numerous times how
Speaker 2: will a nuclear power react in response to ambiguous data
Speaker 2: about a potential incoming attack? And additionally, it talks about
Speaker 2: the purported advantage of ambiguity in intense slash response, namely
Speaker 2: in the case of mad Man theory. This is very
Speaker 2: closely associated with Richard Nixon, but also tied to various
Speaker 2: other figures domestic and international, including the current US president.
Speaker 2: A kind of supposed perceived madness or volatility that would
Speaker 2: lead adversaries to second guests any plans to move against them.
Speaker 3: Right, and we're going to get to some major criticisms
Speaker 3: of the mad Man theory strategy in a bit, But
Speaker 3: the idea of it is that you can leverage a
Speaker 3: reputation for unpredictability to your advantage in negotiations.
Speaker 2: That's right. You know, this is very much that nobody
Speaker 2: knows what I'm going to do approach. That's the message
Speaker 2: you put out there. And the idea part of the
Speaker 2: idea here is that it makes logically empty or extreme
Speaker 2: threats seem more possible. Now, mad Man theory was you.
Speaker 2: Appointment is a term that Nixon even used himself when
Speaker 2: talking about this approach. It was outlined by Daniel Elsberg
Speaker 2: and Thomas C. Showing as well, but the basic con
Speaker 2: pretending to be erratic, irrational, or unhinged to influence the
Speaker 2: other side of a bargaining table. This goes back a
Speaker 2: long ways. Machiavelli wrote about it in fifteen seventeen, and
Speaker 2: it's probably as old as the first prehistoric human to
Speaker 2: like go around hitting trees randomly with a club, you know,
Speaker 2: and say, who knows what tharg is going to do?
Speaker 2: Why would you mess with throg on this? We?
Speaker 3: Yeah, we better just give throarc what he wants.
Speaker 2: Yeah, So again, the Elsberg paradox highlights a core flaw
Speaker 2: in human decision making, the aversion to ambiguity. The madman
Speaker 2: theory as a political strategy seeks to exploit this by
Speaker 2: cultivating a reputation of rationality, creating an ambiguous threat. The
Speaker 2: adversary and their aversion to this ambiguity and the unknown
Speaker 2: risk of an unpredictable response may be coerced into backing down.
Speaker 2: Or at least this is the idea, this is the
Speaker 2: logic behind the approach. Yeah.
Speaker 3: The classic example of mad men theory in practice in
Speaker 3: real life is that the Nixon administration could, for example,
Speaker 3: have Kissinger call up his counterparts in the Kremlin and say, look,
Speaker 3: you know, we're all trying to calm Nixon down, but
Speaker 3: he's boiling mad at you. He's borderline crazy. You've got
Speaker 3: to do X, Y and Z. You know, you've got
Speaker 3: to give him these concessions he wants, or we don't
Speaker 3: know if we'll be able to control him.
Speaker 2: Yeah. Kind of a good cut, bad cotton thing too,
Speaker 2: I imagine.
Speaker 3: Yeah, And this was a way of making I think
Speaker 3: a big part of it was it was a way
Speaker 3: of making the nuclear deterrent feel once again like it
Speaker 3: had force in matters other than just deterring a first strike.
Speaker 3: Because the problem with using nuclear weapons as leverage and
Speaker 3: negotiation between two nuclear armed powers is obviously, if the
Speaker 3: weapons get used at all, everyone loses. There is not
Speaker 3: a winner in mutually sured destruction. So if the White
Speaker 3: House was trying to get the Kremlin to do something
Speaker 3: like I'll nuke if you don't do it, that was
Speaker 3: not a credible threat because bo both parties knew that
Speaker 3: the other party knows that war would be the destruction
Speaker 3: of them both. So no rational actor would ever strike first.
Speaker 3: Between rational actors, I'll knew Q if you don't do
Speaker 3: XYZ is an empty threat. The goal of madman theory
Speaker 3: is to gain leverage in negotiations by introducing some amount
Speaker 3: of fear that your counterparty may not be a rational actor.
