Thread by @RJGyanchandani

Disregarding probability in decision making is a cognitive bias: Neglect of probability

A Thread 🧵👇

1/ One way people violate simple rules of decision making is by neglecting the probability of occurrence of a particular event.

2/ Sometimes, small risks are either ignored or hugely overrated. This bias is completely different from Hindsight bias or gambler's fallacy where people use probabilities incorrectly, In case of this bias, People completely ignore the probability altogether.

3/ This occurs when a decision must be made in which one possible outcome has a much lower or higher utility but a small probability of occurring.

Here is a question we asked:

https://twitter.com/FincademyIn/status/1327856588711895040

4/ To understand and answer this question, We first need to see the probability of occurrence of this event. Here is the historical data of all terrorist attacks on flights: en.wikipedia.org/wiki/Timeline_…

5/ In the above data, We can see that around 44 attacks of this sort have occurred in past. Let's see how many flights operate each day in world: flightradar24.com/data/statistics
Approximately 120000 flights operate each day. Let's do some maths on probabilities now that we have the data.

6/ In the past 20 years, There have been 8 such instances where the unfortunate event has occurred. The total number of flights in the past 20 years would be around 876 Million. But let us take 100 million for easy calculation. Now, the probability of such an event is 0.000008%.

7/ Such tactics are used in marketing a certain product and consumers go for it without realizing the probability of occurrence or Neglect of Probability.

End.

I invite @SmartSyncServ @kanodiaankit12 to add to this if he has something :)