How much would you pay for a coffee mug decorated with your school’s insignia?

On average, probably somewhere around $10.

But here’s an interesting twist.

Once you own the mug, how much would you be willing to sell it for?

This is what researchers wanted to study in an economics theory known as the endowment effect – which hypothesizes that people ascribe greater value to things that they own. This seems somewhat counterintuitive since a $10 mug should be worth $10 to us, whether or not we have purchased it.

But it turns out that is not the case. Continue reading →

When I was in 9th grade, my statistics teacher performed an experiment in class that blew me away – and forever cemented my love of probability.

On the first day of class, this is what she said.

“There is greater than 80% chance that two of you in this room have the same birthday.”

I looked about the room and counted 35 students and thought, “No way!”

Here was my thinking: there are 365 days in the year. To guarantee that two people have the same birthday, there would need to be 366 people in this room. And while she didn’t say “guarantee”, she did say “greater than 80% chance”, and those are pretty high odds.

So, the teacher started down the line asking the first student to state her birthday. Continue reading →

When I was about eight years old, I was riding on a bike with a friend of mine. He was pedaling, and I was sitting on the handlebars with my feet on the axle that protruded from both sides of the front wheel. It was a glorious spring day that would soon end in agony.

I was barefoot, and when we hit a bump, my right foot bounced from the axle into the spokes of the spinning wheel, which then jammed against the fork causing the bike to instantly stop and flip over.

The pain was excruciating.

You likely winced as you read this story of my trauma. And the reason you winced is because the human brain is programmed to react to trauma like this as if you had experienced the pain yourself. Continue reading →

The first time I reviewed a legal document many years ago, I was struck by the phrase force majeure. Although I had studied French and knew the literal translation, I was curious as to why this clause would exist within a binding contract.

The term was used to describe events such as hurricanes, floods, earthquakes, volcanic eruptions, and those sorts of “natural disasters”.  The wording set certain conditions by which the legal policy would be no longer binding.

It makes sense.

And it doesn’t.

To cover risks beyond the reasonable control of one party is certainly a sensible consideration.

But to think that hurricanes, earthquakes, and other such events are an “act of God” is Continue reading →

Word spread across the countryside about the wise Holy Man who lived in a small house atop the mountain. A man from the village decided to make the long and difficult journey to visit him. When he arrived at the house, he saw an old servant inside who greeted him at the door.

“I would like to see the wise Holy Man,” he said to the servant. The servant smiled and led him inside. As they walked through the house, the man from the village looked eagerly around the house, anticipating his encounter with the Holy Man. Before he knew it, he had been led to the back door and escorted outside. He stopped and turned to the servant, “But I want to see the Holy Man!”

“You already have,” said the old man. “Everyone you may meet in life, even if they appear plain and insignificant … see each of them as a wise Holy Man. If you do this, then whatever problem you brought here today will be solved.”

This classic Zen parable is Continue reading →