Speaker 3: He might be crazy enough to do it, we don't know. Therefore,
Speaker 3: the madman strategy makes direct use of the opponent's ambiguity
Speaker 3: version as a tactic to get leverage over them. The
Speaker 3: madman player in this game is betting that the fear
Speaker 3: and uncertainty about how to handle their unpredictability will cause
Speaker 3: their counterparty to make concessions they might not make otherwise,
Speaker 3: Like you end up thinking, well, I'll just take a
Speaker 3: bad deal rather than wander into territory with unclear levels of.
Speaker 2: Risk, right right, and not to derail the pointer, But
Speaker 2: I want to bring it back to Ellsberg's other criticisms
Speaker 2: of nuclear weapons and the rhetoric surrounding nuclear weapons, that being,
Speaker 2: there's all the there's all these other uncertainty factors and
Speaker 2: ambiguous data that would be coming in about what the
Speaker 2: enemy is or is not doing, and therefore any given
Speaker 2: situation like this is going to be just rot with
Speaker 2: with potential ambiguity, potential missteps and potential mistakes, So like
Speaker 2: if it were only as easy as we're laying it
Speaker 2: out here, it would almost be a different situation totally.
Speaker 3: I mean Ellsberg's point about the all of the uncertainty
Speaker 3: in the actual command and control of you know, nuclear
Speaker 3: strategy like that's that that introduces real levels of existential
Speaker 3: risk into playing games like this. There are a lot
Speaker 3: of reasonable criticisms of mad Man theory, but I think
Speaker 3: a major one, at least from my point of view,
Speaker 3: is that at best it is a strategy for short
Speaker 3: term gain at the expense of long term stability and
Speaker 3: negotiating power, because one way or another it undercuts your
Speaker 3: credibility and your ability to be seen as an honest
Speaker 3: and reliable broker in future negotiations, either because you come
Speaker 3: to be seen as actually irrational, in which case people
Speaker 3: don't want to deal with you, and they you know,
Speaker 3: they will find what you know. They may be they
Speaker 3: may be motivated to do something bad to strike first
Speaker 3: to you because you're too dangerous to be let loose,
Speaker 3: or they may be, you know, they may try to
Speaker 3: find ways to cut you out of negotiations, so that
Speaker 3: could be one consequence, or just because you are revealed
Speaker 3: to have been bluffing, in which case you lose your credibility.
Speaker 2: Right right, and yeah, this is this is all valid.
Speaker 2: I was looking at a couple of papers on mad
Speaker 2: men theory and mad man theory, like ambiguity of version itself,
Speaker 2: is something that has been written about a lot there.
Speaker 2: There are no shortage of papers out there, but I
Speaker 2: looked at just a couple. I looked at one titled
Speaker 2: crazy like a Fox? Are leaders with reputations for madness
Speaker 2: more successful international coercion? By Roseanne W McManus. This came
Speaker 2: out in twenty nineteen from Cambridge University Press, and in
Speaker 2: this the author points out that a reputation for madness
Speaker 2: would seem to be more often harmful than helpful in
Speaker 2: international coercion, So it undercuts the leader's ability to make
Speaker 2: believable peace commitments, treaties and so forth, which and it
Speaker 2: really almost feels absurd that we need to stress this.
Speaker 2: These are all vital for peaceful relations between nations. No
Speaker 2: one knows what I'll do easily slides into. No one
Speaker 2: knows what I'll honor, No one knows what treaties I
Speaker 2: would well I actually stand by, and so forth. You know,
Speaker 2: to bring this back to Dungeons and Dragons, I think
Speaker 2: any dn D player worth your salt knows that while
Speaker 2: you might well enter into a pact with a lawful
Speaker 2: evil devil, you never enter into a pack with a
Speaker 2: chaotic evil demon because the lords of the nine hell
Speaker 2: are going to stick to their letter of the contract,
Speaker 2: if not the spirit of the contract. But demon lords
Speaker 2: such as the mcgorgan will honor nothing, and there is
Speaker 2: no coherence even within themselves. They're just pure ambiguity, and
Speaker 2: you can't strike any sort of deal because they won't
Speaker 2: stand by it no matter what. Whereas the devil's being
Speaker 2: lawful evil, they may look for that wiggle room, they
Speaker 2: may find ways to, you know, to avoid the spirit
Speaker 2: of the deal, but they're still bound to the letter.
