Critique of “Perceiving and managing business risks: Differences between entrepreneurs and bankers” by Sarasvathy, Simon, & Lave (1998)

This is a critique of a qualitative, protocol-analysis empirical study by Sarasvathy, Simon, and Lave (1998) that I wrote on 2017-09-22 for the class, EDF 7475: Qualitative Research in Education taught by David Boote, Ph.D. at University of Central Florida.

EDF 7475 Article Critique One
Richard Thripp
University of Central Florida

Article Citation

Sarasvathy, D., Simon, H. A., & Lave, L. (1998). Perceiving and managing business risks: Differences between entrepreneurs and bankers. Journal of Economic Behavior & Organization33, 207–225.


The authors wrote a series of business problems, some involving risk of financial loss, and others involving uncertainty of workers dying or getting cancer. They administered these written problems to successful entrepreneurs (n = 4) and seasoned bankers (n = 4) who were recruited from continuing education participants and alumni of Carnegie Mellon University. The authors used verbal think-aloud protocols to analyze participants’ responses and thought processes to the written problems. Through cluster and protocol analyses, the authors concluded that entrepreneurs and bankers conceptualize risk and uncertainty differently. Bankers tend to hold returns fixed and try to decrease risk, while entrepreneurs accept the given levels of risk and focus on increasing returns. When confronting potential cancer or death due to carcinogens and other hazards in the workplace, bankers spoke in the third person and restricted their problem space to financial, legal, and ethical issues, often refusing to make a decision; contrastingly, entrepreneurs put their personal values first and looked for external solutions (e.g., being acquired by a larger company) to provide the millions of dollars required to improve safety.

Contribution to the Field

Methodologically, this article contributed by using a qualitative approach, which is unusual in finance and economics. The stark conceptual differences that emerged from protocol analysis of the bankers as compared to the entrepreneurs contributes to future studies of different financial perspectives, and more broadly, to management and leadership studies. Moreover, the business problems the authors developed are of value, although unfortunately from a web search it appears no one else has ever used these problems in the 21 years since this article’s acceptance.

Strengths and Weaknesses

Ericsson (2002) says a protocol analysis should ideally include other indicators like response times and brain activity. While the authors verbal coding and analysis was parsimonious yet sufficiently detailed, they did not include any information on how long respondents took on each question nor the entire instrument. One strength was that many utterances along each cluster dimension were included in Table 1, although the amount of time respondents spent pondering the problems could also have been included. However, the inclusion of quantitative participant-level statistics in Tables 3–4 is laudable and should be followed by other qualitative researchers, albeit the value here is dubious due to the small amount of data.

In delivering the instrument, procedural rigor was lacking. This is abundantly clear in Appendix A, where Banker 2 mistook an amount in Problem 5 to be $1 million instead of $5 million, because “apparently he was given the copy of the problems used by the previous subject who, after completing the protocol, had discussed the possibility of making it one million and had changed the number 5 to number 1” (pp. 224–225). Another oversight is that Appendix B: Results of Cluster Analysis only refers readers to statistics in Tables 3–4 which were included in Appendix A, but these tables should have been moved to Appendix B. Finally, participants may be identifiable—we know the entrepreneurs founded companies with $5–30 million annual revenues—but social desirability bias is never mentioned, despite the nature of the problems. Given the prestige of the journal and institution, these shortcomings are surprising.

There is no getting around the fact this was a convenience sample. Entrepreneurs who were participating in the authors’ continuing education program were solicited to participate, and bankers were alumni “selected based on geographical accessibility and convenience of scheduling” (p. 208). Moreover, the design of the study suggests the authors may have held a priori assumptions about the differences between bankers and entrepreneurs. Further, the writing and design of the problems, including rationale for offering only di- or trichotomous choices, is absent. It is not even clear the authors wrote the problems— “five problems were used” (p. 208) is what they state, although I surmise they wrote the problems based on an absence of web results when searching portions of the exact text of the problems, besides this article itself.

