Investing in luck vs. investing in people

Imagine I tell you that you have two options:

  1. Invest at a special roulette. The information you have is that in the last 100 draws of this roulette, the player lost $50 at 40 draws; and won $150 the rest of the times (60).
  2. Give the money to Peter. Peter is somebody you do not know but we nevertheless have some information for him: out of the last 100 people that invested to him, 40 lost $50 and 60 won $150.

In theory it should not matter – investing to Peter or to the roulette should be the same.

It turns out it is not the case.

In one study (Lauharatanahirun* N, Christopoulos* GI, King-Casas B. (2012)) we found that – all other things equal- some people prefer to invest in humans whereas other prefer to invest in non-social risks (roulette). This is, in principle, irrational as, given the very same information about previous outcomes, one should be indifferent on the source of uncertainty (humans or nature). This preference for human vs. nature related risk was reflected to neural processing in striatum and amygdala.

Get paper.

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