◐ Behavioral
◆ The PatternJudging probability by how easily examples come to mind.
The availability heuristic (Tversky & Kahneman, 1973) — judging probability by how easily examples come to mind.
Why it distorts:
• Dramatic events (crashes, bankruptcies) are vivid and memorable
• Steady compounding is boring and forgettable
• Media amplifies dramatic events → they feel more probable
• Result: overestimate crash risk, underestimate steady-growth scenarios
• Dramatic events (crashes, bankruptcies) are vivid and memorable
• Steady compounding is boring and forgettable
• Media amplifies dramatic events → they feel more probable
• Result: overestimate crash risk, underestimate steady-growth scenarios
Counter: use base rates (actual historical frequencies) not vivid memories.
Pattern bridge: Judging probability by what comes to mind is probability estimation gone wrong — confusing salience with frequency. In ML, accuracy vs. recall captures the same distortion.