Rational Pessimism

Adverse selection means that what you don’t know is probably worse than you thought. Businesspersons must often make decisions about people when they don’t have full information. When faced with uncertainty, however, the rational businessperson makes intelligent guesses. This chapter showed that the reason someone wants to interact with you should educate your estimate of their value. When considering forming a new commercial relationship, ask why your potential partner wants to interact with you and what this motivation signals.