Quote:
Originally Posted by Tinordi
The Flames organization needs to read Kahneman's book THinking Fast and Slow, explaining the senescence that has happened to this organization is explained by prospect theory.
Flames were bad 3 years ago, noticeably bad, they only really had bad options at that point, ride it out and hope the team somehow turns it around or sell off your players and take the bitter pill. There were no good options.
When a decision maker is in this situation they to become MORE risk seeking. Instead of cutting their losses and minimizing their pain, the agent will actually pursue less likely riskier scenarios that have higher payoffs.
The analogy is that you've bought a house and it's going down in price, all signs in the market are that the price declines will continue. For a rational agent the proper decision would be to sell the house immediately and cut your losses. For a human decision maker they will most likely choose to hold onto the house and hope that house prices turn around, or they spend more money to renovate the house and try to increase it's resale value. This behaviour is widely observed in behavioural studies and it's what has afflicted the Flames management.
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My favourite book in the last five years. Every few pages there's another epiphany about human behaviour.