Risk

We humans are an odd lot when it comes to taking risks. Economists love to study this. For instance, what do people do if they are offered a chioice between A) flipping a coin and either winning nothing or $10,000, or B) getting $5,000 with certainty. Statistically they are equivalent and thus you should be indifferent. What would you do? Some people opt immediately for the coin flipping, others for the certain payoff. People seem to have very different levels of risk aversion, as economists call it (for the math geeks, people who love risk have negative risk aversion).

What is harder to understand is how some people seem to have different levels of risk aversion for different areas of their own life. Take, for example, the following two pictures:

In the first case, we were willing to pay $50 (Dad actually paid...thanks Dad!) to take a 1 in 125,000 chance of dying while white water rafting. How risky was this? It was 182 times as risky as taking a plane flight.

In the second picture (an external hard drive in a fire-proof, water-proof box), we spent about $150 to mitigate the risk that we would lose our digital pictures. The pictures of our previous risky behavior are now safe just in case our Mac hard drive dies, our house burns down, and water from the fire department floods the charred remains.

Hm. So in one case we paid to take a risk with our lives. In another we paid even more to protect pictures of our lives. What does this say?