Why People Lose Money in Pyramids and Bubbles

Dan Ariely suffered a severe body burn in his youth, which left permanent scars. He spent three years in the hospital, during which he became interested in human psychology. This experience led him to become a professional in behavioral psychology. Today, he is a professor of psychology and behavioral economics at Duke University.

How is this related to finance? Quite directly, actually. It helps explain why financial bubbles occur (where prices of assets detach from historical norms and skyrocket, with everyone believing these prices are justified), why people fall for Ponzi schemes like MMM, and why even highly intelligent and educated individuals can fall into mental traps. Even Isaac Newton lost money in a bubble during his time (you can read about it on Wikipedia).

I highly recommend watching this TED talk and reading Ariely's book, "Predictably Irrational: The Hidden Forces That Shape Our Decisions." People living in a financial bubble rarely realize it until the bubble bursts. After reading his book, you’ll have a much deeper understanding of these concepts.

You can watch the TED talk with translations available in various languages. It's a valuable resource for anyone looking to improve their financial and general knowledge: Dan Ariely's TED Talk: Are We in Control of Our Own Decisions?

https://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions