Are we always rational?
This was the question I posed in my previous article on the psychological biases that investors face. Over the last few decades, there have been many proponents in the academic world who argue that investors are not always rational. They suffer from psychological biases which may negatively affect them.
A Quick RecapLet’s start with a simple question, just like before.
If it takes 5 minutes for 5 machines to produce five items, how long would it take 100 machines to produce 100 items?
Our gut reaction is to answer 100 minutes.
But this intuitive answer is wrong.
Don’t worry, though. This wrong answer was given by many MIT students too.
Essentially, we have two systems of thinking. System 1 is intuitive and quick, while System 2 is slow, effortful and deliberate.
Most likely, the intuitive but wrong
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