Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Probabilities and Pessimism

Written by johnleemk on 1:44:37 pm Jul 6, 2007.

After reading my review of Transformers, one reader remarked that my statement in favour of pessimism appeared to contradict some of my earlier comments suggesting I am an optimist.

To be completely frank, if we want to lump people into the categories of pessimists and optimists, what I would be classified as would depend entirely on the circumstances.

The reason for this is that I don't think I fit into the classical dichotomy between pessimism and optimism. As you might remember, I often think in terms of probabilities and shades of grey, rather than binary absolutes.

(As an aside, I do believe there are absolutes — the statement "there are no absolutes" is a paradox because it itself is an absolute — but I don't think you are likely to encounter many absolutes in the course of your daily life.)

Now, you could call me a pessimist because I think I have a natural inclination to assume that there is a high (or at least greater than 1/2) probability of a bad outcome.

However, you have a just as good reason to call me an optimist. I realise I have a habit to assume that the odds are things will turn out badly, but nevertheless go ahead and try.

This is because there are two aspects to a cost-benefit analysis when probabilities are involved — to calculate the expected result, you multiply the probability of success by the value of that success.

So, if I think that the chance I can score a three-pointer in basketball is 10%, but the value of scoring that three-pointer is, say, $1000, the value I expect from attempting to score (instead of passing the ball to a teammate) is $100. Thus, even though I know that 9 times out of 10, I will fail, I attempt to score anyway.

This of course is far from a rock-solid rule to how I go about life, especially since I am not a calculating mechanical homo economicus, but it does reflect how I try to approach things from an objective angle.

I don't know if this is the right way to go about evaluating different things, but I think that pegging people as pessimists or optimists is a bit simplistic, and should only be done for the sake of convenience (as I have done by labelling myself a pessimist or optimist, dependent on context, in the past).

In the end, it's all about the probabilities, and the value of a successful outcome. I just happen to place a high premium on success, making me an optimist, and estimate a low chance of success, making me a pessimist.

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