This strategy wasn’t suggested in ignorance of evolutionary stability. Actually, it’s the result of an insight I had in recent years that I wrote about in my Hack the World essay which can be summarized as: fuck evolutionary stability.

You have abstraction disease.

You’re making perfectly reasonable arguments about a hypothetical, abstract game. About how things might be if “agents” (like doves and hawks) worked a certain way, and made certain decisions en masse. You’re arguing from the premise that what you should do is predicated on whatever the universal axiom is, like Kant argued (I like Kant, but his arguments are pretty outdated these days).

My point, which I didn’t articulate in this essay, but I have elsewhere, is that that’s an old line of thinking that’s not optimal for you as an individual… it’s only optimal for the “evolutionary structure”, which is a theoretical construct over which you, Marcus, have no control.

I’ve gotten enough flak over that example though, to realize I could’ve chosen a better one. Any ideas?

What you propose, that your friend should not have spent so much time getting back his $11, is not what is called in game theory an evolutionarily stable strategy. In other words, a society composed of such individuals cannot work.

In game theory there is a classic game called hawks and doves. You should read about it and understand how it applies to the situation you have described concerning your friend.

All your analysis boils down to is that there is a payoff to being a dove. Of course there is. But a society of doves cannot exist because there is a payoff to being a hawk too.

If everybody just rolled over like you suggest your friend should do then the hawks would proliferate.

In fact, the only evolutionarily stable strategy is to be a dove when acquiring resources and to be a hawk when protecting a resource. Precisely the behavior your friend exhibited.

Loss aversion bias is not a flaw in human behavior. It is certainly possible that in such a society it can be profitable to be a pure dove (which is essentially the gist of your post) but only because most people are not pure doves. As a couple of people above have noted, it is basically freeloading.

Nothing wrong with standing for a principle if you CHOOSE to, but do it intelligently and effectively, not by reflex.

Don’t miss the important part of this post for you: “You’ll rarely achieve 100% better in one move”. Don’t let this programming limit your opportunities – make conscious choices and benefit.
.-= Karilee´s last blog ..Three Words For The New Year =-.

Peace, eh?
.-= Mr. Natural´s last blog ..Here’s the newest in the "Small Guys" series:TIMELESS SOJOURN: =-.

It’s interesting because I’ve read about the loss aversion principle before, but never applied it to my own life.

Some people are good at managing time/money instinctively, but for others (like me) it’s necessary to really work at it.

AT&T once screwed me over for about $350 on a cell phone bill when I was nearly broke. So later on, I made sure that when my IT customers were buying T1s, they heard my horror story. And to a client, they went with other vendors. AT&T got their $350, but I made sure they lost many, many tens of thousands of dollars.

Seriously, you can’t beat that feeling! :-D

When a friend bought a new car they were choosing between luxury car A and economical car b. They couldn’t decide because the playing field wasn’t level.

So we played a thought game, Lets say luxury “A” costs 10,000 and economy “b” costs 8,000. If you already owned luxury car “A”, and someone offered to trade you that car for economy “B” and 2,000 would you take the deal? If the answer is yes, then they should obviously buy the economy car.

It may be a little confusing but its a great way to evaluate the worth you place on two comparative items.
.-= Richard´s last blog ..Take a Note =-.

I would figure it would take about $11 worth of effort and in the end, wreck more damage than than what your friend went through. Plus, it would put a smile on my face for several days.

In todays world, you have immense power at your disposal to make companies think twice about screwing its customers – either on purpose or by mistake.

One should note, however, that in certain contexts loss aversion bias makes perfect sense even if it doesn’t mathematically/rationally.

Taking your example, a situation where one is taken advantage of, and to rectify or balance the damage, it costs more than the original damage may be completely rational if repuational effects need to taken into account.

If this happened to Joe in a large-scale business deal, say in a real estate, and the word got out in the local real estate community that Joe was a sucker and wouldn’t object to getting rolled — Joe could expect to get rolled more often. Therefore, it is in his interest to short-term pay more to regain his damages/costs, if long-term it serves his interests.

It may be true that ‘we prefer avoiding loss about twice as much as acquiring gains’, but I don’t see why our biases towards losses and gains should be symmetrical.

Lastly, I would guess that loss aversion bias was evolutionarily adaptive in the EEA (Environment of Evolutionary Adaptedness) and still maybe in certain situations.

BTW If you’re interested in biases, I wrote a post about cognitive biases and startup success here:

http://market-by-numbers.com/2010/01/cognitive-biases-positive-black-swan-events-and-startups/

Most online purchases we make go through well because other people paid the extra price (in time and effort) to punish and weed out the bad businesses. So if you spend more effort than the pure money’s worth, you are paying back your part to society.

In this particular example, I would probably have gone one step further and dropped the credit card company for providing bad service. Then maybe Twitter about it and what not…

That said, you can of course still argue that it is stupid to contribute to society for free. That would then make you a freeloader, without an immediate backlash. I don’t have an answer to that ready, just saying that the whole “game theoretic setup” might be a bit more complicated than what at first meets the eye. You have to consider evolution theory, too. I suppose for starters if you decided to freeload, prices would generally go up for you. Other people seeing you might become less bothered, too, and as a result more often you won’t read a warning about a shady company than before, resulting in more broken deals.

If you really wanted to test the theory of loss aversion shouldn’t your deal have been $22 for 2 hrs of work?

surely Joe was not acting purely for the $11, he probably felt slighted and was pissed off, and if he was asked about it he might have responded he did it “for the principle” which can’t be ignored.