Gerd Gigerenzer is one of the most innovative thinkers in the world. I have had lunch with him and find him a very engaging fellow. His focus is on risk and decision-making, but his potential influence on thinking in finance, medicine, and everyday life can be profound. Everyone has to become more risk literate or as he puts it, risk savvy. It is not all about knowing statistics or complex measurement but being able to ask good questions and be good at counting. He shows in this book how to get more risk savvy, so that everyone can make better decision and live a little happier. This is a powerful book even with very little math and statistics.
Being risk savvy is always asking for the right reference. what does a statistic refer to? It means understanding the difference between relative and absolute risk. The chance of some event increases by 100% could just mean that one extra person per thousand is affected. Being risk savvy can be as simple as understanding the difference between risks that are countable and uncertainty which may not be easily quantified. It is understanding the illusion of certainty and the uncertain with unexpected events. The classic case is with the turkey that is fed well every day until Thanksgiving. There was no risk until the day of reckoning. If you avoid being a turkey, reading this book is time well spent.
Given the difficulties of measuring risk and dealing with uncertainty, there needs to be rules of thumb for dealing with uncertain events. Call it defensive decision-making. We have to accept that we have fears that can be unfounded; consequently, we have to work through our natural tendencies for avoiding risks that just do not exist.
Everyone should take control of the risk they face from discussion of medical treatment to saving money. Risk is not something to be avoided but rather controlled through using good rules of thumb and learning to count occurrences through concepts like natural frequencies.
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