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Risk Savvy: How to Make Good Decisions

Gerd Gigerenzer

4.06 · Rating details · 1,286 ratings · 142 reviews

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 ...more

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Hardcover, 336 pages

Published April 17th 2014 by Viking (first published March 18th 2013)

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Jun 16, 2017 Tevfik rated it it was amazing · review of another edition

I was in favor of Kahneman & Tversky ecole, a branch of bounded rationality called "cognitive biases and heuristics" until I read this book. Now I am noticed that there is another point of view called "fast and frugal heuristics", led by Gerd Gigerenzer. This book partially explains this approach, which shows that some rule of thumbs relying on heuristics may perform better than a complex strategy suggested for a problem. I have also become aware of demarcation between risk and uncertainty by re ...more

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Feb 09, 2017 Ha Thu rated it it was amazing · review of another edition

I live in Japan and work for a global company. At every 6 months or so I would receive a notice from both the company and the ward office of where I live in, calling for breast cancer free check up that are held on regular basis.
I never go for it, feeling that the earlier I find out about anything like breast cancer, the less happily I could live the rest of my life. If the cancer were there, it were there, medical intervention would not do much help with serious illness like that, so why ruinin ...more

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Mar 05, 2014 Jeff rated it really liked it

Recommends it for: Anybody who wishes to understand how to best assess risk

The version of the book I read had the following notation: "Advanced uncorrected proofs - not for sale." Of course I can only comment on that version, and not on the final copy.

I received this book for free through Goodreads First Reads.

This book is hard to rate objectively. Any assessment will be based at least partly on the level of desire the reader might have to wade through some fairly complex calculations. (In certain situations, Mr. Gigerenzer promotes the "simpler is better" theory whic ...more

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Nov 13, 2018 Andy rated it it was ok · review of another edition

A high level discussion that tends to use substantially more words than are necessary to get the point across. Written like most business books where you get a kind of vague point, followed by an anecdote, and maybe a slightly better explanation of the point. My bigger issue is that Gigerenzer dismisses the idea put for by Kahneman, Tversky, and others without honestly engaging with them. Kahneman's and Tversky's idea, as identified in Thinking Fast and Slow does not say that intuition is always ...more

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May 05, 2014 Jafar rated it liked it

"GET SCREENED NOW! Early detection saves lives. The 5-year survival rate for breast cancer when caught early is 98%. When it's not? 23%."

Actually, there's no evidence that screening for breast cancer, or any other type of cancer, saves lives. So is Komen lying about the statistics? No. But did you notice that they're talking about "5-year survival rate," not mortality? 5-year survival rate is meaningless because it's distorted by lead-time bias. Don't know what lead-time bias is? Read this book ...more

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Jan 06, 2015 Akim McMath rated it it was amazing

H. G. Wells once predicted that “statistical thinking will one day be as necessary for effective citizenship as the ability to read and write.” Many decades later, we are as clueless about risk as ever—and at a heavy price. Ignorance about risk lies behind innumerable contemporary problems, from the rising cost of healthcare to the recent global financial crisis. In Risk Savvy, Gerd Gigerenzer seeks to change that. Not only does this book demonstrate how and why we fail to understand risk. It al H. G. Wells once predicted that “statistical thinking will one day be as necessary for effective citizenship as the ability to read and write.” Many decades later, we are as clueless about risk as ever—and at a heavy price. Ignorance about risk lies behind innumerable contemporary problems, from the rising cost of healthcare to the recent global financial crisis. In Risk Savvy, Gerd Gigerenzer seeks to change that. Not only does this book demonstrate how and why we fail to understand risk. It also provides the tools we need to move toward a risk-savvy society.

Here is a pop quiz. A 50-year-old woman receives a mammogram and tests positive for breast cancer, although she has no symptoms. The prevalence of breast cancer among women like her is 1 percent. The test is not always accurate: where breast cancer exists, the test will detect it 90 percent of the time; where there is no cancer, the test will come up positive 9 percent of the time. What is the probability that the woman has breast cancer?

If you said 1 in 10, you have done very well. Most people—including most doctors—vastly overestimate the probability. And it isn’t just conditional probabilities such as these that throw people off. In the 1990s, many women stopped taking birth control pills because they increased their (relative) risk of thrombosis by 100 percent. If they had known that their absolute risk was only increased by 1 in 7000, many unwanted pregnancies and abortions might have been avoided. Similarly, many men get screened for prostate cancer when they hear that those who get screened have a survival rate of 82 percent, while those who don’t have as survival rate of 44 percent. If they knew that their chance of dying of prostate cancer—their mortality rate—was unaffected by screening, many men might be spared unnecessary procedures and their nasty side effects.

Perhaps the most serious mistake that people make is the failure to distinguish known risk from uncertainty. We are dealing with known risk when all of the possible outcomes are known and the probability of each outcome can be computed. Otherwise, we are dealing with uncertainty—a very different kind of thing. This is the kind of mistake that can lead to global financial crises. When bankers mistake uncertainty for known risk, they create the illusion of certainty—and they have the mathematical models to prove it. None of these models, however fancy, were able to avert catastrophe in 2008.

So far, the story seems bleak. Are we hopeless when it comes to risk? Do we need to call in the experts to make all our decisions for us, lest we destroy ourselves? No, says Gigerenzer. This book is not just about our failings in dealing with risk, but also about how we can overcome those failings. And many of the solutions are surprisingly simple.

One thing we can do is to present statistical information in natural frequencies rather than conditional probabilities. Here is the mammogram quiz again. For every 1000 women, 10 will have breast cancer. Out of those who have breast cancer, 9 will test positive. Out of those without breast cancer, 89 will test positive. What is the probability that a woman who tests positive has breast cancer? Now, the answer is clear. Out of 98 women who test positive, only 9 have breast cancer. Natural frequencies are just as informative as conditional probabilities, with the added benefit that they do most of the calculation for us. Even fourth-graders, when presented with natural frequencies, outperform doctors presented with conditional probabilities.

Similarly, information should be presented in terms of absolute risk rather than relative risk, and in terms of mortality rates rather than survival rates. Relative risk and survival rates are typically useless, but most of us find them very convincing. The media regularly use relative risks to generate eye-catching headlines, while unscrupulous hospitals and drug companies use survival rates to inflate the efficacy of their products and services. Transparent framing of statistical information is one of the simplest ways to ensure a risk-savvy citizenry.

When it comes to uncertainty, we need an entirely different set of tools than those that are used for dealing with risk. We need to scrap the mathematical models and focus on developing good heuristics, or rules of thumb. Heuristics are often derided as crude approximations to careful consideration of all available information. This may be true under known risk. But under uncertainty, heuristics are often both faster and more accurate. Simple rules have been shown to outperform complex models in situations ranging from consumer behaviour to stock market investment. And successful executives are more likely to rely on rules of thumb than on complex mathematical models, even if they pretend otherwise. When it comes to uncertainty, less is often more.

Risk Savvy is a hugely important book. It shows where we routinely go wrong when it comes to dealing with risk, often with disastrous consequences. More importantly, it shows us how we can do better—a simpler task than it may first appear. And it does all this with masterful clarity and concision. Everyone—from investors, to patients, to educators, to policymakers—will benefit from this book.
...more

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Oct 11, 2018 CaptainWolfsborg rated it really liked it

There are numbers of good books about risk, and I would like to place Gigerenzer's "Risk Savvy" into this category. Need to admit, I wasn't at all interested in it when it appeared in the bookshelves. I was thinking I wouldn't have time for yet another book on Risk, but when I heard that he argues against Kahneman and Tversky, it caught my interest. It's a tall order to question the school of Kahneman and such a bestseller as "Thinking, fast and slow". However, it is always worth to have a contr There are numbers of good books about risk, and I would like to place Gigerenzer's "Risk Savvy" into this category. Need to admit, I wasn't at all interested in it when it appeared in the bookshelves. I was thinking I wouldn't have time for yet another book on Risk, but when I heard that he argues against Kahneman and Tversky, it caught my interest. It's a tall order to question the school of Kahneman and such a bestseller as "Thinking, fast and slow". However, it is always worth to have a contrarian attitude and look at things from quite an opposite angle.

One of my favourite areas of exploration is the concept of risk. What seemingly should be an easy concept to grasp, the more you know of it, the more fuzzy it gets. Especially if you're looking into quantitative aspects of risk. Quantitative risk management approaches require a very rigid understanding of the underlying concepts of risk and related terms, otherwise, models won't make much sense, and, usually, risks we're chasing would realize on us in a totally unforeseen ways.

Gigerenzer's book serves well in stretching the understanding of risk and probability. According to the common view, we, humans, are probability-blind and predictably irrational . The author provides some useful tools for dealing with risk and uncertainty, arguing that it is perfectly possible to remove our seemingly hardwired cognitive biases. The three important angles of probability are discussed in the book. As I understand it, Gigerenzer proposes methods for training of our fast thinking system by equipping us with thumb-rules for many different life situations and thus becoming an effective heuristic being where the gut-feeling plays a central role in decision making. This stands in contrast to fact and data-based approaches, and the book gives some good arguments why the risk savviness is better.

Apart from author's reasoning about the gut heuristics, which is really interesting, the book has some other good material on risk, uncertainty and probabilities. There some very good examples from healthcare and how statistics is employed there to rob patients. Statistically-enabled fear is a great weapon for the greedy schemes which seems to exist in many healthcare systems.

