Manhattan Reborn 1978

Southeast Texas, Houston.

West of downtown, 19 Piney Point Village, Memorial District, Piney Point Village.

Dinner time~

After everyone put down their glasses, Professor Bartley asked his old friend John Nesbitt while cutting the delicious-looking secret pastrami with a table knife.

"Why didn't you come with your family this time?"

John Nesbitt said with a smile: "After the New Year, I originally planned to take my family to Hawaii for a vacation."

"But my wife caught a bad cold before leaving and it took two weeks to fully recover..."

"So, I can only bring my assistant with me when I come out this time."

"Hehe~"

Professor Barclay smiled regretfully and talked a little more about John Nesbitt's current situation and his own recovery after the operation.

Then, he changed the topic and brought the topic to David, who was "burying his head in his work".

"David~"

"Paul Samuelson said that when he first met you at Rockefeller Center, you told some very funny little stories?"

"..yes!"

"How about you tell us some interesting stories?"

"Uh...?" David put down the knife and fork in his hand, wiped the corners of his mouth with a napkin, blinked and thought about it, feeling a little embarrassed and asked.

"speak Now?"

"Huh!" Professor Barclay put a small piece of apple pie into his mouth, raised his eyebrows at him, and asked.

"You're not going to tell all the stories you know, are you?"

"That's true... no~"

"Ok!"

"let's start."

"..."

David wiped his nose with his hand, and when he saw Lilith and Livlin sitting opposite, they all looked at him with interest.

Leslie even put on a "watching the fun" expression and winked at him. .

Polly, who was sitting next to David, also kicked him lightly under the table and asked in a very low voice.

"This shouldn't bother you, right?"

"Hehe~"

David smiled bitterly, turned his head and glanced at John Nesbitt, who looked curious and expectant, and swallowed his saliva.

"Okay~"

"Actually, I have been thinking about a very important issue recently."

"That's right... I found out from my interactions with many people that I have been slightly shaken by one of the foundations of mainstream traditional economics, the rational man hypothesis~"

"One of the characteristics of rational people is selfishness ~ that is: economic man!"

"Characteristic two: Consciously or instinctively act in accordance with the principle of maximizing self-interest, and at the same time, consciously or unconsciously use various rational analysis methods to make choices~"

"But as my reading volume gradually increased and my social interaction activities gradually increased, I gradually began to waver in this rational person hypothesis."

"Because, selfishness is certainly one of human nature, but selfish people will also have many selfless behaviors~"

"Although this kind of behavior is definitely not mainstream."

“But it has a positive effect on society that cannot be ignored.”

"For example: there are many successful people who have selflessly donated to their alma maters, helping many juniors and juniors from poor families to obtain scholarships and complete their studies."

After David finished speaking this paragraph, he felt that he had completely relaxed. He smiled and raised his glass to signal to his mentor, Professor Barclay, and continued.

"I once heard an interesting metaphor~"

"Some people say that economics is like a flashlight..."

"It is a tool specially designed to illuminate others, but in the end no one can illuminate it."

"However, the fact that I can tell everyone my true inner thoughts here also shows that my wavering on the rational person hypothesis is no small matter!"

"Because the entire economic system is based on this foundation."

"Without this premise, rigorous and exquisite theoretical analysis and highly logical derivation of mathematical formulas will not be so solid..."

"From this, the theory drawn will also be greatly compromised!"

“One of the basic centers of economics is to prove the perfection of the market mechanism!”

"The half-equilibrium theory, based on the rational man hypothesis, proves this."

"From a historical perspective, no one can deny the market mechanism."

"But...perfection is definitely out of the question!"

"Hundreds of years ago, Adam Smith, the founder of market economic theory and the founder of modern mainstream economics, not only proposed the theory of economic man and the invisible hand, but also proposed the complexity of human nature and the invisible hand. Hands can cause all sorts of problems.”

