In the Face of Risk: With Guests Jeff Elison & Ido Erev | Summary and Q&A

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December 5, 2023
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Charles Schwab
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In the Face of Risk: With Guests Jeff Elison & Ido Erev

TL;DR

People underestimate risks when they have experienced positive outcomes or lack experience with negative outcomes, leading to potential risky behavior.

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Questions & Answers

Q: Why do people become less cautious over time even when the risks are still present?

As people experience positive outcomes or lack negative outcomes, they become more confident in the absence of risk, leading to a decrease in caution.

Q: How does the perception of risk change when people have personal experiences with it?

When people have direct experiences with positive outcomes, they tend to downplay the risks involved and underestimate the possibility of negative outcomes.

Q: Can personal experiences with risks lead to riskier behavior?

Yes, personal experiences that result in positive outcomes can lead individuals to engage in riskier behavior, as they believe the positive outcomes will continue.

Q: How can the gap between perception and experience of risk be reduced?

Increasing awareness of the potential negative outcomes and reminding individuals of the risks involved can help bridge the gap between perception and experience, leading to more informed decision-making.

Summary & Key Takeaways

  • People often become lax in taking precautions over time when the negative outcomes they were initially concerned about do not occur.

  • The experience of success or lack of negative outcomes leads people to underestimate the risks involved.

  • The gap between the perception of risk from description and the experience of risk can lead to poor decision-making.

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