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You Don’t Understand Risk.

Posted By Barry Ritholtz On May 21, 2014 @ 8:30 am In Investing,Psychology | Comments Disabled

You don’t understand risk.

I don’t mean you, in your professional capacity. I mean you, the human being whose brain is desperately trying to keep you alive. An endless procession of mortal threats are trying to end your particular genomic variation, forcing your brain to respond first and think later.

Your existence is threatened by hungry predators, roving bands of Neanderthals, poison mushrooms and all manner of germs.

What’s that you say? You don’t live on a savannah where lions hunt, and there haven’t been any Neanderthals for 30,000 years?

That is irrelevant to your risk-calculating engine. Your wetware was optimized during a period when those were the highest potential threats to your well-being. Humans who failed to avoid those didn’t manage to pass on their DNA, becoming someone else’s lunch.

Let’s look at some of the world’s top predators as an example of risk in the modern world. Continues here [1]


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[1] Continues here: http://www.bloombergview.com/articles/2014-05-21/what-kills-you-and-your-investments

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