Nevertheless, this was a concise, enjoyable read that resulted in surprising findings and insights. For example, in Problem 1, I find bankers’ preference for Project 2 stunning given the high probability of low returns contrasted with only a 0.5–0.75% increase in summed returns, based on cumulative probability. Even with discretionary monies, accepting enormous uncertainty for such marginal gains seems overly rational—almost inhuman. Finally, it was smart of the authors to note that causality could flow counterintuitively—perhaps bankers self-select due to their pre-existing aversion to risk, rather than developing the aversion on the job?

Contribution to My Understanding

This article showed me that conducting a verbal protocol analysis is not an insurmountable challenge. The authors’ coding scheme was concise and readily accessible, while their consistent emphasis on participants’ quotes gave me a clear window into several perspectives and lines of reasoning. Moreover, the article made it starkly clear that qualitative research involves many value judgments—there were certainly hundreds of utterances the authors did not see fit to include, and a detailed copy of their encoding protocols is only available upon request. However, trusting in their judgments and techniques, I feel reading their selections and analyses is preferable to having the raw recordings or transcripts. Finally, I now understand that protocol analysis can be used not just for comparing experts and novices, but also different kinds of experts, and that many inferences can be inductively drawn from the results.

Personal Intro to EDF 7474 Peers

Here is an introduction discussion post I wrote to my peers in Dr. Hahs-Vaughn’s EDF 7474: Multilevel Data Analysis course at University of Central Florida this semester (Fall 2017). Here, I recap my first year in the Ph.D. program, discuss my plans for the fall semester, and share an anecdote about the time I sold a photograph to NBC.

Hello, my name is Richard Thripp and I’m a 2nd-year Ed. Ph.D. Instructional Design & Technology student. I like math and statistics, and am in the Advanced Quantitative Methodologies certificate program.

The area I am most passionate about is financial literacy education and research, although in the past year I have been all over the place, working on an engineering testing center (a manuscript on which I am Author # 4 of 4 is under review), threshold concepts for doctoral students (abandoned this), Florida 7th grade civics test data (a manuscript on which I am Author # 3 of 5 is under review), and National Financial Capability Study (NFCS) data. Tentatively, this semester I want to further analyze NFCS data in this course and in Dr. Witta’s Quantitative Methods II course, leading to a publication, while an unrelated project will be observing consumer behavior at Starbucks for Dr. Boote’s qualitative methods class.

This semester is my first one teaching. I have 70 students in two sections (35 each) of EME 2040: Introduction to Technology for Educators. So far I have enjoyed it a lot.

An interesting fact about me is that in 2011, I sold this framed copy of this image of a grasshopper, a photograph I took in 2006 and removed the background, on Etsy to NBC, for $20. It appeared in Max Burkholder’s room in Season 3 of Parenthood. I still haven’t watched the show, and could not find it while skimming through it, but was told by one other person they saw it.

Message from NBC on Etsy

Demand Letter to Bank of America and Commentary

LETTER OF DEMAND, AUGUST 24, 2017 [PDF version]
[Address and contact information redacted]

Fax: 980-233-7070

Please forward as appropriate.

On August 21, 2017, Bank of America stated by mail that my personal checking account # [redacted] and my personal savings account # [redacted] are being restricted in 21 days and permanently closed in 30 days. The only reason that is stated is that Bank of America may elect to close my deposit accounts at any time. However, the savings account has a pending promotional offer of $150.00 which has not yet been paid out. I have met all requirements for the offer, which stated that I would receive a $150.00 cash bonus for depositing $10,000 within 30 days of opening the savings account, and that, following this 30-day period, the $10,000 balance must be maintained for 60 days. Subsequently, I should receive the $150.00 bonus within 60 days, which is a maximum of 150 days from account opening (April 18, 2017), which would be September 15, 2017. However, Bank of America has elected to restrict my deposit accounts on September 11, 2017, and permanently close them on September 20, 2017.

