Daniel Kahneman — Dyads, And Other Mysteries
The Joe Walker Podcast
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Nasm-Tyleb's Argument for Overestimating Tail Risks
Nasm-Tyleb argues that we underestimate tail risks. Does that contradict prospect theory? Well, no, I would say, in overweight in prospect theory you overweight the low probabilities which is one way of compensating. It's not some of the probabilities, it's the consequences. The product, the probabilities and consequences turn out to be huge with tail events. So prospect theory is not a realistic description of what one would think in the same Tyleb's world.
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