Heston

You are called Heston. You need to make a bar of chocolate. The process to make this bar of chocolate uses three machines, one after the other. All three need to work for the chocolate bar to be made. Each machine has a success rate of 90%. What is the probability that the whole process is a success and the chocolate bar gets made?

Answer = 73%. (0.9 x 0.9 x 0.9 = 0.73)

People often guess a higher success rate than that. This is an example of the confirmation heuristic, whereby people overestimate the probability of conjunctive events. A 'heuristic' just means a rule of thumb, we use them all the time and mostly that's okay, but sometimes they lead us to make systematic mistakes just like the one above.

Percieved Intentions

This interview with the founder of Wikipedia about the takeover of Tumblr by Yahoo touches on how internet advertising works, and why it is important to get it right.

Jimmy Wales (BBC)

As he says, 'it's a social contract'. That is, things that aren't strictly financial, like intentions, matter. For example, if I think a website is taking advantage of me by throwing too many adverts at me, I might be offended or put off using that website. But if I perceive the website as just using fair means to make ends meet I might put up with the same amount of adverts. In summary, perceived intentions matter. (And as we speak behavioural economists are beavering away to include intentions in standard economic models...)