As of August 24, 2017, my Merrill+ Visa Signature credit card ending in [redacted] has vanished from my online banking profile with Bank of America, and, upon attempting to sign in to my Merrill+ rewards account, the error message “You do not have an eligible rewards credit card account to access this website” is displayed. However, my Merrill+ Visa Signature card has a rewards balance of 53,159 points, which have a cash value of $531.59. This closure appears to have been a targeted action initiated by Bank of America to prevent my redemption of these reward points, because my Cash Rewards and Better Balance credit cards, which have no accumulated rewards, remain open.

I believe these actions by Bank of America are unlawful. I am writing to demand payment of the $150.00 savings promotional offer and the cash value of my 53,159 Merrill+ reward points, which is a total of $681.59. You may send me a check to my address on file (also listed at the top of this letter), or deposit the owed amounts to my Bank of America deposit accounts prior to September 6, 2017.

If Bank of America will not comply, I am prepared to litigate. My initial actions will be to file complaints against Bank of America to the Federal Reserve, Consumer Financial Protection Bureau, and Attorney General of Florida. Subsequently, I will sue Bank of America in Volusia County, FL civil court. In the past, I have litigated against, Inc. (see RICHARD THRIPP V. JEFFREY P BEZOS, ETC., Case # 2016 30054 COCI), which had favorable results.

Richard X. Thripp


As someone who is acutely financially literate, as a customer I am frequently a losing proposition for corporations. I don’t pay any interest on my credit cards. In fact, I have been known even to take advantage of 0.00% APR offers on credit cards while parking the money in a CD or stock market index fund. When I opened my BankAmericard Cash Rewards credit card, I received the largest bonus they ever offered, which was $440 (including 10% customer bonus). Every quarter, I have received $30 from my Better Balance card like clockwork, simply by charging and paying my Google Drive $1.99 storage fee to it.

While I typically cash out rewards as quickly as possible in case of situations like this, Merrill+ points are unusual in that they can be worth much more for certain travel redemptions than when redeemed for cash. Therefore, I was saving them for potential future travel.

While Bank of America and other giant corporations such as, Inc. are usually successful in bullying and defrauding customers who are costly or otherwise unfavorable, for an increasing number of Americans, the jig is up. We know how to fight back. We can search the web to see what others have done in response to your unlawful actions. Like Amazon, who hides behind their Terms of Use to claim they can ban customers and steal their gift card balances, we know these “terms” do not stand up in courts of law. We know they are unlawful, preposterous, and not consensual. To say that a customer agrees to “binding arbitration” by choice is utterly ludicrous. Even a child can determine that a $37.00 overdraft fee for a cup of coffee is usury.

Richard Thripp fights back. His platform is Hundreds of visitors per month come here via Google Search to read how I brought to heel. I have responded to dozens of pleas for advice from customers defrauded by Amazon, and tens of thousands have heard my story. The game is on, Bank of America. You just banned the wrong customer. Although you may have averted paying out $681.59, I will repay it a thousandfold.

If you have been defrauded by Bank of America, contact me and I may publish your story.

Tech Insights for Educators #3: Intro to managing digital data

Although preservice teachers are often “digital natives,” meaning they grew up with and are familiar with common computing devices, they often are not actually proficient in using them for advanced purposes. In fact, there is a lot more to technology than mere social networking websites and apps. Educators often have many types of files and data to manage and share with their students and colleagues. It is important to establish productive practices that minimize wasting time and loss of data.

Digital data comes to us in many forms that are actually rather “siloed.” For example, typically we do not have a way to reliably search all our emails, text messages, and other digital data sources all at once. Further, while ideally, software would automatically keep a log of all edits made to a file (“versioning”), including a versatile user interface to navigate through prior edits if needed, in fact this is still uncommon and if available, often impractical to use. For example, the “Track Changes” function in Microsoft Office is satisfactory for sharing edits with colleagues, but you still have to create multiple copies of a file to keep track of prior edits that have been “accepted.”

The typical teacher or professor is working many hours per week, frequently in an office setting with Windows PCs provided by their institution. In fact, they often are not even able to install software or fully configure the software available to them. For this reason and others, for practicality it is necessary to manage digital data using commonly available practices and tools. Therefore, we are often restricted to file-level management and web tools.

