Thinking, Fast and Slow. 24. The Engine of Capitalism

Following the schedule of our Reading Calendar

Here we are presented with unreasonable optimism. All of us to a certain degree overestimate our good traits and our capabilities to achieve success in any project that we may start. Some people, however, are extreme optimists to a point close to detachment from reality. Optimism may come as a result of a particular emotional predisposition in some individuals but also comes as the result of several of the cognitive bias that we have been presented in previous chapters. The beautiful chapter 23 was on the planning fallacy that is nothing more than a particular kind of unreasonable optimism. Together with individual factors underlying our tendency for supporting this optimism, there is a social pressure that seems to ask from as a continuous state of self confidence and that forbid us to show any doubt about the solidity of our knowledge and beliefs.

Now, the interesting part comes with the conjecture that, unless everything that we have seen previously, where biases are essentially presented as damaging characteristics, here there seems to be an upside of it all. May be not at the individual level but at the collective one. Overconfidence promotes risk taking and societies need risk taking individuals to try new venues in economic activity, science, technology etcetera. Probably, most entrepreneurs would never set up a firm if they really understood the odds of success and failure. That’s why this chapter is entitled “The Engine of Capitalism”.

All that’s OK, but if there is something that makes this chapter worth reading, this is the “premortem” procedure. In fact, the whole book maybe worth reading just to get that piece of advice.

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One thought on “Thinking, Fast and Slow. 24. The Engine of Capitalism

  1. Indeed. Premortem analysis is a great gift. I don’t use it as much as I should, but It has saved my ass a couple of times, and we should engage with it any time a complex project lands on our table

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