My guest today is Paul Slovic, a professor of psychology at the University of Oregon and the president of Decision Research. Decision Research is a collection of scientists from all over the nation and in other countries that study decision-making in times when risks are involved. He study the psychology of risk and decision making. Current interests are motivating action to prevent genocides and nuclear war.
The topic is his paper Perception of Risk.
In this episode of Trend Following Radio we discuss:
The psychometric paradigm of risk perception
Balancing risk vs. reward
The concept of affect heuristics
How the media sways the public’s risk assessment
Fast vs. slow thinking
Risk in the context of decision making
“Bad is stronger than good. If something goes wrong in a system it decreases our trust in the management of that system more than when something goes right. Something goes right, it doesn’t really boost our trust and confidence. It’s the negative that outweighs the positive, and the negative is being conveyed to us much more frequently and forcefully through the media than the positive is.” – Paul Slovic
Michael, is the last black swan the next black swan? Please have an expert on your show to explain where are all those toxic assets (CDOs, collateral debt obligations, or mortgage backed securities) are now? They caused the crash (2008), so where are they? The Fed buys some every month apparently, but where the heck are they all and whose balance sheets are they on? Banks, taxpayer? What could they do to the economy now or in the future? Did they just disappear or get absolved somehow?