Karl Iagnemma Quotes

We tend to ignore the high probability of small gains or losses and focus on big payoffs or disaster despite remote odds.

You have a natural tendency to want an emotionally satisfying tale - and to make investments based on that - despite times when the actual data may be telling you something different.

Except for some effects that I attribute mostly to age, my intuitive thinking is just as prone to overconfidence, extreme predictions, and the planning fallacy as it was before I made a study of these issues.

We historians are increasingly using experimental psychology to understand the way we act. It is becoming very clear that our ability to evaluate risk is hedged by all sorts of cognitive biases. It's a miracle that we get anything right.

Much of the research into humans' risk-avoidance machinery shows that it is antiquated and unfit for the modern world; it is made to counter repeatable attacks and learn from specifics. If someone narrowly escapes being eaten by a tiger in a certain cave, then he learns to avoid that cave.

We misjudge risk if we feel we have some control over it, even if it's an illusory sense of control.

Some people feel affronted when something they thought to be true doesn't happen. If that's the case, then your sense of risk is much higher, and that leads to risk aversion. You need to be able to be comfortable in uncertainty.

The ability to calibrate risk doesn't happen rationally.

People react differently to hearing 'Procedure X has a 70 percent chance of survival' and 'Procedure Y has a 30 percent chance of death.' Phrased that way, people flock to Procedure X, even though the numbers are the same.

And your brain doesn't naturally know how to think the way Zeckhauser knows how to play bridge. "for example," people do not react symmetrically to loss and gain. Well maybe a great bridge player like Zeckhauser does, but that's a trained response. Ordinary people, subconsciously affected by their inborn tendencies.

That the chance of gain is naturally over-valued, we may learn from the universal success of lotteries.

We pride ourselves on being the only species that understands the concept of risk, yet we have a confounding habit of worrying about mere possibilities while ignoring probabilities, building barricades against perceived dangers while leaving ourselves exposed to real ones.

Even the most analytical thinkers are predictably irrational; the really smart ones acknowledge and address their irrationalities.

Why are empirical questions about how the mind works so weighted down with political and moral and emotional baggage?

It is true that from a behavioral economics perspective we are fallible, easily confused, not that smart, and often irrational. We are more like Homer Simpson than Superman. So from this perspective it is rather depressing. But at the same time there is also a silver lining. There are free lunches!

I held a conference in Harvard where Americans said they didn't believe in risk. They thought it was just European hysteria. Then the terrorist attacks happened and there was a complete conversion. Suddenly terrorism was the central risk.

An investment said to have an 80% chance of success sounds far more attractive than one with a 20% chance of failure. The mind can't easily recognize that they are the same.

Some of the most interesting research that I did was about risk assessment and how ordinary citizens like me handle risk assessment and how irregular our risk assessments are.

Interestingly, human irrationality is a hot topic in economics at the moment. Behavioural economics it's called, on the cusp of economics and psychology.

I think we need to think beyond the issue of absolute risk.

Public health authorities exaggerate health risks for the same reason that sharks eat seals—because that’s just what they do.

We respond to the unknown by trying to retreat from it, or trying to comprehend it, or trying to control it. The first approach is evident in longings for return to a simpler "risk-free" life that never was. The second is reflected in the fantasy of synoptic risk assessment: Measure the requisite probabilities and trade-offs, calculate the social risk-benefit function, and the common good will have been defined. The third approach is in the tradition of professional engineering. It serves us well but, as engineers have been among the first to point out, has met its match and more in the complex social problems it increasingly is called upon to address.

There is a tendency to overestimate the positive things in our lives and underestimate the possibility of negative things

I think that we have to be constantly asking ourselves, 'How do we calculate the risk?' And sometimes we don't calculate it correctly; we either overstate it or understate it.

People are used to dealing with risk.