Is the Possibility Bias Keeping Us from Having Crazy Fun?

Amateur auto racers aren’t reckless; in fact, they’re more rational about choices than the average population, according to a study by Mary Riddel of the University of Nevada, Las Vegas, and Sonja Kolstoe of the University of Oregon. Survey results show that racers’ behavior arises not from a devil-may-care attitude but from a relative insensitivity to what’s known as the “possibility” bias, an exaggerated fear of possible but low-probability negative events and an exaggerated expectation of low-probability positive events. The possibility bias, which afflicts the majority of people, leads to poor financial decisions, such as overinsuring against highly unlikely losses and overinvesting in highly unlikely payoffs.