2725: Cognitive Bias by The Mad Fientist on Financial Investments & Investing Risk vs. Reward

Optimal Finance Daily

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Episode 2725:

Explore the profound impact of cognitive biases on our decision-making processes, especially in high-stakes scenarios like financial investments. This episode, inspired by a Mad Fientist article, delves into everyday examples and psychological experiments that reveal our subconscious preferences for risk over certainty, influenced by how choices are framed.

Read along with the original article(s) here: https://www.madfientist.com/cognitive-bias/

Quotes to ponder:

"If the problem is framed as a loss, as it is in the island #1 scenario, we become risk-seeking."

"Your brain is useful when setting up an investment plan but it’s not useful when you execute that plan."

Episode references:

The Simple Path to Wealth by JL Collins: https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926

Predictably Irrational by Dan Ariely: https://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248

You Are Not So Smart by David McRaney: https://www.amazon.com/You-Are-Not-So-Smart/dp/1592407366

Thinking, Fast and Slow by Daniel Kahneman: https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555

Sources of Power: How People Make Decisions by Gary Klein: https://www.amazon.com/Sources-Power-People-Make-Decisions/dp/0262611465

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