"For example: How many times have problems occurred with the free market economic mechanism of the United States?"

"How many disasters have these problems caused?"

David took a sip of his drink, looked at John Nesbitt beside him, spread out his other hand and smiled: "People choose the market economy not because it is perfect, but because there is no other better choice!"

"..." John Nesbitt nodded slightly. Looking at David's young face, he suddenly felt an inexplicable sense of dislocation in his heart.

At this time, of course, David could not know his mental activities. He reached out and grabbed a few cooked pink shrimps and put them on his plate. He peeled off the shrimp shells and said.

“When I was working as a bartender in a bar, I often met some interesting people and heard some interesting things.”

"For example: a few friends came to the bar to drink, shouting at each other about the wonderful moments of today's football game, and lamenting that someone actually guessed the result of the game correctly and won the underground lottery~"

"Then when someone suggested that the lottery winner buy everyone a drink, most people would immediately jump in and cheer."

"But when someone who is supposed to make a small profit from winning a football lottery ticket, after treating everyone to drinks, he will find that he has actually lost all the money he won and spent a lot of money on drinks..."

"So, when he won another football game lottery and came to the bar to celebrate with his friends, he would explain the upper limit of the amount to everyone in advance to avoid further losses to his wallet~"

David placed a pink shrimp on the edge of his plate, shrugged at John Nesbitt, and smiled.

"A few years ago, an oil exploration company in Texas discovered an oil field beneath a ranch or farm."

"So, the company immediately contacted the auction house and asked it to contact the customer to conduct an on-site inspection before proceeding with the auction~"

“But when people who are willing to buy come to this undeveloped oil field and want to estimate the total reserves of the oil field~

"

“Due to their different psychological expectations and judgments about field exploration results, their performance at auctions will also be different.”

"Some people have optimistic expectations and think the total value of this oil field will exceed 10 yuan."

"Other people have more conservative psychological expectations and expect the total value of this oil field to not exceed 5 yuan at most."

"In the final auction results, the highest bidder and the lowest bidder almost all bid high prices that exceeded their psychological expectations~"

“When the winner of the auction continues to mine for a period of time, he or she will generally feel that he may have made a wrong decision.”

"I call this interesting phenomenon: the winner's curse."

"This phenomenon actually happens often in the stock market on Wall Street in New York~"

"For example: after the last oil crisis broke out, many companies listed on Wall Street issued some new shares in an attempt to raise funds from the financial market to tide over the crisis~"

"The market value of these new shares is also uncertain."

"Therefore, the issuing company needs to set the issuance price and sell new shares at the issuance price. Investors subscribe according to the issuance price. If they subscribe too much, they must allocate proportionally."

"What people often overlook is that there has always been information asymmetry among potential Wall Street investors!"

"They can be roughly divided into informed investors and uninformed investors."

“Informed investors who have sufficient information about new stocks will be more inclined to invest in new stocks whose expected market value is higher than the issue price.”

"Investors in the uninformation group are more likely to suffer losses from the so-called winner's curse."

“So, when many people realize this possibility, they will only subscribe for new shares priced at relatively low prices, and many people will not be motivated to participate in new share subscriptions.”

"If the issuing company does not lower the issuance price, investors with less information will not enter the new stock market, and many new stock issuances will fail."

"Therefore, in order to attract more uninformed groups to subscribe for new shares, the issuing company's new share price must be lower than the normal price to ensure the success of the new share issuance."

David put a few more peeled scaries on the edge of the plate, wiped his hands, distributed them one by one to Professor Barclay, Lilith and others, and continued.

"As I just said, as my reading volume continues to increase, I have developed a strong interest in behavioral economics, which is different from traditional economics and is more inclined to find theoretical basis from real life."

"Many researchers in behavioral economics generally believe that people are not purely rational beings, but social beings."

"It is not just economic rationality that determines people's decisions, but more importantly, psychological factors that are determined by many factors."

