tungwaiyip.info

home

about me

links

Media

Yucatán Photos

St Lucia Photos

Photo Album

Videos

Blog

< May 2010 >
SuMoTuWeThFrSa
       1
2 3 4 5 6 7 8
9101112131415
16171819202122
23242526272829
3031     

past articles »

Click for San Francisco, California Forecast

San Francisco, USA

 

Why Smart People Make Big Money Mistakes

I have just finished a fascinating book, Why Smart People Make Big Money Mistakes by Gary Belsky and Thomas Gilovich. Traditional economics considers people as rational being, acting to optimize one's own welfare. In practice, few people really acting rationally all the time. Even well informed people have found to make many faulted financial decisions. Behavioral economics incorporates psychology and cognitive factor into consideration. It have found great insight into people decision making process.

Below are simply my notes taken from the book.

Ch.1 Mental Accounting, Richard Thaler. Statistical Regression, Sir Francis Galton, 1911 (tendency to fall back into statistical mean).

Ch.2 Prospect Theory, Daniel Kahneman, Amos Tversky, 1979. (Issue framing, e.g. loss aversion, sunk cost fallacy).

Ch.3 The Devil That You Know

Decision Paralysis - tendencies to avoid or delay action, particularly due to the fear of regret and a preference for the familiar.

  • Maximizer/Satisfier - Herbert Simon, 1950s.
  • Trade off contrast - choices are enhanced or hindered by the tradeoff between options, even for options we wouldn't choose anyway, Tversky, Simonson.
  • Extremeness aversion - people are more likely to choose an option if it is an intermediate choice within a group, Tversky, Simonson. (so it can be manipulated by introducing extreme choice).
  • Status quo basis, endowment effect - preference for holding on what you have.
  • Regret aversion - avoid the pain of regret and the responsibility for negative outcomes.

Counter Measures

  • Take opportunity cost into account
  • Mark Twain's saying, "Twenty Years from now you will be more disappointed by the things you didn't do than by the ones you did do."

Ch.4 Number Numbness

  • Neglecting the base rate - tendency to disregard or discount overall odds, Kahneman, Tversky.

Ch.5 Dropping Anchor

  • Anchoring - clinging to a fact or figure or idea that may or may not have any real relevance to your judgment or decision.
  • Confirmation bias/Preferential bias - once people developed bias, they tend to view new information in such a way that it supports those preferences (Edward Russo).

Ch.6 The Ego Trap

The tendency to attribute success to your ability but to attribute failure to other causes.

  • Heads I win, tails it's chance, Eileen Langer, 1975
  • "Expert" predicition, Tetlock
  • "Hindsight bias", Baruch Fischhoff

2010.05.27 [, ] - comments

 

 

blog comments powered by Disqus

past articles »

 

BBC News

 

Brexit: EU demands 'serious UK response' on citizens' rights (29 Apr 2017)

 

North Korea crisis: North in another 'failed' missile launch (29 Apr 2017)

 

Turkish authorities block Wikipedia without giving reason (29 Apr 2017)

 

France election: Marine Le Pen would make Dupont-Aignan PM (29 Apr 2017)

 

Tense moment plane lands without wheel (29 Apr 2017)

 

Italian woman 'returns mixed-race surrogate baby' (29 Apr 2017)

 

Hungary education law: Orban 'to meet EU demands' (29 Apr 2017)

 

El Salvador zoo: Prosecutors investigate 'suspicious deaths' (29 Apr 2017)

 

China deports US 'spy' Sandy Phan-Gillis after conviction (29 Apr 2017)

 

Ted 2017: Elon Musk's vision for underground road system (28 Apr 2017)

more »

 

SF Gate

 

Bay Area News (7 Jan 2012)

 

City Insider (11 Feb 2012)

 

Crime Scene (13 Feb 2012)

 

C.W Newius Column (10 Jan 2012)

 

C.W. Nevius Blog (11 Feb 2012)

 

Education News (10 Jan 2012)

 

KALW (11 Feb 2012)

 

Matier and Ross Blog (11 Feb 2012)

 

California issues historic medical marijuana rules (29 Apr 2017)

 

In dot-com bubble time, it’s still only 1997 for U.S. equities (29 Apr 2017)

 

ICYMI: Trump’s job hard, dirty jeans scorned, Charmin for Butt (29 Apr 2017)

 

Craigslist sues Instamotor for allegedly re-posting car ads (29 Apr 2017)

 

Wait for calorie count on burgers, pizza may get longer (28 Apr 2017)

 

The biggest regrets people have after buying a home (28 Apr 2017)

more »

 


Site feed Updated: 2017-Apr-29 12:00