Thinking, Fast and Slow
6 discussion topics on which David agrees with Taleb:(1) [p. 286] The sterilized randomness of games does not resemble randomness in real life; thinking it does constitutes the Ludic Fallacy (his neologism). This is exactly right, and mathematicians should pay attention. In my own list of 100 instances of chance in the real world, exactly 1 item is... See more
David Aldous • Taleb, Nassim Nicholas. The Black Swan: The impact of the highly improbable. Random House, 2007.
A similar analysis applies to each of the cells of the fourfold pattern: systematic deviations from expected value are costly in the long run—and this rule applies to both risk aversion and risk seeking. Consistent overweighting of improbable outcomes—a feature of intuitive decision making—eventually leads to inferior outcomes.
Daniel Kahneman • Thinking, Fast and Slow
The effort is justified only when the stakes are high and when you are particularly keen not to make mistakes. Furthermore, you should know that correcting your intuitions may complicate your life. A characteristic of unbiased predictions is that they permit the prediction of rare or extreme events only when the information is very good. If you exp
... See moreDaniel Kahneman • Thinking, Fast and Slow
Because of the possibility effect, we tend to overweight small risks and are willing to pay far more than expected value to eliminate them altogether. The psychological difference between a 95% risk of disaster and the certainty of disaster appears to be even greater; the sliver of hope that everything could still be okay looms very large. Overweig
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