The Psychology Behind Why Smart People Make Terrible Decisions | Alex Edmans – EP 823

You're smart. You're informed. So why do you still make terrible decisions?

We like to believe that intelligence and information protect us from bad decisions. They don't.

Professor Alex Edmans, Professor of Finance at London Business School and Fellow of the British Academy, returns to Passion Struck to reveal the psychological forces that can distort our judgment—from confirmation bias and anchoring to herd behavior, emotional decision-making, and our tendency to follow whatever information is most visible.

His new book, The Madness of Markets, uses financial markets to expose a much bigger truth about human behavior: the same biases that influence investors can shape the decisions we make in our careers, leadership, relationships, and everyday lives.

Even Isaac Newton wasn't immune.

In this conversation, Alex explains:

• Why being intelligent doesn't make you rational
• Why more information doesn't necessarily lead to better decisions
• How confirmation bias makes us see evidence that supports what we already believe
• Why we tend to overreact to information that's flashy, visible, and impossible to ignore
• How anchoring causes the first information we encounter to influence our later judgment
• Why millions of people making the same mistake can create collective irrationality rather than canceling one another out
• How compelling stories can overpower better evidence
• Why culture, human capital, reputation, and innovation can matter enormously even when they're difficult to measure
• Why AI may change the decisions humans make without eliminating human bias
• And the one question Alex believes can make you wiser: “What is the other side?”

Alex's advice extends far beyond investing. Before you change jobs, relocate, end a relationship, make a major purchase, or commit to an important belief, look for the strongest argument against your own position.

If you can't see it yourself, find someone you trust who disagrees with you and ask them to make the case. Because becoming a better decision-maker isn't always about knowing more. Sometimes it's about learning to see what you're missing.

Listen to the full shownotes

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Disclaimer

The Passion Struck podcast is for educational and entertainment purposes only. The views and opinions expressed do not necessarily reflect those of Passion Struck or its affiliates. This podcast is not a substitute for professional medical or psychological advice.

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