Thread by @DellAnnaLuca

I disagree with many of the points below. One by one:

#6: the problem is not herding, but herding in absence of skin in the game.

Herding + skin in the game = we imitate those who prepare for disasters.

Herding w/o skin in the game = we imitate charlatans and fools.

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#4: Inertia. If it were a thing, people who got a driving license would keep driving slowly, as they got used to while practicing.

Instead, inertia is a confabulation. We constantly adapt our optimal risk-taking level based on our experiences and incentives.

Sometimes it means not to change (and a researcher jumps in calling "inertia!") but other times it means to change (and someone jumps in calling "another fancy name for another bias") – but both are confabulations that tell more about the study design than about our brain.

Here is more on the dynamics of risk taking

https://twitter.com/DellAnnaLuca/status/1207615026024124417?s=20

#2: Again, I disagree. The problem is not amnesia – we perfectly remember about the lessons of past disasters. Any trader will be able to tell you what was the learning of each previous financial crisis.

The problem is acting in accordance to the lessons we know.

The latter is not an instance of amnesia. We fail to act in accordance with the lessons we know because the part of our brain that makes decisions is distinct from the part that takes action (One of the core theses of my book "The Control Heuristic", gum.co/heuristic)

(by the way, original screenshot by @rshotton – recommended follow – from a copy of The Ostrich Paradox, a book by H. Kunreuther and R. Meyer)

Another core point of "The Control Heuristic" is that we optimally evolved for our ancestors' environment. Most instances of "bad decisions" are not the result of a bias in our brain but of a novel environment for which we didn't adapt yet.

For example, yes, I shouldn't eat a sugary donut.

But if my brain didn't crave sugar, would humans have survived till today?

This is important because…

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Because, we cannot change how we're wired. Not enough to relay on it as a strategy.

Given a problematic environment very different from the one we evolved, we'll keep taking terrible decisions.

For example, we are prone to imitation because imitation is a great survival strategy (assuming a society with skin in the game, where only those with behaviors worth imitating survive, and those with harmful behaviors disappear from the pool of people to imitate).

Therefore…

…we are prone to imitate because we evolved assuming skin in the game.

If today's society lacks skin in the game, we'll head to ruin.

Trying to imitate less won't work.

What will work is to require and enforce skin in the game. So that only the good is left to imitate.

So, whenever we see what looks like a bias, we should ask ourselves: am I measuring behavioral defects, or am I measuring the difference between the observed environment and the one our brain evolved for?