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Left Brain, Right Stuff by Phil Rosenzweig

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6

BASE RATES AND BREAKING BARRIERS

            ALL PILOTS TAKE CHANCES FROM TIME TO TIME, BUT KNOWING—NOT GUESSING—WHAT YOU CAN RISK IS OFTEN THE CRITICAL DIFFERENCE BETWEEN GETTING AWAY WITH IT OR DRILLING A FIFTY-FOOT HOLE IN MOTHER EARTH.

            CHUCK YEAGER, YEAGER: AN AUTOBIOGRAPHY, 1985

Overconfidence isn’t the only bias that has to be reconsidered when we combine the ability to influence outcomes and the need to outperform rivals. We also need to take a fresh look at the base rate bias.

The base rate bias was identified in the early 1970s by psychologists Daniel Kahneman and Amos Tversky. Imagine that at a busy intersection during evening rush hour, a taxicab clips a pedestrian and speeds away. A witness identifies it as one of the ...

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