Example List of Folders Organization and naming of one’s files and folders is still important to finding and maintaining data, in part because of Windows’ abysmal search functionality. Depicted right is a selection of folders for classes I have taken or been a teaching assistant for at University of Central Florida. Here, we see I have made many choices, with various pros and cons. I have chosen to organize my folders by course code, in a flat structure that includes many different semesters, thus avoiding navigating through many levels of subfolders. I have included other folders not directly related to classes, and have forced them to be displayed at the top of the list in Windows Explorer by prepending the folder names with symbols (here, “%”). For readability, I have used both capital and lowercase letters, and have included the year and semester subsequent to the course codes. I use hyphens instead of spaces because spaces in folder and file names can be problematic when data is directly uploaded to a web server. For classes I am currently enrolled in (not shown here), I prepend the folder names with “!” so they appear at the top of the list, and then remove the “!” at the end of the semester. Note that there is a tradeoff here—renaming a folder breaks shortcuts or links and forces many “dumb” applications (e.g., Google Drive, SyncBack) to delete and re-copy the entire folder.

Example List of Subfolders Here, we have one of my course subfolders (EME 6646, pictured right), which contains additional subfolders to organize files related to this class. The upper six folders consist of files provided by the professor, while the module folders contain more folders and files relating to each module’s materials and assignments. The “Outdated” folder contains an older version of the syllabus subsequently replaced by the professor, and the “PRIVATE” folder contains peer evaluation assignments I did not want to share with teammates. This course had a lot of group work, so I actually shared my files for this course (minus the private folder) with teammates via Google Drive.

I use a Windows application called SyncBackFree to backup data. The Google Drive desktop application allows you to automatically synchronize folders with your Google Drive, meaning that changes that are made on one will be synchronized on the other. For example, I could save a PDF file from my web browser on my mobile phone to a Google Drive folder and it would automatically be downloaded to my PC, or vice-versa. Google Drive also allows sharing folders with friends who can also be co-editors. I used these features along with a backup profile in SyncBackFree to duplicate changes on my flash drive (“X:”) to the Google Drive EME 6646 folder (excluding the private folder). SyncBackFree offers “synchronization” as well, but I stick to backup, meaning that I am careful to only edit files in one place rather than editing in two places and having to reconcile the differences. (In this case, my peers were not adding to the Google Drive on their own—if they were, a straight backup could overwrite their files if the option to delete data present in the “destination” but not the “source” was checked.)

In the EME 6646 course, moreover, we used Google Docs to collaboratively edit our group assignments, and then at the end, I would manually copy-and-paste into a Microsoft Word file and correct formatting prior to submitting the group assignment. Of course this is inefficient, but the professor would not accept Google Docs submissions, so it was more efficient than sending many different Word files back and forth.

One might ask why I did not just edit files directly in my PC’s Google Drive folder? Well, what if Google Drive does something weird, or my colleagues accidentally delete or damage a key file? Then, my Google Drive would automatically synchronize the undesirable changes, resulting in data loss. Backing up your data regularly is important to avoid data loss. However, when synchronization occurs in the background, without user input or reversibility, your data can easily be wiped out by an undesirable change in one place being automatically propagated to another place. This is why RAID-1 disk mirroring is not backup, although it protects against failure of a hard disk drive.

Going back to educators having office PCs at work that don’t allow them to install software, this is a reason I like working from home. I work on my class files, even when at home, directly from a flash drive, while running a SyncBackFree profile frequently to backup the flash drive to one of my PC’s hard disk drives. Then, I can work directly from the flash drive in the field while assuredly having the latest copy of my files. You could also use Google Drive via the web interface, but this has disadvantages too (e.g., must log-in to Google first, cannot save files directly to Google Drive, Internet problems, limited to 15 GB for free, latency). Another piece of the puzzle that I added a year ago is BackBlaze, which securely backs up all files on my home PC (except it will not backup flash drives) for $95 per two years (or, you can pay $5 per month). Although BackBlaze will not backup my flash drive directly, because I am using SyncBackFree to backup the flash drive to a hard disk drive, all my data still gets backed up to the cloud, which is literally multiple terabytes because I am also a photographer who shoots in RAW mode, even on my Samsung Galaxy S7 smartphone (BackBlaze offers unlimited backup, even though they lose money on customers like me).

