Why are we happy? Or How do we make decisions?

This subject attracted almost immediately my attention and I was glad to find such an interesting and developed video. Dan Gilbert, instead of answering this question analyzes how we made decisions. He started by saying that in 1738 we got the formula to do the right thing at all possible times and this formula, even if it was in Greek it was quite simple to understand, but not to apply in all possible circumstances of day to day life.

The fantastic formula, as he said, can be summarized as follows:
Expected value = odds of gain * value of gain.
If we could apply this formula to all the circumstances we have in life, for sure we would be able to do exactly the right thing always. Regretfully, we, as human beings are not able to do so, because we are terrible estimating probability and we are even worst estimating value. Dan, provides some examples of how and why we made mistakes in our day to day estimations.

On the one hand, the way we estimate possibility is by remembering in history, and that is not bad except that what we remember can be manipulated, so that our memory and brain make us to estimate based on erroneous information. A typical example is lottery, the reason for which we still buy it is because we see a lot of winners, so immediately we feel and think we have lots of chances to win, when in fact we don’t. That is a typical example of how our brain was manipulated by media, which show us hundreds of advertisements of people who win, creating in our minds the false idea that chances are higher than the ones that really are.

On the other hand, the way we estimate value is again comparing with the past instead of the possible. We almost never wonder what else we can do with the same amount of money in a determinate country or circumstance. Instead of doing that, we tend to compare with a past experience and this tendency is causing us to pass off the best deals. For instance, if people are asked which of two companies to join: First option, company A, which offers $175K total amount in three years, but in decreasing wages; second option, company B, which offers increasing wages for three years, but for a total amount of $135K, most of people answers that they prefer company B, even though the total wages amount is lower and the reason for that is because we thing that decreasing wages are worst than rising ones.
Finally, Dan makes us a question, which is if we are so stupid how did we get to the moon? and the answer is pretty simple: our brains evolved from beings whose highest priority was to fulfill their basic needs of food, water, sleeps and so on. We need to learn how to survive in a world for what nature never design us and the good news are that we evolved so well, that now we are the masters of our physical environment and the only thing that could destroy us is our own decisions, so let’s start using the formula that could change our lives forever.