However, optimism is highly valued, socially and in the market; people and firms reward the providers of dangerously misleading information more than they reward truth tellers. One of the lessons of the financial crisis that led to the Great Recession is that there are periods in which competition, among experts and among organizations, creates powerful forces that favor a collective blindness to risk and uncertainty.
Interpretation
Optimism can lead to a preference for falsehoods over truth, particularly in competitive environments.
In this quote, Daniel Kahneman highlights the societal and market tendency to value optimism, often resulting in the reward of misleading information over truthful insights. The financial crisis exemplifies how competition among experts can foster a collective disregard for risks and uncertainties, ultimately contributing to detrimental outcomes.
In practice
In a discussion about the financial crisis, one could say, 'As Daniel Kahneman pointed out, optimism can overshadow the truth, leading to reckless 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.
Banks are run by executives, and executives protect themselves, and that does not always mean that banks are going to behave rationally.
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.
I'll tell you that for me, one when someone used to say something that was true, one way I knew it was true was that I immediately felt defensive. I blocked it off, and I went to war with them in my mind and suffered all that goes with it. And they were only saying what was true.
Barking dogs may occasionally bite, but laughing men hardly ever shoot!
I have a friend who lives by a three-word philosophy: Seize the Moment. Just possibly, she may be the wisest woman on this planet.
Sometimes early in my career I thought what I did was who I was. As you mature, I've learned that is not the case. This is what I do, this is not who I am.
The highest purpose of intellectual cultivation is to give a man a perfect knowledge and mastery of his own inner self.
Simplicity, simplicity, simplicity! I say, let your affairs be as two or three, and not a hundred or a thousand; instead of a million count half a dozen, and keep your accounts on your thumb nail.
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