Editing The Psychology of Risk (section)

== <span style="color: #FFFFFF;">Understanding</span> ==
The psychology of risk is understood through '''Emotion''' and '''Probabilistic Failure'''.

'''1. Fear of the Unknown (The Dread Factor)''':
We are much more afraid of risks that are:
* '''New''' (like a new technology).
* '''Involuntary''' (like someone else driving).
* '''Catastrophic''' (many people dying at once).
* '''Hidden''' (radiation).
We are much less afraid of familiar, voluntary risks (like driving ourselves), even if they are much more deadly.

'''2. Loss Aversion (The Pain of Loss)''':
Psychologically, losing $100 feels "twice as bad" as gaining $100 feels "good."
* This makes us "Risk Averse" when things are going well (we want to lock in the win).
* It makes us "Risk Seeking" when we are losing (we take huge gambles to try to "get back to even").

'''3. The Illusion of Control''':
We think that if we are "In the driver's seat," the risk is lower.
* This is why many people feel safer driving than flying, even though flying is statistically the safest way to travel.
* We think our "Skill" can overcome "Chance."

'''The House Money Effect''': If you win $100 at a casino, you are likely to take much higher risks with that specific money than you would with $100 from your paycheck. You treat it as "The House's Money," even though it is now yours.
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