“These factors include both rationality and many irrational factors, or factors that are self-interested but irrational.”

"These factors cannot be expressed numerically or included in mathematical models."

"Therefore, using the method of behavioral economics to study people's economic behavior must start from the observation of real life and experiments on people's behavior~"

"Careful observation of real life and bold experiments on various factors that affect people's decision-making are the basis of behavioral economics!"

After David distributed the "fruits of his labor", he raised his glass with a smile and took a sip. He relaxed in his chair and said while holding the last shrimp on the plate.

"The winner's curse I just mentioned is rooted in the cognitive biases and limitations caused by people's overconfidence."

“People always tend to think that their wisdom, judgment and ability are higher than others, and their estimates of the probability of events often go to extremes, that is, they overestimate the time when a high probability event will occur and underestimate the possibility of a small probability event happening. "

"To sum up, the reasons that often cause people to be overconfident can be roughly divided into four points~"

"1. People usually overestimate the accuracy of private information and believe that as information increases, their decision-making abilities and accuracy of judgment about the future will also increase."

"2. People often believe that they have influence over things that are beyond their control."

"3. People always tend to look for opinions and evidence that are consistent with their own, and intentionally or unintentionally ignore those opposing opinions and evidence, etc."

"Finally, the psychological and physiological reactions that people have under the stimulation of fierce competition will have an impact on the way people's brains think, driving people to take more risks and place heavy bets."

David finished eating the shrimp, wiped his fingers with a napkin, picked up his fork and took a piece of his "masterpiece" cherry chicken steak, threw it into his mouth, and continued vaguely.

“After I had a complete theory of the winner’s curse, I began to develop a stronger research interest in the psychological, sociological and behavioral economics related explanations triggered by the overconfidence theory.”

"Because people tend to understand their abilities by observing the results of their actions, and there is a self-attribution bias in this process."

“To put it in more layman’s terms, people tend to overestimate their own success when they look back on their past success~”

"And they will subconsciously ignore and forget some information and people related to failure, and it is easier to clearly remember and recall information and people related to success."

"So, people expect that the probability of good things happening to themselves is higher than the probability of good things happening to others."

"People have unrealistically positive self-evaluations and often believe that their abilities, prospects, etc., are better than others."

"Overconfident people are often smart after the fact and like to exaggerate the accuracy of their predictions."

“Particularly when they expect an outcome and that outcome does occur, they tend to overestimate their role in producing that outcome.”

When David said these words, at the dinner table, Professor Barclay, Lilith and Leslie, who knew something about John Nesbitt, couldn't help but look at David with wide eyes. .

John Nesbitt's complexion first turned from white to red, then from red to black, and finally turned purple. .

But David didn't even look at him at this time, he was still eating cherry chicken steak and said.

“My research has also found that some career fields are associated with overconfidence.”

“For example: surgeons and nurses, psychologists, investment bankers, engineers, lawyers, investors and fund managers, etc.”

"Practitioners in these professions often have overconfidence in their judgment and decision-making."

"Also~"

"I also found that people tend to be overconfident when answering moderately to extremely difficult questions and less confident when answering easy questions."

“People engaged in repetitive tasks that are highly predictable and have quick and clear feedback are more inclined to calculate carefully~”

"For example, professional bridge players, horse bettors, and meteorologists all tend to make careful calculations when making decisions."

"Many successful people attribute their success to the accuracy of their knowledge and personal abilities."

“This self-attribution bias will cause successful people to limit themselves to their own cognitive scope, resulting in overconfidence.”

David put down the fork in his hand, swallowed the food in his mouth, looked sideways at John Nesbitt, who looked extremely ugly at this time, and smiled.

"To summarize~"

"It is that overconfident people will overestimate salient and attention-grabbing information when making decisions."

"In particular, they will overestimate information that is consistent with their pre-existing beliefs and tend to collect information that supports their beliefs and ignore information that does not support their beliefs."

