We’re big fans of behavioral economics, so the idea that you can make better decisions by flipping a coin naturally caught our eye. The author of a working paper that makes this claim is none other than Steven Levitt, of Freakonomist fame. Levitt recruited people who were struggling to make a big decision and were willing to allow their choice to be governed by a coin toss.
When he followed up, what he found was telling:
For important decisions (e.g. quitting a job or ending a relationship), those who make a change (regardless of the coin toss) report being substantially happier two months and six months later.
Perhaps more importantly, Levitt also found that “those who were instructed by the coin toss to make a change were both more likely to make the change… and on average, report greater happiness.”
One of the most basic ideas of behavioral economics is loss aversion: the idea that people feel losses more acutely than they do gains. And most of the decisions that Levitt gives as examples involve leaving something behind — a job, a partner, a geography. So it makes sense that we are more reluctant to give up the thing we know than to gain something that often lacks shape. But what is remarkable is that this tendency exists so strongly that we are willing to be governed by pure chance, so keen is the desire to be able to point to a catalyst.
There are many caveats here, including sample size and selection, and Levitt is clear that he has not established a casual impact. But the basic idea here is one that most entrepreneurs readily embrace: if you are unsure of what to do (and you’ve correctly monitored all your cognitive biases), then go for it. Walking away from the status quo is something many of us are reluctant to do, regardless of the potential rewards. We are simply far too cautious for our own good.