There is a gambling experiment conducted by behavioral economics researchers. The subject starts with no money and is told that they have two choices. They can choose to gamble 50/50, where the win would be $0 or $20, or they can choose to go home and get a guaranteed $10. The EV of these two offers is clearly the same, and you can probably guess right away that the vast majority chose the guaranteed $10. So, it seems to conclude that people tend to avoid risk.
Now let's move on to some variables. Let's say that instead of starting with no money, the subjects start with $20. Again, they are told that they have two choices: gamble 50/50 to either keep or lose everything, or they can guarantee to accept a $10 loss and keep the remaining $10. What do you think most people chose? In such a situation, most people chose to gamble and try to keep everything. So, maybe they are inclined to take a bit of risk.
But if you are an insightful researcher, you will notice that both of these experiments have the same results. In both cases, if you decide to gamble with a 50/50 chance of winning, you will end up with either $20 or $0 in hand, and if you refuse, in both cases you will get $10. Not only is the EV the same, but the actual results are equivalent. However, in one case, people choose to avoid risk, and in the other, they seek it. Why?
We could say that people are not rational beings, but that doesn't give us any useful information and only removes the overall picture. We would do better to conclude that such behavior arises for an important reason. Essentially, risk aversion means that a certain amount of gain causes less satisfaction than the pain caused by a loss. An example from poker: when faced with a choice to flip, giving a small +EV, and the flip is so big that it makes you furious, you will always refuse it. But such a decision is not necessarily irrational – you are simply optimizing your feelings instead of money. In the same way, the subjects rationally respond to their incentives – their incentives maximize feelings since the EV is exactly the same.
These experiments demonstrate the power of reframing, presenting something as a gain or 
loss, but there are also more subtle conclusions. You probably noticed that at the beginning of each experiment, a different amount of money was given. Of course, the initial amount was immaterial. But if you tell the participant that they start with $20 instead of $0, it gives the person an anchor point. Such anchor points are mental and emotional anchors by which we orient ourselves. They set the initial conditions, like the opening chapter of a book. By controlling anchor points, we can control the mental frames through which we see objects or situations.
Even experts are sometimes swayed by such anchor points. In one experiment, medical professionals were offered hypothetical procedures with a “90% 5-year survival rate” or a “10% chance that the patient will die within 5 years.” Although essentially the same information, the experts reacted very differently, undoubtedly choosing the 90% survival rate.
The way information is presented greatly affects our reaction. Reframing and adjusting anchor points is a widely used tactic in advertising and politics, as well as in rhetoric and persuasion. However, we will narrow our research to poker, making money and EV-based decisions.