"And when certain opinions are supported by relevant, concise, statistical and basic probability information, people often underestimate this information and underreact to this information."

"When certain opinions are supported by vivid information, important cases and obvious scenarios, people will be more confident and overreact to this information."

"So~"

"Based on the theoretical research on overconfidence, I began to expand the theory of people's common overreaction behavior."

When David said this, he glanced at his mentor, Professor Barclay, meaning: What do you think of my performance?

Professor Barclay grimaced, stared and raised his eyebrows: Are you crazy?

Emm. . ? ?

David suddenly felt that he had misunderstood Professor Barclay's intention. He opened his mouth in shock and blinked his eyes several times: Don't you want me to "teach him a lesson"?

Professor Barclay showed a sneer at the corner of his mouth, glanced at his old friend who had not "exploded" at this time, and shook his head: You have to clean up the mess you made yourself!

"..."

David felt his scalp numbing for a while, looked at John Nesbitt cautiously, and said with an apologetic smile.

"Um...that..."

"Hehe~"

"Actually, my research on behavioral economics has a total of four results!"

“They are: Prospect Theory (Prospect Theory), Regret Theory, Overconfidence Theory and Overreaction Theory.”

“In addition, there are endowment effect, regret theory, mental accounting expectation theory, inter-temporal choice theory, certainty effect, isolation effect and reflection effect, etc.~”

"but!"

"These studies and theories of mine are just the opinion of one family, and none of them can be called professional research, let alone those experts and scholars who have summarized these theories through sufficient practice and experiments~"

David picked up the wine glass and said to John Nesbitt with a serious and sincere expression.

"The overconfidence theory I just talked about was based on my own psychological changes while studying it!"

“For example: People always tend to think that their wisdom, judgment and ability are higher than others, and their estimates of the probability of events often go to extremes, that is, they overestimate the time when a high probability event will occur, and underestimate the possibility of a small probability event happening. sex."

"It has bothered me for a long time!"

"Because, as early as this time last year, I had already discovered the upcoming new round of oil crisis from various public media information."

"But I always remind myself in my heart that I cannot let myself be overconfident, let alone overly complacent."

"I must strictly use a rational person's perspective to collect information, analyze problems, and give predictions or answers, so that I can go further~"

"And this seems to be somewhat similar to what you are doing, right?"

"..." John Nesbitt nodded silently and said nothing.

David continued to hold up his glass, took a deep breath, and said: "In the prospect theory I study, people generally make some predictable choices or decisions under different risk expectations."

"And the four basic conclusions I derived from prospect theory are~"

"Most people will choose to avoid risks when facing profits (the certainty effect, that is: buying stocks but not being able to hold on when the price rises, and unable to obtain returns beyond expectations)."

"Most people are risk-loving when faced with losses (reflection effect, that is: they are reluctant to cut their flesh when the price of a stock falls, leading to the illusion that it can rise again)."

"Most people's judgments of gains and losses are often based on reference points (reference dependence, that is: most people who like to ask for lottery numbers will carefully study the lottery numbers of previous periods, which is useless)."

"Most people are more sensitive to losses than gains (the loss effect, that is: when losses are equal to gains, people generally magnify the impact of losses in their minds)."

"Simply put, when faced with gains, people are unwilling to take risks; but when faced with losses, everyone becomes a risk-taker."

"The pain of loss is more sensitive than the joy of gain, and losses and gains are relative to reference points. Changing the reference point when evaluating things will change your attitude towards risk."

David carefully observed John Nesbitt's expression and found that his expression gradually changed from gloomy to clear. He cursed himself a few times in his heart and then continued.

"And~"

“I’m working on the summary theory of regret, which suggests that the emotion resulting from comparing the outcome or state of a given event with a state that would have been chosen, could be called regret!”

