Schneier on Security

Bruce Schneier, an author who writes about how we perceive danger, gave a great talk at TED recently, outlining five cognitive biases people fall victim to when making decisions about risk.

None of the five were intended to relate to investing, but all of them can teach investors something about the rampant biases we make with our money.

1. We tend to exaggerate spectacular and rare risks and downplay common risks. 
Schneier used the example of flying vs. driving. Driving is statistically more dangerous than flying, yet flying freaks many of us out…