Economic theory is built on the flawed premise of a rational, economically-motivated individual. Financial historian Russell Napier argues this ignores psychology, sociology, and politics, making financial history a better guide for investors. The theory's mathematical edifice crumbles without this core assumption.

The hosts of 'Risky Business,' both high-stakes poker players, use the game not just as a topic but as a core mental model. Poker provides a practical framework for understanding probability, risk management, and human incentives, which they assert can be applied to decisions in politics, business, and personal life.

'Risky Business' posits that analytical frameworks used to dissect complex systems like politics (e.g., game theory, expected value) are equally applicable to optimizing personal decisions. The show bridges the gap between macro-level strategic thinking and the micro-level choices that contribute to personal well-being.

Work by Kahneman and Tversky shows how human psychology deviates from rational choice theory. However, the deeper issue isn't our failure to adhere to the model, but that the model itself is a terrible guide for making meaningful decisions. The goal should not be to become a better calculator.

Post-WWII, economists pursued mathematical rigor by modeling human behavior as perfectly rational (i.e., 'maximizing'). This was a convenient simplification for building models, not an accurate depiction of how people actually make decisions, which are often messy and imperfect.

Satirical examples of using prediction markets to replace DoorDash or Tinder reveal a core flaw in their utopian vision. Applying these financial models to everyday life can create bizarre and perverse incentives, highlighting the absurdity of a one-size-fits-all solution.

Contrary to popular belief, economists don't assume perfect rationality because they think people are flawless calculators. It's a simplifying assumption that makes models mathematically tractable. The goal is often to establish a theoretical benchmark, not to accurately describe psychological reality.

Milton Friedman's 'as if' defense of rational models—that people act 'as if' they are experts—is flawed. Predicting the behavior of an average golfer by modeling Tiger Woods is bound to fail. Models must account for the behavior of regular people, not just theoretical, hyper-rational experts.

Quoting G.K. Chesterton, Antti Ilmanen highlights that markets are "nearly reasonable, but not quite." This creates a trap for purely logical investors, as the market's perceived precision is obvious, but its underlying randomness is hidden. This underscores the need for deep humility when forecasting financial markets.