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Risk Savvy: How to Make Good Decisions Paperback – March 31, 2015
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Numbers may not lie, but they are certainly often misunderstood, according to German psychologist and risk analyst Gigerenzer. We make poor decisions on an array of issues, from health-care screenings to investment decisions to planned outings, because we blindly rely on data that may be incorrectly interpreted and reported. Gigerenzer draws on psychology, sociology, and math to explain how data can start off clear and end up murky by the time it reaches its intended audience, leaving us helpless to make sound decisions about the risks involved. He notes that the risk of cancer is often misinterpreted and can lead to overzealous screenings and that Americans irrationally refused to fly after the 9/11 terrorist attacks even though the risk of being killed in an auto accident is much greater. Gigerenzer cautions readers to always look for a reference point when data is quoted and to understand the difference between relative and absolute risk. This is a highly accessible look at the importance of data and the equally great importance of clearly understanding data. --Vanessa Bush --This text refers to an alternate Paperback edition.
About the Author
GERD GIGERENZER is director of the Max Planck Institute for Human Development in Berlin, and lectures around the world on the importance of risk education for everyone from children to prominent doctors, bankers, and politicians.
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Top Customer Reviews
The core thesis of the book is that heuristics are powerful. Why? For one, they deal with noise (& overfit!) extremely well, which is abundant in modern life. Two, in domains where we know little, a heuristic may give you expert-level performance. The author even suggests developing correct heuristics is essentially what an expert does! So, as an individual, if you work on refining the heuristics you follow, you can make better decisions in life. The book is full of examples and suggestions for various domains.
Regarding content, the section on health care was an eye-opener for me. Comparing the medical industry with the financial industry, exposing the statistical illiteracy of doctors & incentives are truly revealing regarding what's wrong with the US health care system. Most important message? Put test results in statistical context. Don't get overtested to avoid the problem of false positives & unnecessary treatments. This book will likely change the way you seek health care.
The author's thoughts regarding teaching risk literacy to wide swathes of population are commendable. Decision making, though extremely important, is a skill few of us master. I highly recommend Risk Savvy and the other mentioned works to those who want to make better decisions.
PS: I'd like to thank the author for writing a popular book that plays the devil's advocate against the skeptics of human rationality. After reading his arguments, I'm convinced that human beings aren't necessarily irrational, rather we're untrained to make sound decisions in a complex world. This book provides that kind of training.
He advocates using rules of thumb in cases of uncertainty and simple solutions whenever possible. Schools foster risk aversion by emphasizing getting the right answer over creativity and the last chapter contains some advice on how to improve education. Much of the book is focused on specific topics such as financial matters, health care and even romance. Gigerenzer has negative views on the health care industry and especially doctors who he says make defensive decisions regarding patients for fear of being sued, do not understand the health statistics they receive, and pursue profit over doing what is right. He states that a number of medical tests are worthless and even harm the patient and cites the PSA test for prostate cancer as one example. Regarding personal investments he recommends using the 1/n rule, which means dividing your investments equally over a number of different sources. In the chapter on romance he cites several interesting methods of decision-making including “maximize expected utility,” identify all the pros and cons and assign a value to each and then chose the side that gives the highest return. The 37% rule is another interesting example. If you have to pick the best of 100 choices one at a time and cannot go back after rejecting each one, you should wait until 37 choices have been uncovered and then choose the next one that exceeds the highest value of the previous 37. In this way you have a one in three chance of finding the best choice from the entire group. The book also includes a useful glossary of terms on this subject.
I rate this book at five stars—a must read—primarily because of the chapters on medical care. These chapters provide information that is invaluable in helping you assess what to do in regard to your own medical care, information that could save your life, or at least reduce the pain and worry associated with a disease condition.