Lollapalooza Effect Essay
**Lollapalooza**
>When you get two or three of these psychological principles operating together, then you really get irrationality on a tremendous scale.
If two or more of psychological principles or misjudgments work in the same direction, you get a lollapalooza effect, “irrationality on a tremendous scale.”
What are some psychological principles that cause misjudgments?
***Self-interest and incentives***
People do what they perceive is in their best interest and are biased by incentives.
Example 1:
When the first dead Sea scrolls were discovered and the archeologists wanted more fragments of the scrolls to be found, they offered reward per fragment: The result: the fragments were split into smaller pieces before they were turned int.
Example …show more content…
***Persian Messenger Syndrome***
We don’t like to deliver bad news. We try to distance ourselves from doing it. We tend to dislike people who tell us what we don’t want to hear even when they didn’t cause the bed news. This gives people an incentive to avoid giving bad news. It is called Persian Messenger Syndrome because if a messenger delivered good news, he would be treated like a king, if a battle was lost, he would lose his head.
***Self-serving tendencies and optimism***
We see ourselves and unique and special and we have optimistic views of ourselves. We overestimate the degree of control we have over events and underestimate chance.
Example 1: Warren Buffett:
>Any investor can chalk up large returns when stock soar, as they did in 1997, In a bull market, one must avoid the error of preening duck that quacks boastfully after a torrential rainstorm, thinking that is paddling skills have caused it to rise in the world. A right thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.
Example 2:
“It worked because we made the right decisions.” “It didn’t work because of a bad business
>When you get two or three of these psychological principles operating together, then you really get irrationality on a tremendous scale.
If two or more of psychological principles or misjudgments work in the same direction, you get a lollapalooza effect, “irrationality on a tremendous scale.”
What are some psychological principles that cause misjudgments?
***Self-interest and incentives***
People do what they perceive is in their best interest and are biased by incentives.
Example 1:
When the first dead Sea scrolls were discovered and the archeologists wanted more fragments of the scrolls to be found, they offered reward per fragment: The result: the fragments were split into smaller pieces before they were turned int.
Example …show more content…
***Persian Messenger Syndrome***
We don’t like to deliver bad news. We try to distance ourselves from doing it. We tend to dislike people who tell us what we don’t want to hear even when they didn’t cause the bed news. This gives people an incentive to avoid giving bad news. It is called Persian Messenger Syndrome because if a messenger delivered good news, he would be treated like a king, if a battle was lost, he would lose his head.
***Self-serving tendencies and optimism***
We see ourselves and unique and special and we have optimistic views of ourselves. We overestimate the degree of control we have over events and underestimate chance.
Example 1: Warren Buffett:
>Any investor can chalk up large returns when stock soar, as they did in 1997, In a bull market, one must avoid the error of preening duck that quacks boastfully after a torrential rainstorm, thinking that is paddling skills have caused it to rise in the world. A right thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.
Example 2:
“It worked because we made the right decisions.” “It didn’t work because of a bad business