Speaker 3: Right. So if you think you discover that your your
Speaker 3: counterparty is actually just chaotic evil, all you can do
Speaker 3: is roll for initiative like there's no making a.
Speaker 2: Deal yeah, and then you slide into chaos, pure chaos.
Speaker 2: McManus back to her paper, though, she found that mad
Speaker 2: men theory may be helpful in crisis bargaining, but only
Speaker 2: under certain conditions, namely when employed by military week leaders.
Speaker 2: So we're not talking about a true superpower here they
Speaker 2: can engage in like true mutually assured destruction. Rather, we
Speaker 2: would be dealing with the state that could do a
Speaker 2: lot of damage, but in striking out with just thoroughly
Speaker 2: destroy themselves. So the idea here is that no one
Speaker 2: would take this hypothetical nation or the leader of this
Speaker 2: hypothetical nation seriously unless they presented an air of madness,
Speaker 2: and then perhaps, hey, they might do it anyway if provoked.
Speaker 2: They they you know, they're they're unhinged, and thus it
Speaker 2: can be a form of asymmetric leverage. So we're talking
Speaker 2: low probability but high consequence. And MacManus also points out
Speaker 2: that there would also seem to be more of an
Speaker 2: advantage if you had a mild reputation for madness rather
Speaker 2: than an extreme one. You don't want to come off like,
Speaker 2: you know, a complete da da you know, eye rolling maniac.
Speaker 2: In one of these cases, the idea would be like, well,
Speaker 2: you know, we can, we can still get this individual
Speaker 2: to the negotiation table, but we just have to be
Speaker 2: hyper sensitive and I guess again, kind of avoiding that
Speaker 2: complete fall off into chaotic evil demonhood and instead dealing
Speaker 2: with devils that can still be bound by some sort
Speaker 2: of law. All right, I have a hypothetical example here.
Speaker 2: So we have demigodic hero Hercules and we have his
Speaker 2: mortal cousin Eurystheus, and they're grabbing lunch at the local
Speaker 2: euro place. Great, So Eurystheus warns his cousin that if
Speaker 2: he tries to steal any of his fries, he's going
Speaker 2: to flip the table and all their food's going to
Speaker 2: wind up on the floor, and he acts just really
Speaker 2: sensitive and unhinged about the whole thing. Yes, Okay, Hercules
Speaker 2: obviously knows that Eurystheus can't take him in a fight
Speaker 2: and might not even be able to flip that table
Speaker 2: over before Hercules stops him, and rationally, Eurystheus should realize
Speaker 2: this and just let big Hurk have a few extra
Speaker 2: fries if he wants, like that's what does it matter.
Speaker 2: But from Hercules's standpoint, does he really want to risk
Speaker 2: his lunch winding up on the floor. Maybe he should
Speaker 2: just let Eurystheus keep all of his fries. Okay. The
Speaker 2: downside of course here is that maybe Hercules just won't
Speaker 2: invite you risk the us out for lunch next time,
Speaker 2: and he's certainly not going to pick up the check.
Speaker 2: And on top of all that, how are they going
Speaker 2: to work together to defeat the hydra? Because, as you
Speaker 2: remember from past episodes and from Greek mythology in general,
Speaker 2: Hercules can't do that on his own. He has to
Speaker 2: have his cousins help to burn the stomps after each
Speaker 2: head of the hydras cut off.
