Monthly Archives: February 2014

On Tails

Tail events, in probability speak, are extreme events with the potential for a very large impact but which have a very low likelihood of occurring. Many people (I think accurately) view the most recent financial crisis as the occurrence of a tail event: it was highly unlikely that the system would experience such a drastic collapse, but […]

Reference points in the NFL

One of the essential insights of Daniel Kahneman and Amos Tversky and behavioral economics more generally is that reference points matter. When we make decisions, we care about the outcome, but we also care how the outcome compares to our current situation. Imagine two scenarios: Scenario 1: After not having a smartphone for the first […]