The Flaw in Our Decision-Making Process

Every day we make decisions. Sometimes, we wonder if we’ve made the wrong one—and our happy ending is at stake.

To help us understand the difference of a good and bad decision, Dan Gilbert, a Harvard psychologist, begins his TED Talk by introducing the audience to an 18th-century theory of decision making developed by a Swiss mathematician, Daniel Bernoulli.

In short, the theory is this: Expected Value of a Decision = (Odds of Gain) x (Value of Gain). According to Bernoulli, the expected value of any of our actions, that is the goodness that we can count on getting, is a product of two simple things: the odds that this action will allow us to gain something and the value of that gain to us.

In theory, the theory is right, but it is flawed, explains Gilbert. Why? Humans tend to underestimate the odds of future pain and overestimate the value of present pleasure.

Watch this TED talk to begin to reframe how you make decisions.

Watch this video to hear more.