Risk Savvy: How to Make Good Decisions by Gerd Gigerenzer is an excellent book and I have to recommend it to everyone! I first heard about it in The Guardian’s Science Weekly podcast about a year ago and decided to read it; much better than other books I’ve read based on interesting radio interviews.

Always ask for the reference class: Percent of what?

Gerd Gigerenzer: Risk Savvy: How to Make Good Decisions

As the title suggest, the topic is risk and how we interact with it. Gigerenzer clarifies terms we use - risk is not uncertainty, points out common fallacies we fall victims to - absolute v. relative risk, lists many examples when probabilities are misinterpreted either by mistake or purposefully, but also suggests methods and tools to employ to improve our chances. The number of interesting, fascinating or scary examples is mind blowing. I had to restrain myself not to mark the whole book and keep it down to 61 highlights. Just go ahead and read it. You won’t regret.

Always ask: What is the absolute risk increase?

Gerd Gigerenzer: Risk Savvy: How to Make Good Decisions

In a way, it’s surprising how a few elementary mistakes can cause such a havoc in all areas of human life. Gigerenzer encourages skeptical thinking and simplicity. Always ask what is actually measured - does discovering more cancers actually mean better survival? When presented with a change in percents always ask percent of what - 25% reduction in mortality sounds excellent, unless you realize it is a relative reduction from four people in a thousand to three in a thousand. What are people’s motivations are they aligned with yours when they give you advice - doctors in (not only) the USA advise more tests, more drugs and defensive treatment in order to reduce risk of being sued even when the option is suboptimal for the patient. Simple things might fail as often as complex, but at least one can understand them - number of pages of Basel Accords grows with every revision by an order of magnitude, huge amounts of time, money and effort is spent in implementing it, but it gives only an illusion of control. Intuition is underrated; we’ve been indoctrinated with the need to justify and explain any decision with the assumption that only rational thinking can be relied upon; most of the decisions we make are made under uncertainty, not risk - all probabilities can’t be calculated, some of them are completely unknown and more information doesn’t necessarily lead to better decisions.

If reason conflicts with a strong emotion, don’t try to argue. Enlist a conflicting and stronger emotion.

Gerd Gigerenzer: Risk Savvy: How to Make Good Decisions

The author refers to works of many cognitive and behavioral scientists and often criticizes them for being too pessimistic with regard to human abilities to deal with probability and uncertainty. This point is summarized in the last chapter of the book:

The science magazine Nature covered the debate between those who believe that people are basically hopeless at dealing with risk and those who have a more positive view of human nature, such as myself (Bond 2009). On the pessimistic side, economist Richard Thaler (1991, p. 4) asserted that “mental illusions should be considered the rule rather than the exception,” cognitive scientist Massimo Piatelli-Palmarini (1991, p. 35) that “our species is uniformly probability-blind,” evolutionary biologist Stephen Jay Gould (1992, p. 469) that “our minds are not built (for whatever reason) to work by the rules of probability,” and economist Dan Ariely (2008) that “we are not only irrational, but predictably irrational—that our irrationality happens the same way, again and again” (p. xx), while psychologist Daniel Kahneman (2011, p. 417) went even further and attributed mental illusions to a biologically old “System 1” that is “not readily educable.” I disagree with this dismal picture. Cognitive illusions are not hard-wired. There are simple tools to deal with risk and uncertainty that can be quickly learned by everyone (Gigerenzer 2000, 2008; Gigerenzer et al. 2012).

Gerd Gigerenzer: Risk Savvy: How to Make Good Decisions

I’ve read Nudge, Inevitable Illusions, Predictibly Irrational and Thinking Fast and Slow, but I didn’t understand them so pessimistically as Gigerenzer does. It might be true that Kahneman and Tversky focused more on describing cognitive biases than suggesting how to avoid them, but their tone was definitely optimistic; we need to understand what we do wrong before we can correct it. Similarly, Ariely documents the mistakes we make, so that we can learn from them and design our world so that we don’t fall victims to them. Thaler and Sunstein have the most practical approach with soft paternalism; they change default options, manipulate contexts and use our biases in our favor instead of against us, while still giving all the options. None of them claim that we are doomed, only that we’re by default ill-equiped to live in our complex world - partially by biology, partially by habits - but we can design the world around us in such a way which reduces the negative effects our mistakes can have - avoid those situations completely if possible, simplify the decision making process, give helpful default options, learn more about ourselves and ask good questions.

Despite this minor quibble, I highly recommend this book to everyone. The text is clear, not complex and full of real life examples.