Summary of Why We Make Bad Decisions

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Why We Make Bad Decisions summary
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9

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  • Applicable

Recommendation

Basic human errors in calculating the odds and value of success distort the decision-making process. Psychologist Dan Gilbert educates his audience in this humorous lecture that implicates human naïveté in poor decision making. getAbstract recommends this eye-opening oration to consumers, financial advisors and product strategists.

About the Speaker

Psychologist Dan Gilbert studies the brain’s influence on happiness. He wrote Stumbling on Happiness.

 

Summary

In 1738, polymath Daniel Bernoulli formulated a seemingly simple equation: Expected value equals the odds of gaining multiplied by the value of the gain. This formula should aid decision making. However, several cognitive errors impede the calculation of both factors. Evaluating odds isn’t straightforward. For instance, humans rely on the power of recall when establishing odds. To illustrate: The higher a person’s exposure to an event, the more readily it comes to mind. Thus, people overestimate the number of deaths caused by tornadoes and fireworks, which feature heavily in...


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