Banks are run by executives, and executives protect themselves, and that does not always mean that banks are going to behave rationally.
Interpretation
Executives prioritize their own interests, which can lead to irrational banking behaviors.
In this quote, Daniel Kahneman highlights the ingrained self-protective tendencies of bank executives that can influence decision-making within financial institutions. This may result in irrational behaviors that do not always serve the best interests of the bank's stakeholders or the broader economy.
In practice
In a discussion about corporate ethics, this quote can be used to illustrate how executives may make self-serving decisions.
We think, each of us, that we're much more rational than we are. And we think that we make our decisions because we have good reasons to make them. Even when it's the other way around. We believe in the reasons, because we've already made the decision.
The average investor's return is significantly lower than market indices due primarily to market timing.
Laziness is built deep into our nature.
Through some combination of culture and biology, our minds are intuitively receptive to religion.
You are more likely to learn something by finding surprises in your own behavior than by hearing surprising facts about people in general.
It's very easy for trusted companies to mislead naive customers, and life insurance companies are trusted.
It isn't as important to buy as cheap as possible as it is to buy at the right time.
Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.
Families rely on financial services more than ever, but those who need them most - who struggle to make ends meet - too often must contend with sky-high interest rates and tricks and traps buried in the fine print of their loan products.
Short term volatility is greatest at turning points and diminishes as a trend becomes established
Eliminate emotion from your investment program.
We've used derivatives for many, many years. I don't think derivatives are evil, per se, I think they are dangerous.
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