Which would you rather have:
- A 50 / 50 chance of winning $500 or nothing
- $250 for sure
Many people prefer the sure $250 over the gamble… even though the lottery has the same expected value as the sure thing.
People who are indifferent between gambles and those gambles expected values are called risk neutral. Those who prefer the sure thing are called risk averse; those who prefer the gambles are risk seeking.
Typically, people are all three depending on the nature of the choice. For gains, people tend to be risk averse; for losses they tend to be risk seeking.
As strange and surprising as it may seem, all sorts of critters have shown sensitivity to risk in their foraging habits. Birds do it. Bees do too. That is, when these animals are faced with a choice between an option that offers a chance of a big amount of food or nothing at all, or a different option that offers a lesser but sure amount, they tend to choose the sure thing.
In a pretty cool study, researchers from Israel and England managed to raise pea plants with roots that straddled two pots. This allowed them to treat each pot differently and observe how the plant reacted (i.e., via root growth). For example, one pot might get a constant dose of fertilizer while the partner pot might sometimes get no fertilizer at all and at other times might hit the fertilizer jackpot.
Believe it or not, the pea plants showed the same type of risk sensitivity as that observed in insects and animals. Perhaps even more remarkable is that the researchers we able not only able to induce risk averse but risk seeking behavior as well.
Here’s a figure from their report. The top panel shows fertilizer concentration; the bottom shows whether the plants responded in a risk-averse vs. risk-prone manner.
That’s right: when the level of fertilizer in the constant dose pot was reduced below that needed to sustain life, the pea plant would shift strategies, shift away from the sure thing, and invest in the gamble… even those with really long shots of winning.
I think there’s a critical message here. Attitudes toward risk are profoundly fundamental; that’s why we see similar patterns across gobs of species. And it makes sense that even when the chances are long, any chance of survival beats no chance (if that makes me risk seeking, sign me up).
Perhaps more importantly, nature has imbued us with a pattern of risk sensitivity (aversion on losses, seeking on gains) that reflects the very permanent nature of death. In general, more stuff is better than less… but not at the risk of losing everything.