“For example, when given a choice between a familiar and unfamiliar brand, consumers may consider the regret of choosing the unfamiliar brand to be less effective than the regret of choosing the familiar brand.”

"Therefore, when most people go shopping in shopping malls, they rarely choose unfamiliar brands."

"But~"

"I discovered this after reading French social psychologist Gustave Le Pen's book "The Crowd"..."

"Whether it is in our daily lives or on Wall Street, where there are relatively more smart people, everyone has an inexplicable herd mentality~"

"For example: To avoid the regret of making a bad decision, investors may refuse to sell a stock whose price has dropped."

"And when one considers that a large number of investors also suffered losses on the same stock, that person may experience a decrease in negative emotional reactions and frustration."

"Therefore, many investors will generally subconsciously follow the herd mentality and buy stocks that are popular this week or that are being chased by everyone. This can easily lead to a herd effect in the stock market and become the biggest victim when stocks fall."

"Similarly~"

"In the economic development of a country, problems similar to those described in prospect theory often arise...the problem of human nature selection!"

"Moreover, at the international and national level, it is also very easy for the winner's curse to occur."

"For example: a few years ago, there was a grain shortage in Xiong Daguo, and the grain robbery incident of buying wheat from the United States was a very typical winner's curse phenomenon."

"For example: the Cuban crisis that broke out in 1963 almost started a nuclear war after an overreaction."

"For example: due to the deliberate concealment of the US government for 20 years, ordinary American people are overconfident in the results of the Vietnam War~"

"As a direct result, after the war, people learned that they had been cheated. Not only did they lose trust in the government, but they also became full of hatred towards the soldiers who actively fought for the country."

"But do those soldiers who bravely went to the battlefield really deserve to suffer a lifetime of infamy for that wrong war?"

"No!"

"Mr. Nesbitt!"

"Freedom of speech is never an excuse for people to belittle others arbitrarily, nor is it a fig leaf used to cover up the evil of human nature~"

"When the soldiers' efforts and gains are not proportional..."

"Who is willing to stand up and speak out for them?"

"Hehe~"

David stared at John Nesbitt with a sneer and asked: "You are probably like me. You like to collect information from open letters in newspapers and magazines from all over the country to analyze and predict the future development trend of the United States~"

"Then, when you, like me, find that the United States has developed into a chaotic free country..."

"Do you have any good ideas on how the United States can get out of the trough?"

"For now, no." John Nesbitt stared at David and replied in a low voice.

"I have!"

David said with a hint of confidence on his face: "But my method may lead to slander, abuse and criticism from countless people."

"Perhaps, someone will point a gun at my head and yell at me to go directly to hell~"

"Tell me, what should I do?"

"..."

David sighed with a little helplessness on his face again: "Sorry, Mr. Nesbitt."

"Tonight is the first time we meet."

"I have finished saying many things that I shouldn't have said~"

"But I want you to believe it!"

"I never want to let myself live a lie!"

"Sincerity is all I am willing to give to my family, elders, and friends~"

"You are an old friend of my mentor, Professor Barclay."

"You are my elder!"

"So, I want to ask you..."

"No!"

"I would like to ask you to criticize and correct me when I say something extreme or wrong."

"...Hmm!" John Nesbitt's face slowly returned to its original state, but he looked at his old friend with a very complicated expression, shook his head and sighed.

"You student... are so scary!"

"Hahaha~"

Professor Barclay laughed proudly, stroking his wine glass and asked.

"You're praising him for being so thick-skinned, right?"

"Haha~" Mr. Nesbitt laughed dryly and did not respond.

When David heard the conversation between the two, he deliberately appeared to be "out of power", slumped down in his chair, and spread his hands to everyone.

"Can I continue eating?"

"Hahahaha~" Everyone couldn't help laughing~

Ps:

In fact, in our real life, we often see or hear real news about the winner’s curse and overconfidence ~ Stone Gambling!

As the saying goes, one knife heaven, one knife hell.