Speaker 3: Very good points, I mean, apart from any like otherwise
Speaker 3: like moral considerations or honesty considerations about deploying something like
Speaker 3: mad men theory. Just from a strategic point of view,
Speaker 3: it seems like it is probably best for situations where
Speaker 3: like your counterparty has to deal with you, it is
Speaker 3: not optional for them, and you don't have to like
Speaker 3: or respect each other or ever work together on anything,
Speaker 3: and you don't care about long term goals. You are
Speaker 3: only interested in this situation right now, in extracting a
Speaker 3: short term advantage.
Speaker 2: That's right, that's right. But some papers out there that
Speaker 2: have crunched the numbers on all this and done some
Speaker 2: experimentation questionnaires and so forth, do acknowledge that you know
Speaker 2: that there are multiple dimensions to any of these situations. Namely,
Speaker 2: and this is something I think everyone can relate to, Like,
Speaker 2: you can have a leader that is engaging in an
Speaker 2: international situation, but there is still the domestic view of
Speaker 2: that situation. There's still the domestic response, the domestic relationship.
Speaker 2: And so one of the papers that I was looking
Speaker 2: at this one is titled mad Man or mad Genius.
Speaker 2: The International Benefits and Domestic Costs of mad Man's Strategy
Speaker 2: by Joshua A. Schwartz, published twenty twenty three in Security Studies,
Speaker 2: and in this the author found that the Madman approach
Speaker 2: can work in negotiations with foreign adversaries, but quote entails
Speaker 2: significant domestic costs that potentially erode its efficacy. He also
Speaker 2: points out that mad Man theory may simply not work
Speaker 2: against major powers, because while it might make a threat
Speaker 2: more credible, that doesn't necessarily make the threat more effective
Speaker 2: and make the adversary willing to cave to those demands.
Speaker 2: So he points out that this is perhaps why Nixon's
Speaker 2: use of mad Man theory didn't work against the Soviets. Like, Okay,
Speaker 2: it made Nixon's threat more credible, but did it actually
Speaker 2: make it more effective? Did he actually get what he
Speaker 2: wanted to out of these bluffs these threats, and then
Speaker 2: you have the domestic side of things, with the hypothetical
Speaker 2: leader's own citizens not loving the heightened stakes because you know,
Speaker 2: obviously I mean, I say obviously, but this is one
Speaker 2: of those things that we often have to be reminded
Speaker 2: of in a case of mutually assured destruction, or even
Speaker 2: a case of asymmetric exchange involving nuclear weapons or some
Speaker 2: other kind of just you know, horrible weapon of mass destruction,
Speaker 2: a leader is always bargaining with the lives of their
Speaker 2: own citizens. You are the chips on the board in
Speaker 2: a no one knows what I'll do wager. Yeah, And
Speaker 2: there also notes that, okay, you know, this is going
Speaker 2: to also differ depending on how much of a voice
Speaker 2: the people have in a given nation versus how much
Speaker 2: power the ruler has, and there's going to be less
Speaker 2: backlash in places where the people have less of a
Speaker 2: voice in the ruler has more absolute power.
Speaker 3: That's right. But one thing I did want to clarify
Speaker 3: is that the sense in which you are the chips
Speaker 3: on the board and no one knows what I'll do
Speaker 3: wager is true is not just limited to like the
Speaker 3: worst possible scenario like nuclear warfare. I mean it's also
Speaker 3: the case in say, like trade negotiations or something like that,
Speaker 3: like your economic prospects are in a way, those are
Speaker 3: the chips on the board, Like the citizens' fates and
Speaker 3: futures are the things that are being negotiated with.
Speaker 2: That's right. Yeah, in contemplating potential nuclear exchanges, everything is
Speaker 2: a bit more stark and a bit more black and white.
Speaker 2: But obviously, you know, any give who can think of
Speaker 2: any number of scenarios where the steaks are are still
Speaker 2: quite high for the individual.
