Monday, July 20, 2009

COCKSURE - Banks, battles, and the psychology of overconfidence

Since the beginning of the financial crisis, there have been two principal explanations for why so many banks made such disastrous decisions. The first is structural. Regulators did not regulate. Institutions failed to function as they should. Rules and guidelines were either inadequate or ignored. The second explanation is that Wall Street was incompetent, that the traders and investors didn’t know enough, that they made extravagant bets without understanding the consequences. But the first wave of postmortems on the crash suggests a third possibility: that the roots of Wall Street’s crisis were not structural or cognitive so much as they were psychological.../
COCKSURE - Banks, battles, and the psychology of overconfidence by Malcolm Gladwell

This article in the New Yorker is on the theme of what Malcolm Gladwell spoke on when he was in Glasgow recently. Well worth a read.

(via a tweet from swissmiss)

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