After amassing winnings of $2.4 million (only $56,000 less than Ken Jennings's all-time record), Jeopardy! champion James Holzhauer finally lost.
Much was made of Holzhauer's mastery of the buzzer, a skill requiring exquisite timing. More important was Holzhauer's ability to overcome the common cognitive bias of loss aversion, a mental approach that causes most people to prefer avoiding a loss than acquiring an equivalent gain--although he did wager an uncharacteristically low amount for his last Final Jeopardy question.
But what often went ignored in all the talk about buzzer mastery and game strategy is that Holzhauer is really smart: No strategy could make up for too many incorrectly answered questions.
By amassing a huge lead, he rarely had to worry about losing in Final Jeopardy, where he typically bet as much as possible while making sure no one could overtake him. Miss too many questions, though, and he would have to get the Final Jeopardy question right -- and also wager enough to ensure a win.
That wasn't possible on Monday, though. Holzhauer went into Final Jeopardy with $23,400, while Emma Boettcher had $26,600.
Both Holzhauer and Boettcher got the question right.
But Holzhauer wagered only $1,399, while Boettcher wagered $20,201.
Seemingly, Holzhauer finally fell prey to loss aversion, choosing to protect what he had rather than maximize his potential gain. Even host Alex Trebek was surprised, calling Holzhauer's wager "a modest one for the first time."
But wait, there's more: Since Boettcher could cover any bet Holzhauer made, he could win only if she got the Final Jeopardy question wrong. So if Holzhauer missed in Final Jeopardy, he likely would have fallen to third place, winning $1,000 instead of $2,000.
That made the logical strategy simple: Cover Boettcher's wager in case she got the answer wrong -- which would allow him to survive to and play another day, helping him maximize his potential earnings -- and cover the third-place contestant, Jay Sexton, in case he got the answer right.
All of which means loss aversion had nothing to do with it. Nor did another common cognitive bias: "I'm playing with house money, so why not bet big just in case?"
Holzhauer stayed logical to the end: He did the math, and made the right bet. It didn't work, but it was the smart bet.
Sometimes going all-in really is the smartest bet. Sometimes it's not. Every situation is different.
Take a step back the next time you're more worried about losing what you have than you are excited about what you could gain. Take a step back the next time you consider the risks versus the rewards. Consider your long-term goals. Evaluate the risk of losing what you already have. Then determine the value of what you could have.
Make your decisions based on logic, and reasoning, and data -- and also in your belief in yourself.
You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future.
You have to trust in something -- your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.
Take small risks. Try things. Learn from your failures and your successes. See taking intelligent risks as a way to gain the skills, knowledge, and experience you need to succeed.
And don't forget: No matter how extensively you calculate the risks, there is never a guarantee that you will always succeed.
But when you never try something new, something risky, something that scares you, you'll never be more than you currently are.