If you say something is “likely”, how likely do people think it is?
Very interesting analysis of how people perceive what probability is meant by phrases such as “likely” or “real possibility”. It turns out there is a lot of scope for misinterpretation.
However I would quibble with the following:
You are trying to assess the probability that the [product launch] doesn’t happen. The way to frame your bet might be: “If the product fails to launch, I receive $1 million, but if it does launch, I get nothing.”
Now imagine a jar full of 25 green marbles and 75 blue marbles. You close your eyes and select a marble. If it’s green, you receive $1 million, and if it’s blue, you get nothing. You know you have a one in four chance (25%) to get a green marble and win the money.
Now, which would you prefer to bet on: the launch failure or the draw from the jar?
An interesting thought experiment, but not quite true. People prefer to receive an amount of money sooner rather than later. So you’d still rather place the bet on the jar, even if you thought the probability of product failure was 25% — because you wouldn’t receive the money until the unspecified future date.
Thanks to my colleague Lauren Tormey for the tip.