Quotation

Selena Gomez: Okay. So here's how a synthetic CDO works.Let's say I bet $10 million on a blackjack hand. $10 million because this hand is meant to represent a single mortgage bond. Dr. Richard Thaler: Okay, Selena has a pretty good hand here, showing 18. Dealer showing seven. That's a really good hand for Selena. Good odds. In fact, her chances of winning this hand are 87%. So, my odds are good. I'm on a winning streak. Everybody in this place wants to get in on the action. How could I lose, right? Now, this is a classic error. In basketball it's called the Hot Hand Fallacy. A player makes a bunch of shots in a row. People are sure they're gonna make the next one. People think that whatever's happening now is gonna continue to happen into the future. During the real estate boom, markets were going up and up and people thought they would never go down. So people who are watching and think that I won't lose will make a side bet. Now, this is the first synthetic CDO.