Risk Perception: Emotions can be Misleading

I caught this quote in a Charles Faulkner presentation:

“People base their judgments of an activity or technology not only on what they think about it but also on what they feel about it. If they like an activity, they are moved toward judging the risks as low and the benefits as high; if they dislike it, they tend to judge the opposite — high risks and low benefits. Under this model, affect comes prior to, and directs, judgments of risk and benefit.”
Paul Slovic, Melissa Finucane, Ellen Peters, Donald G. MacGregor
‘Risk as Analysis and Risk as Feelings’

True that. Faulkner is in my film.

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2 thoughts on “Risk Perception: Emotions can be Misleading

  1. This perception of lower risk is the essence of advertising…a company puts its name out there and people become comfortable with the name. Then when it comes time to buy, they say, “Hey, I know that company, they’re good because I’ve heard of them.”

    In fact, the only difference between this “safe” company and another one is that the “safe” one invested in some marketing.

    An entire mutual fund industry comprised of underperforming funds with high MER’s grew out of this concept over the past 30 years. Whereas the high performers — see lists of trendfollower traders on several of Michael’s posts — are viewed as risky by the average investor because of advertising constraints that make them appear “mysterious” and “scary.”

    Cheers.

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