This American Life and the financial fiasco
Jan
25
This American Life had a show a few months ago that I just discovered. In my mind this is the best description of the financial fiasco I’ve heard. it is worth listening to.
You can also download the transcript as a PDF.
It is just amazing to see what we end up doing to ourselves.
Irrationally yours
Dan
My latest book, The Upside of Irrationality, explores some positive and some negative ways that irrationality plays out in our lives.
Hi Dan:
All of this is good analysis of how this happened, however, I have two questions asking you to make predictions. I would love to know what you think.
a. In your opinion – what should the government do? How will tax-cuts be taken by America’s population (household income less than $200K)? Why are banks looking for further bailouts? Will stronger regulation stifle the market? Are these examples of being predicatably irrational?
b. What would you advise the regular citizen to do to weather this storm? Squirrel away his money OR spend it as fast as he earns it OR invest in the market OR something else? What do you predict folks will do if they have no direction?
Best, Mamta
We hold on to the illusion that we are rational in all our decisions. It is an illusion that feeds our ego. However, under a thin veneer of culture, we are apes. We have evolved to find strength in numbers, therefore we have evolved the capacity to trust other members of our tribe, and follow the leader. Science and literacy are but latecomers on the scene, and as such had no influence on our biological instincts.
You may know where the market is going tomorrow, but not the day after tomorrow. Just ask Polaroid, Eastern Airlines, etc. We have to accept the fact that the trade-off between risk and expected profits is real, and that for every X% of expected increase in rate of return, there is a Y% increase in the risk of being wiped out.
Who every predicted that Russia would totally bail out of its financial responsibility towards the rouble?
If the economic world were logical, why wouldn’t the sellers of home heating oil advertise something like “buy the heating fuel that can’t blow up and burn your house down, like natural gas can”?
my dentist installed a veneer on my front tooth and it looks better than ever,”.
veneers maybe necessary if you have very crooked teeth:,’