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Stress testing is a standard technique used to test how someone will perform in the "worst-case" scenario. The problem is that the "worst-case" scenario is subjective, causing an illusion of control.
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Your own incentives may support an illusion of control. If you draw up your own worst-case scenarios, you will always pass, but as a result, you will develop blind spots.
Encourage innovation in risk models to increase diversification and decrease risk.
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The illusion of control can be adaptive, in the sense that it encourages a focus on problem-solving behaviors as opposed to an emotional response.
Producing your best-informed guesswork prevents the anticipation in stress testing. However, there will always be some things you cannot comple...
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Success in “normal” circumstances does not mean that you will succeed in a crisis since, in a crisis, the rules change. However, it can make you feel confident and make you highly vulnerable to the next crisis.
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Stress tests cannot be improved. History is a much better predictor than a stress test. But even history requires a model to interpret it.
We always have a preconception of cause and effect, and therefore some prejudice for how to interpret the data. That does not mean that we shoul...
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Life is like facebook. People will like your problems & comment, but no one will solve them because everyone`s busy updating theirs.
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The illusion of control can be adaptive, in the sense that it encourages a focus on problem-solving behaviors as opposed to an emotional response.
Producing your best-informed guesswork prevents the anticipation in stress testing. However, there will always be some things you cannot comple...
Many people, who are otherwise perfectly healthy can create patterns and have an illusion that they are somehow in control of the external events that no one could influence.
The belief is so strong that it can affect their behaviour and make them do superstitious actions that make no sen...
One of the fathers of the Stoicism philosophy, the Roman Statesman Seneca, suggested a Stoic technique called Premeditation.
The exercise involves imagining the worst-case scenario of your situation, like your partner leaving you, you catching a virus and dying, or your getting fi...
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