Framing as it Guides Risk Seeking Behaviors

Limitations* to negotiation:

• Risk seeking due to "framing" parameters as loss function  (Prospect theory)
• Poor calibration   (over confidence) in judgment
• Lack of empathy (atrophied perspective)
• Sunk costs driving escalation
• Emotional investment due to early, public "demands" (Loss of face)
• No pain, no gain
• The mythical fixed pie

Desiderata

... Avoid loud and aggressive persons, they are vexations to the spirit. If you compare yourself with others, you may become vain and bitter; for always there will be greater and lesser persons than yourself. Enjoy your achievements as well as your plans....

NaNook of the North

It is human nature to compare our station in life with others.  It had much survival value in the evolution of human culture.

Our clothing, our homes, our diets and tools are all artifacts of culture.  If you live with the Eskimo you better have similar clothing, similar housing, eat a similar diet and have the tools needed to hunt the native species....or you will not survive. 

Risk avoiding

The skins that were made into clothing represented an enormous investment in:

• Opportunity (best species not always available), 
• Time (in trapping and tanning skins) and 
• Risk (bears and wolves are dangerous to hunt).  

Deviating from a proven pattern could make the skins unusable.  Screw it up and people will die.  This is a case of risk avoidance and it is rooted in husbanding a scarce, impossible-to-replace resource.

Risk (change) seeking

If NaNook is the most successful hunter in the village and he has a harpoon with a detachable head then you would strive to barter or make one that was similar.  This is an example of risk seeking (striving for something you never had).  You are motivated to step up because you see that NaNook is depleting the resource with his better technology and you (and your children) will be left behind.

Ontogenty recap...

Kids easily gravitate to this thinking as they push away from family and try to climb the pecking order in their new tribe.

They cherry-pick.  They insist that we need to vacation like Willie's family, have a boat like Rich, drive two new SUV's like Spud's family, live in a McMansion like Jacob's family....They see our family as a dreadful failure because no one thing we have (that matters to his/her tribe) is the grandest.

Early on we dubbed that "Measuring elevation from the top of Mt Everest".

You are dooming yourself to a lifetime of disappointment and feelings of inadequacy if you insist on measuring the height of everything from the top of Mt Everest.  You are no longer six feet tall when you measure down from Mt Everest, you are -29,023 feet tall.

Survivor's bias

The hero who overcomes adversity by cantilevering one risky venture upon another is part of our collective narrative:  Homer's Ulysses, Ernest Shackleton,  Indiana Jones.

This narrative has a strong survivor's bias.  How many fisherman went out one more time because Bjorng had a few more planks of lute fisk stacked up in his attic?  How many of them never came back?

The movie The Perfect Storm does a magnificent job of illustrating how desperation provides a fertile seedbed for risk-seeking behavior.


Mrs ERJ's take on the subject


I usually don't discuss blog entries with Mrs ERJ but we did talk a little bit about this one.  She reminded me of how hard we scrape and fight to stay on budget as long as the balance is a positive number.  But if adversity pushes our head underwater toward the end of the month we find it very hard to maintain spending (or more accurately, not spending) discipline.

Mrs ERJ's observation points out why poor people (like Ralph Kramden) stay poor.  They are frozen in a negative frame regarding money and are risk seekers.  They are plungers.   Compare Ralph Kramden to the stereotypical Asian family that starts a boring, labor-intensive, moderately profitable business.  They usually send multiple children to University to become professionals.