For example, if you rarely give in to your dog begging at the table for some food, you will actually encourage the begging habit (that you usually want to discourage) as the dopamine is so much more intense.
Unexpected, i.e. unlikely, payouts probably make the gambler addicted (and probably bad judgement, lack of impulse control maybe).
It's natural that novice investors chase low probability bets, seeking to get rich quick. But I think another reason we keep chasing low-probability bets is because so many professional investors are unaware of how the low-vol anomaly negates the presumed high risk/high return assumption.
Nuclear energy stagnation is an example of humans focusing on high risk but not on low probability.
That's a good example. Disasters of the past have probably tainted perception there.
Nice work. I would add the more biological level reasoning:
It seems that the dopamine rush an animal gets from an unexpected reward is so much higher than when it gets an expected reward. https://pmc.ncbi.nlm.nih.gov/articles/PMC4767554/
For example, if you rarely give in to your dog begging at the table for some food, you will actually encourage the begging habit (that you usually want to discourage) as the dopamine is so much more intense.
Unexpected, i.e. unlikely, payouts probably make the gambler addicted (and probably bad judgement, lack of impulse control maybe).
Superb additional context, thanks sir.
Most lottery tickets are overpriced, most financial risks are not worth taking.
Great write-up!
Thanks Thomas!
Very well written. Great work!
Appreciate that, thank you!
Great piece!
Appreciate it!
Great piece, thanks Conor.
It's natural that novice investors chase low probability bets, seeking to get rich quick. But I think another reason we keep chasing low-probability bets is because so many professional investors are unaware of how the low-vol anomaly negates the presumed high risk/high return assumption.
I wrote about this in more detail here: https://www.lowriskrules.com/p/picture-this-investment-anomaly
Subscribed and will read this, thanks!
Great take Conor, thank you, appreciate it!
Have a great day!
Thanks Mav, you too!