Cognitive biases affecting judgment of existential risks
http://www.singinst.org/ourresearch/publications/cognitive-biases.pdf
This article descrives cognitive biases (heuristics) that humans use to operate in the world and how those biases can lead us into incorrect decisions.
Some of the biases can be observed in popular thinking about housing prices.
A particularly interesting section about black swans:
This article descrives cognitive biases (heuristics) that humans use to operate in the world and how those biases can lead us into incorrect decisions.
Some of the biases can be observed in popular thinking about housing prices.
A particularly interesting section about black swans:
Black Swans are an especially difficult version of the problem of the fat tails: sometimes most of the variance in a process comes from exceptionally rare, exceptionally huge events. Consider a financial instrument that earns $10 with 98% probability, but loses $1000 with 2% probability; it's a poor net risk, but it looks like a steady winner. Taleb (2001) gives the example of a trader whose strategy worked for six years without a single bad quarter, yielding close to $80 million - then lost $300 million in a single catastrophe.