Saturday, December 31, 2011

Predictably Irrational: Chapter 8

Dan Ariely is a behavioural economist who refutes the idea that we are fundamentally rational. Through empirical data, experiments and anecdotes, he illustrates that our irrationality can actually be predicted. He then presents ways in which we can make more rational decisions, both as investors and as people.

Humans also behave irrationally when it comes to keeping our options open. We can't resist having alternative options, even if it reduces our overall focus. Through a series of experiments, Ariely demonstrates that humans perform worse than otherwise when faced with the prospect of diminishing alternatives. The subjects of the experiments sacrificed way more than they should have (if they were rational) in order to keep options open.

Ariely believes this occurs to a great extent in society, much to our detriment. Many opportunity costs are lost as a result of delays we make in order to keep our options open. Sometimes a coin-flip decision is better than no decision at all, as it forces the individual to move on, thereby increasing the value of the end result.

2 comments:

rayhaan said...

hey saj,
happy new year dude...hope the markets become even more voilatile and drop lower!
hope u ve had a great year despite the ups and dowS
just wondering is RIM still worth it?...i mean is it stilL in your "net net" zone or is it now FIRMLY IN THE "POWERBALL" territory as whopper likes to say so fondly?

and yeah,hers the link to one of the best cash bargains around IMHO

http://fundooprofessor.wordpress.com/2011/03/26/the-grand-strategy-of-ajay-piramal/

hope you find some "food for thought" about piramal healthcare

once again HAPPY NEW YEAR 2012

P.S INCASE THE STUPID LINK STILL DOESNT WORK PLEASE GOOGLE FUNDOO PROFESSOR+GRAND STRATEGY OF AJAY PIRAMAL
TC

Saj Karsan said...

Thanks Rayhaan,

I think RIM is worth it, however, I've thought so all along and all it has done is lost value and become cheaper, so take my answer for what it's worth!

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