Updated on March 25, 2023 We are not rational when we make choices under risk and uncertainty. This is because we prefer certainty. We do not want to live in uncertainty. Look at the following scenarios; The following examples appear in Daniel Kahneman and Amos Tversky’s 1979 paper on prospect theory. Their data were from the responses to hypothetical scenarios presented to Israeli university students. Scenario 1: Certainty effect with a monetary outcome gain Consider that you are given the following two options; Option A: A guaranteed win of 2500 in cash. Option B: 33% chance of winning 2500 in…

Derek Siver’s first follower:  One evening, a crowd numbering about 100 were sitting and chatting in a greenery garden in front of a beach. Suddenly a young lad stood out, marched forward, and started to dance according to the tune of the music playing behind. He was without his shirt. A little while later, another guy joined him. Another few minutes later, about 4 – 5, both boys and girls joined them. Soon, another 10 – 20 more stood and were them; all were dancing and enjoying themselves together; later almost all were there; few of them did not join the…