Saturday, 29 October 2011

Thinking about Thinking
While Daniel Kahneman’s new book, “Thinking Fast, Thinking Slow” flies off the shelf, he’s quietly written a few articles that might catch your interest.

In terms of its consequences for decisions, the optimistic bias may well be the most significant cognitive bias. Because optimistic bias is both a blessing and a risk, you should be both happy and wary if you are temperamentally optimistic.

The authors write, “We find that firms with award-winning CEOs subsequently underperform, in terms both of stock and of operating performance. At the same time, as CEO compensation increases, CEOs spend more time on activities such as writing books and sitting on outside boards, and they are more likely to engage in earnings management.”

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