Friday, March 20, 2009

Risk/Reward

Much has been said of the mistakes that teenagers make. The prevailing idea is that teenagers generally don't think about the consequences of their actions before doing something stupid that gets them in trouble. Studies, however, have shown that not only are teenagers aware of the risks behind their actions, they actually spend a considerable amount of time weighing the risks vs. perceived rewards before finally making their (bad) decision. Here's an example of what might go through their heads:

Action: Going to a party, getting drunk, and driving home afterward.
Risk: Might be grounded/get arrested/kill somebody.
Reward: Social acceptance/pretty popular girl might actually talk to me.
Verdict: Party on!!!

I've observed that this sort of risky behavior may start much earlier than the teenage years. Here's an example from my observations of the three-year old twin boys I talked about in my last post:

During a holiday gathering, these twin boys found themselves standing around a bowl of peanuts and decided to have an extended snack before dinner was served. Not wanting the boys to spoil their appetites, several adults told them to stop eating, yet they still continued, saying, "but I have to eat it!". To get them to stop, their great-grandfather decided to make up a story. He told them that if they ate any more, the big scary dog who was staring in from beyond the sliding glass door would charge in and eat them up.

There was no doubt that the boys believed everything that was said to them. You could see fear in their faces every time they tentatively turned their heads to glance at the dog, assuring themselves that the glass door was securely fastened before turning back around and grabbing more peanuts to put in their mouths. So here's what probably went through their heads:

Action: Eating peanuts.
Risk: Dog might eat me.
Reward: I'd get to eat more peanuts.
Verdict: Eat more peanuts.

Perhaps this sort of risky behavior has a purpose. After all, early man would have had a hard time evolving without taking a few risks. Here's another example:

Action: Forsaking life in a tree and stepping around on the ground.
Risk: Bear might eat me.
Reward: I'd finally get to see what's beyond that bush over there.
Verdict: Walking on four legs is SO last millennium!

Of course, risky behavior will ruin us every now and then. Here's what probably went through the mind of more than one AIG employee:

Action: High-risk credit swap.
Risk: Might default- company loses millions/people lose jobs/economy pulled into downward spiral.
Reward: Company stock goes up by a cent/big bonus.
Verdict: What could possibly go wrong? The government will bail us out if this backfires, anyway.

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