Digital asset management is the buzzword particularly for managing many thousands of photos or other non-text data, but such software is too complex and unwieldy for educators’ purposes. Basically, working directly with files and folders is your main option for types of data such as PDFs, Word, Excel, et cetera. For note-taking, I use EverNote (with reservations), which is great for writing, searching, and sorting through text or even PDFs, images, and receipts if you pay for the premium version. I would not recommend taking notes in text, Microsoft Word files, or Gmail drafts because they are harder to search, manage, and/or synchronize. I have come very much to like taking notes in EverNote on my phone with a Bluetooth keyboard to type on.

One of my big shortcomings is my complete lack of familiarity with Apple products. Some of the issues I talk about here may be Windows-specific and the situation may be much better on Mac… but nevertheless, you are much more likely to be compelled to work on a PC than a Mac. Although it is dated and no longer updated, I use Locate32 to search through files on my PC, which is much faster and better than Windows or Cortana search. It is especially useful if you give descriptive filenames, which I recommend, although it takes practice to make filenames short, consistent, useful, and quick to devise.

Example List of Files When naming files and dealing with different versions, a simple and effective approach is to make a copy for each editing session and then save it with the date and time (“timestamp”) in the filename, as pictured left. If you are working in Adobe Photoshop, you might use non-destructive editing techniques such as layers or parametric editing instead. However, Microsoft PowerPoint and many other applications cater toward destructive editing (where data is deleted or overwritten during the editing process), so multiple files with timestamps is the simplest compromise. Then, you can revert or borrow elements from a prior version if needed. Although this takes up additional storage space and duplicates material, you could always archive the files in a 7-zip archive afterward. For example, the pictured files are 3.5 MB but only 1.5 MB in a .7z archive.

Note in this example that I have used YYYYMMDD-HHMM format for the timestamps. If you use MM-DD-YY format, all the files from the same month are clustered together, even if they are from different years! This is why formatting the timestamp in order of declining significance (i.e., year, month, day, hour, minute) is preferable. Then, files will be sorted chronologically. Further, I recommend using and becoming familiar with the 24-hour clock, because using a 12-hour clock would end up grouping files from 5 AM with files from 5 PM. You could use YYYY-MM-DD-HH-MM format for easier readability while maintaining chronological sort, albeit with slightly longer filenames. You could also use two-digit years, but I prefer all four digits because it makes it clearer that you are looking at a year, and will not be confusing in future centuries.

Here, I have put the timestamps toward the end of the filename. An alternate approach, more useful in some situations, is to put the timestamp right at the beginning. Then, all files in a folder will be sorted by timestamp. In other situations, you may want files to first be grouped by some other keyword(s), so the timestamp should be placed later in the filenames. Note that you can also use the “Date Modified” column in Windows to sort the files by when they were last edited. However, this option is not available in many settings (e.g., the Google Drive web interface).

While there are many other pieces to effectively managing your digital data (e.g., a ScanSnap ix500 scanner, LastPass or Dashlane, VeraCrypt or BitLocker, etc.), organizing and backing up individual files is a principal component and important starting point. Putting the time in to learn about this and establish good methods now will pay great dividends in the long run.

Understanding opportunity cost is pivotal to financial literacy

Opportunity cost, the trade-off of making a particular choice, is typically seen as more applicable to economics than personal finance. However, I believe understanding opportunity cost is central to being financially literate, and is sorely lacking among the general public. For example, most people are not aware of the magnitude of the “late-start” opportunity cost of obtaining a four-year degree. Many psychology doctoral graduates are overwhelmed by debt and wish they hadn’t stayed in school so long. While other factors are partly responsible, on the whole, college attendees do not recognize the sky-high value of their late teens and twenties, nor the opportunity cost of their decision. Moreover, delay discounting research shows that people frequently overvalue rewards now versus in the future, particularly if they have addictive dispositions. In part, this may be due to a lack of understanding or consideration for opportunity cost.