Speaker 3: So yes, it's not hard to see at all why
Speaker 3: a citizenry can easily become upset and annoyed if they're
Speaker 3: leader who's supposed to be representing their interests in negotiations,
Speaker 3: is acting unreliable and unpredictable. Like the leader may think
Speaker 3: that they can get good gains out of that in
Speaker 3: the short term, but the citizens are probably thinking about
Speaker 3: a lot of these even if not you know, thinking
Speaker 3: specifically about them, just thinking intuitively about it. Seems like
Speaker 3: there's a lot of downside to this.
Speaker 2: Yeah, and again coming back to what we mentioned earlier,
Speaker 2: the idea too that by constant, if you swing around
Speaker 2: the sword of mad Man theory too much, then it
Speaker 2: makes it more difficult to engage in the other highly
Speaker 2: important tools of state craft, peace treaties and agreements and
Speaker 2: so forth. So it's like you can only swing that
Speaker 2: sword around for so long, and then you have to
Speaker 2: be able to engage in these other acts as well. Again,
Speaker 2: short term gain with mad Man theory, not so in
Speaker 2: the long term. But you know, unfortunately this ends up
Speaker 2: rolling out into so many things about human experience and
Speaker 2: human perception. Is that we are so focused on the
Speaker 2: short term and we don't think about the long term.
Speaker 3: So we've just been talking about a lot of reasons
Speaker 3: that it might actually be bad and not as clever
Speaker 3: as it first seems to try to leverage knowledge of
Speaker 3: ambiguity aversion offensively and negotiations. But I think one way
Speaker 3: that it can definitely be useful is to have knowledge
Speaker 3: of ambiguity aversion to use defensively to think about in
Speaker 3: analyzing your own behavior and being aware of your bias
Speaker 3: to avoid ambiguity and sort of check yourself and think, like,
Speaker 3: wait a minute, am I actually making the right decision here?
Speaker 3: Is this actually what's rational? Or am I just having
Speaker 3: an irrational bias against situations with unknown probabilities that are
Speaker 3: having an outsized scariness in my mind because of the
Speaker 3: ambiguity involved. Like the example we talked about earlier with
Speaker 3: people being afraid to try new experiences because there's some
Speaker 3: amount of ambiguity.
Speaker 2: Yeah, absolutely, there Again, there's always ambiguity and any new
Speaker 2: experience there there's so many ways that could go wrong,
Speaker 2: but there are so many ways that could go right.
Speaker 2: You know, a lot of us do tend to focus
Speaker 2: more on the ways that could go wrong.
Speaker 3: The devil, you know, is not necessarily better.
Speaker 2: Yeah, the devil you don't know, It could be really fun,
Speaker 2: give them a shot.
Speaker 3: Sometimes the devil you know could be like a chaotic
Speaker 3: good devil. Those those exist, right are there?
Speaker 2: So you know, maybe under the new it's possible under
Speaker 2: the new rules, but it's.
Speaker 3: Actually just a friendly tee fling that.
Speaker 2: You can get mistigo. You could have a kat a
Speaker 2: good teethling. There you go, it's entirely possible. All right.
Speaker 3: Well, that's going to do it for part one of
Speaker 3: our look at ambiguity aversion, But we're going to be
Speaker 3: back again next time to talk about how this applies
Speaker 3: to some other domains of life and maybe some subsequent research,
Speaker 3: I might get some into the different ways that the
Speaker 3: ambiguity version observations have been interpreted in terms of different
Speaker 3: types of decision theory, like is it an error or
Speaker 3: is it actually a type of rationality that needs to
Speaker 3: be better understood? So yeah, well we'll talk about that
Speaker 3: kind of stuff next time.
Speaker 2: Who knows what angles we'll actually discuss in the next episode.
Speaker 2: You can tune in to find out in the meantime,
Speaker 2: certainly right in we'd love to hear from you, and
Speaker 2: we'd like to remind you that Stuff to Blow Your
Speaker 2: Mind is primarily a science and culture podcast, with core
Speaker 2: episodes on Tuesdays and Thursdays, short form episode on Wednesdays
Speaker 2: and on Fridays. We set aside most serious concerns to
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Speaker 3: Huge thanks as always to our excellent audio producer JJ Posway.
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