The Gamblers Fallacy (and how Council can avoid bad decisions)

Originally printed in the December 20^th 2016 edition of the Whistler Question

Despite the immense intuitive appeal of providing you, dear taxpayer, with a naughty and nice list of council decisions for the last year, I thought it would be more interesting to explore the decision making process more generally. Recently I read a great New York Times editorial by David Brooks Does Decision Making Matter? And listened to a fabulous Freakanomics podcast How to Make a Bad decision It seems that there is growing research in to, and appetite for, the science of decision making.

 

Brook’s editorial is about Michael Lewis (Money Ball, The Big Short) latest book: The Undoing Project it chronicles Amos Tversky and Danny Kahneman Economists and intellectual giants who’s work illustrated the biases in human decision making Many of the biases they identified are now commonly understood — loss aversion, endowment effect, and hindsight bias. Brooks’ conclusion is that life –like the lives of Tversky and Kahneman for example- doesn’t hinge on big decisions, it’s more a matter of following your nose and succumbing to the things that you find compellingly engaging.

 

I’ve always agreed with that philosophy, I was pleased to see that there is some science behind the sentiment. In life -if my life is any example- that’s how you wind up teaching skiing for 30 years, it’s just too compelling -my mother, untill her death last spring would always ask “When do you think you’ll finish your degree Ralphy?” There’s no big decision it’s just following the path of your passions.

 

The recent Freakanomics Podcast focused on some amazing research by economics professors Tobias J. Moskowitz Kelly Shue and Daniel L. Chen their research is about decision making and the gamblers fallacy. If you haven’t heard of the gamblers fallacy it’s basically the mistaken belief that, there is a pattern in situations that are truly random, Let’s use the rationale that if a slot machine hasn’t paid out a jackpot in two years, that it’s due to pay out soon. This belief, though appealing is false. The fallacy can arise in plenty of practical situations but it’s most strongly associated with gambling. Some of the jaw dropping results of their research was that: when using video replays to review close calls Major League Baseball umpires had their decisions overturned almost half the time, eight percent of loan applicants in India were declined simply because of the sequence they were reviewed in. You also don’t want to be in the wrong line if you’re an asylum seeker entering the United States as Professor Moskowitz describes; “just by the dumb luck of where you get sequenced that day could affect your probability of staying in this country by five percent, versus going back to the country that you’re fleeing.”

 

Given the research a good question would be: How are we to evaluate the decisions made by council? A lot of their decisions would be that you might call casino decisions- Are you the third re-zoing application of the night? What number in the sequence are you if your applying for a Community Enrichment Grant? Is it better to see council before lunch or after?

 

The best way for council to make decisions is to follow their own Policy Direction, listen closely to Public Input and seek Professional Expertise. Voters can be quite critical of councils that disagree and have many split decision, but trust me, far more sinister is the council that agrees on every vote every time.

 

 

The best politicians (especially local ones) are the ones enthusiastically engaged in the conundrums facing thier constituents. Politicians like this will succeed not for their decision making skills but because of their capacity for earnest engagement. They follow their passions and decisions big or small are just steps along that path.

 

Ralph Forsyth is an entrepreneur and ski instructor, he served as a Whistler Councillor from 2005 to 2011 He’s not the best skier on the mountain, but he has the most style…