Research on consumer behavior shows that perceptions of value are often unduly influenced by coupons, promotions, and advertising. For example, an individual who knows that Tylenol and ibuprofen are the same might buy Tylenol with a coupon, even though the cost is still higher than the generic counterpart. The coupon is seen as a savings, when in fact it induced a purchase which was actually more expensive.

Retail gas prices are highly visible, and are given undue weight by consumers. The same consumer who purchased Tylenol might drive out of his/her way to save a few cents per gallon on gas, or might experience psychological distress at observing a lower price at another gas station subsequent to fueling up. However, the opportunity cost of the price difference is almost certainly inconsequential. In fact, the unhappy feelings themselves are more costly and are antithetical to rational choice theory, because they irrational and counterproductive. An understanding of opportunity cost can make this irrationality explicitly visible.

Human behavior when receiving a “windfall gain,” the unexpected acquisition of wealth that feels unearned, is a premier example of failure to understand opportunity cost. The opportunity cost of spending the windfall money is identical to the opportunity cost of spending any other money. However, the $3000 that is received as an IRS tax refund is spent more easily than the $3000 that is earned day-to-day, as if spending the former has less opportunity cost than the latter. Not so! Amazingly, many people will fail to understand opportunity cost even when it is merely their money that was withheld, interest-free, and is now being returned to them.

Money or items of value that are received for “free” are free only when received, but not when spent. Travel hackers who gain “free” vacations via credit card sign-up bonuses fail to recognize that only the acquisition of the rewards was trivial, but that the opportunity cost of using them for travel is what could have been received by cashing them in or selling them to mileage brokers (albeit, with varying levels of risk which should also be factored into one’s valuation). Gift card recipients spend lavishly, even when they would self-flagellate for making identical purchases with money they “earned.” However, the opportunity cost of spending money one received as a windfall or gift is usually no different from the opportunity cost of spending “earned” money.

Not only do purchasing decisions have opportunity costs, but also time-usage decisions. The opportunity cost of driving, for instance, is much greater than the cost of gas—it also encompasses maintenance, depreciation, and insurance on one’s vehicle, time spent driving, and risk of bodily harm. If one can earn $50 per hour in their area of expertise, the opportunity cost of doing one’s own secretarial or housekeeping work is quite substantial.

Investors who reject the risk of stocks for the “safety” of bonds or treasury bills do so at tremendous opportunity cost. In fact, over long time periods (e.g., over 20 years), the risk of stocks evaporates so much that one is over 99% more likely to lose money having picked the “safe” investments. Pandering to one’s psychological shortcomings comes at immense expense.

If an employer offers a 401(k) or IRA match, the opportunity cost of not taking advantage is staggering. Putting $50 per week into such an account at Age 25, which will immediately be doubled by your employer and feasibly may double every 10 years in the market even adjusting for inflation, can be equivalent to 1600 inflation-adjusted non-taxed dollars at Age 65! Even if we are conservative and halve this to $800, statistically as an American you are very likely to live past 65 and still need money at this age. Nevertheless, so many young people “need” this money to make ends meet, without even understanding the raw deal they have given themselves by not contributing.

Understanding and applying the principle of opportunity cost can literally be the difference between becoming a millionaire or pauper. In the Jump$tart Coalition’s National Standards in K–12 Personal Finance Education, 4th edition, it is mentioned only as “every investing decision has alternatives, consequences and opportunity costs” (4th grade knowledge statements; p. 24) and “every spending and saving decision has an opportunity cost” (8th grade additional knowledge statements; p. 8). Moreover, most K–12 teachers don’t even understand “technical” topics such as opportunity cost, let alone being able to teach them. What a pity.

Writing on education, finance, psychology, et cetera