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Enculturation and Wall Street

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WHEN EVERYTHING YOU THINK YOU KNOW IS WRONG
"The question for senators and regulators is why some very smart people (and their very clever quantitative models) missed a financial bubble that, in retrospect, looks devastatingly obvious," writes Jonah Lehrer at The Frontal Cortex. How could such an obvious oversight occur? The answer, writes Lehrer, can be shown through a classic experiment led by Jerome Bruner and Leo Postman. "A group of undergraduates was briefly shown a series of playing cards. The vast majority of the cards were normal, the usual assortment of face cards and numbered suites. Every once in a while, however, one of the cards was "anomalous," so that Bruner and Postman would flash the students a card that couldn't exist, such as the red ten of spades, or the black five of diamonds. Interestingly, the subjects almost never recognized these aberrations. Instead, they distorted the perception to fit their expectations, so that they remembered seeing a black ten of spades, and a red five of diamonds. They were so familiar with the standard deck of cards that they could no longer see what was unfamiliar. This meant, of course, that they ended up missing the most interesting bits of information."

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