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Why life is a battle against the odds

One of the moments in life guaranteed to make us feel old is when we come up against the way the young deal with the future. If you're under 20 you think you're going to live forever; our collapsing bodies painfully remind the rest of us that this simply isn't true.

The future is uncertain, and uncertainty is something we're not good at dealing with. It boils down to risk and how we tend to underestimate some kinds and overestimate others. So when it comes to planning their future, young people will often say they want to follow a career that, while overtly attractive, is obviously risky compared with less exciting, but safe, options.

Generations understand risk differently. Adults, for instance, learn to gauge it from experience. Once you've been burned a few times you realise that not all gambles pay off.

If education is about helping us to make better decisions or improving our judgment, teachers should be helping their pupils appreciate that we live in an uncertain universe that requires us to take risks - and that we need to calculate carefully which risks to take.

The subject has come to the fore in behavioural sciences with Daniel Kahneman and Amos Tversky's recent shared Nobel Prize in economics for their work in trying to understand decision-making in the face of uncertainty. The pair started their research investigating anomalies and contradictions in human behaviour. Kahneman says people may drive across town to save pound;5 on a pound;15 calculator but not to save pound;5 on a pound;125 coat.

Gamblers back long shots over favourites more often than they should.

Kahneman and Tversky suggest this is because they attach too low a probability to likely outcomes, and too high a probability to unlikely ones. They also tend to shift bets towards long shots as the day's racing nears its end. For many, a successful bet on an outsider could turn a losing day into a winning one. This should not matter. The last race of the day is no different from the first of the next day. But most race-goers close their mental account at the end of each racing day, and hate to leave the track a loser.

Kahneman and Tversky also found that most people see blue skies ahead, even if past experience suggests otherwise. For instance, surveys have shown that stock market forecasts are more optimistic than past long-term returns justify. The same goes for hopes of ever-rising house prices or doing well in games of chance. Americans are perhaps the most optimistic: according to a poll, 40 per cent think they will end up among the top 1 per cent of earners.

Such optimism does sometimes turn into a self-fulfilling prophecy. But usually it means wasted effort and dashed hopes. Kahneman and Tversky's work points to three types of over-confidence. First, people tend to exaggerate their own skill and prowess. Second, they overestimate the amount of control they have over the future, forgetting about luck and attributing success solely to skill. And third, in competitive pursuits such as betting on shares, they forget that they have to judge their skills against those of the competition.

To give pupils a chance of surviving in the real world, teachers need to help them become more aware of competition (it's tougher out there than it is in here), to curb the natural tendency to be over-optimistic (if you are worried about failing an exam, work harder) and remind them how large a part chance plays in our futures (you did well, but you also got lucky).

Dr Raj Persaud is a consultant psychiatrist at the Maudsley hospital and senior lecturer at the Institute of Psychiatry in London. He is a fellow of University College London, and author of From the Edge of the Couch published by Bantam Press, pound;12.99.

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