Thinking Fast and Slopes: Kahneman, Taleb, and the Future of Business
In a networked economy, overestimating low-probability events is not irrational — it's optimal. In a rapidly changing and interconnected world, traditional decision-making theories may no longer fully encompass the complexities of the modern economy. The rise of non-linear dynamics, power law distributions, and extreme outcomes has led to an environment where risk-taking and adaptability are increasingly crucial. In this article, we will explore the limitations of prospect theory, introduced by Daniel Kahneman in his book "Thinking, Fast and Slow," and discuss how it may not be entirely applicable to our current economic landscape. We will also consider how embracing both caution and boldness can enable individuals, companies, and societies to navigate this new era of uncertainty and capitalize on the opportunities it presents. Originally published on April 17, 2023, here. Written by Dror Poleg. Check the original article for additional charts and visuals.