Risk Savvy: How to Make Good Decisions
Gerd Gigerenzer
Language: English
Pages: 336
ISBN: 0670025658
Format: PDF / Kindle (mobi) / ePub
An eye-opening look at the ways we misjudge risk every day and a guide to making better decisions with our money, health, and personal lives
In the age of Big Data we often believe that our predictions about the future are better than ever before. But as risk expert Gerd Gigerenzer shows, the surprising truth is that in the real world, we often get better results by using simple rules and considering less information.
In Risk Savvy, Gigerenzer reveals that most of us, including doctors, lawyers, financial advisers, and elected officials, misunderstand statistics much more often than we think, leaving us not only misinformed, but vulnerable to exploitation. Yet there is hope. Anyone can learn to make better decisions for their health, finances, family, and business without needing to consult an expert or a super computer, and Gigerenzer shows us how.
Risk Savvy is an insightful and easy-to-understand remedy to our collective information overload and an essential guide to making smart, confident decisions in the face of uncertainty.
probability P(negative|no disease) of a negative test result given no disease. The specificity and the false-positive rate add up to 100 percent. Survival rate. A measure of the benefit of a treatment: five-year survival rate = number of patients diagnosed with cancer who are still alive five years after diagnosis divided by the number of patients diagnosed with cancer. In the context of screening, changes in survival rates are misleading about the benefit because they do not correspond to
Journal of Evaluation in Clinical Practice 15, 390–92. doi: 10.1111/j.1365-2753.2008.01024.x. Stiftung Warentest (2004, February). Urologen im Test: Welchen Nutzen hat der PSA-Test? Stiftung Warentest, 86–89. Stigler, S. M. (1980). Stigler’s law of eponymy. Transactions of the New York Academy of Sciences 39, 147–57. ———. (1983). Who discovered Bayes’ Theorem? American Statistician 37, 290–96. Stiglitz, J. E. (2010). Freefall: America, free markets, and the sinking of the world economy. New
uncertainty for known risks. Like the zero-risk illusion, it is shown as a move to the left-hand side in Figure 2-4 (right arrow). In both cases, there is a clash between the real world and the perceived one. Let’s begin with risks that are mistaken for certainty. Figure 2-4. Two kinds of illusions of certainty. The first is to confuse a world of risk with one of certainty—the zero-risk illusion. The second is to confuse a world of uncertainty with one of known risk—the turkey illusion
nerve-wracking for the fans, who collectively hold their breath before each kick; some can’t even bear to look. Yet this shoot-out is unique. The German goalkeeper Jens Lehmann is holding a piece of paper that he looks at before every penalty kick. The Argentinian player facing him might be wondering what’s on that sheet. And guessing that it contains information about him, his technique, and his preferred corner. In the end, Lehmann blocked two kicks, eliminating Argentina, and Germany moved on
outside causes contribute to the problem. The good news is that there is a solution. Who would have thought, a few hundred years ago, that so many people on earth would learn to read and write? We will see that everybody who wants to can also become risk savvy. Based on my and other colleagues’ research, I will argue that: 1. Everyone can learn to deal with risk and uncertainty. In this book, I will explain principles that are easily understood by everyone who dares to know. 2. Experts are