Prospect Theory systematically describes these changing attitudes towards risk: people are either risk seeking or risk averse depending on whether the stakes are conceived as gains or as losses. This in turn depends on whether the potential consequences of choices are states of affair that are better or worse than some reference point—what is considered ‘normal.’
.. The political discourses of the Trump and Brexit advocates have framed the stakes in terms of losses rather than gains. The slogans “Make America great again” and “Take back control” clearly refer to the lost grandeur of the past. This sets the reference point as a lost state that was much better than the current one. Also, fear mongering is by definition talking about the frightening (negative) state in which we find ourselves. All this motivates citizens to favor risky options: the gains, even if they are unlikely, are so strongly desired that they induce discounting the very likely losses.
.. With Trump and Brexit voters, we face people who, perceiving that they have lost something, are willing to take high risks. Economic frustrations cause risk seeking preferences, which contribute to motivating votes for Trump and Brexit.
How to De-Risk a Startup
Principle #1: showing is better than telling.
- [1] You think you can do XYZ.
- [3] You’ve done XYZ in the past.
- [5] You’re currently doing XYZ, and doing it well.
Principle #2: external validation is stronger than your personal opinion.
- [1] You claim XYZ.
- [3] Numerous people who are affiliated with you (friends/accelerator batchmates/etc.) claim XYZ.
- [5] Numerous people who are completely unaffiliated with you claim XYZ.
Principle #3: more data is better.
- [1] Your product has 0 sales.
- [3] Your product has 5 sales.
- [5] Your product has 50 sales.
The New York Times risked legal trouble to publish Donald Trump’s tax return
Baquet said during a panel discussion at Harvard that if the Times’ lawyers advised him not to publish Trump tax returns, he would argue that such information is vital to the public interest because the real estate mogul’s “whole campaign is built on his success as a businessman and his wealth.”
.. “The courts could say, if the public thinks the tax returns are so important, let it demand that the candidate authorize the IRS to release them on pain of losing votes,” said Jonathan Zittrain, a privacy expert and professor at Harvard Law School.
Could Deutsche Bank Collapse?
The German bank’s shares reached historic lows this week after a $14 billion settlement request by the U.S.
.. The International Monetary Fund said in June: “Deutsche Bank appears to be the most important net contributor to systemic risks” in the global market.
.. Lehman had $639 billion in assets when it collapsed, and it’s failure is attributed as the dirge that announced the global financial crisis. It was this lesson that led Deutsche Bank investors to believe that if the worst should happen, Germany would bail the Deutsche Bank out. But German Chancellor Angela Merkel has repeatedly said there would be no bailout, no matter what
.. Market Watch wrote that if Merkel kept her word, it meant she “has no idea how the financial markets work, and no appreciation of how much damage the unfolding Deutsche crisis is already doing to the markets and the eurozone economy.” On the other hand, a bailout has been called political suicide for Merkel and would likely ruin her party’s chance in next year’s election.
.. Those who do not believe the sky is falling have said a more likely scenario is that Berlin will pressure the U.S. to lower the $14 billion settlement request. Even without political intervention, that seemed already to be the outcome.