This book has massaged those sceptical parts of my brain so well that I will probably re-read it after a while. ...more

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Aug 22, 2020 Thomas Edmund rated it it was amazing

Risk Savvy is an unusual but helpful tome on risk assessment in a modern world. Gigerenzer skewers several topics, pretty broadly from terrorism, to cancer screening all linked with an overall focus on making accurate, useful and evidence based decisions.

At the moment I have a slightly cynical perspective on my non-fiction, judging books heavily on whether they fit with the shitshow that is 2020, and Risk Savvy passes the test! In fact I think this book is quite useful reading to help make sens ...more

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Sep 17, 2017 Sameer Alshenawi rated it it was amazing · review of another edition

Eye opener .
It addresses risk vs uncertainty , and how often we mistakingly think that risk is unceratinity and uncertainty is risk. It advocates use of rules of thumb or simple ones instead of the sophistaced systems of risk management.
We need educating people in health, financial, and digital risk literacy.

Highly recommended

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Jan 31, 2017 Adrian rated it really liked it · review of another edition

I am constantly afraid of making wrong decisions. I hate it when there is no way to tell if my choices are leading where I want. Therefore I often try to get even the smallest pieces of information before making my choice, balancing carefully out every detail.
...
Turns out it is not the right way to do things. More information does not always give more certainty, as Gigerenzer argues in his book using good examples, clear statistics and simple math. In this world, ever more complex, we must know ...more

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May 22, 2014 David Hammond rated it it was amazing

Shelves: non-ficiton-health

Essential information for anyone receiving medical treatment

An introduction to understanding risk - particularly in medicine. For example - a woman has a positive mammogram for cancer - what is the probability she actually has cancer? 8 in 10, 1 in 10 or 1 in 100?

The answer is 1 in 10. How many gynecologists answered this question correctly? Only 21 percent chose 1 in 10.

The author details how pharmaceutical companies and health providers exaggerate the benefits of their products and play on our ...more

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Mar 23, 2015 Kevin rated it really liked it

This was a book that I thought was amusing, not fantastic, and then overall came around to thinking it was pretty good. Overall, Gerd Gigerenzer talks about how we often make decisions based on a misunderstanding of the data and that we need to do a better job of being what he calls being “risk literate.”
In the first part, he talks about how people internalize a risk if a lot of things happen at once (like 9/11 attacks) where there is a low probability of catastrophe, but that people don’t al This was a book that I thought was amusing, not fantastic, and then overall came around to thinking it was pretty good. Overall, Gerd Gigerenzer talks about how we often make decisions based on a misunderstanding of the data and that we need to do a better job of being what he calls being “risk literate.”
In the first part, he talks about how people internalize a risk if a lot of things happen at once (like 9/11 attacks) where there is a low probability of catastrophe, but that people don’t always see the potentially worse risks that are a higher probability, but lower severity (like individual car accidents that are much more frequent but don’t kill as many people in each event). People sometimes act suboptimally when faced with these types of tradeoffs. “If reason conflicts with a strong emotion, don’t try to argue. Enlist a conflicting and stronger emotion.” (12) We often overestimate the probability of catastrophe, sometimes resulting in bad results. “How many miles would you have to drive by car until the risk of dying is the same as in a nonstop flight?...the best estimate is twelve miles.” (13)
He then goes on to talk about the differences between uncertainty and risk. “In a world of known risk, everything, including the probabilities, is known for certain. Here, statistical thinking and logic are sufficient to make good decisions. In an uncertain world, not everything is known, and one cannot calculate the best option. Here, good rules of thumb and intuition are also required.” (24) We are often given a false sense of certainty by complicated models when they might not do a very good job of predicting anything. He talks about the rule of thumb that pilots can use regarding whether they can make a runway: “Fix your gaze on the tower: If the tower rises in your windshield, you won’t make it.” (28) They also talk about the turkey illusion, where we base our perception on the future on the risk (previous observations of being fed) and not uncertainty (someone “preparing” for Thanksgiving).
The next section discusses defensive decision making. They talk about how pilots use checklists, but surgeons don’t, often to the peril of their patients. “Defensive decision making: A person or group ranks option A as the best for the situation, but chooses an inferior option B to protect itself in case something goes wrong.” (56) People often use a rule of thumb like hiring a recognized company for a job rather than who they actually think is the best because they think it will be more defensible if something goes wrong. Some types of defensive medicine they mentioned include superfluous tests, more prescriptions than necessary, unnecessary referrals to specialists, and invasive procedures to confirm a diagnosis. (59) A remedy that he provided was: “Don’t ask your doctors what they recommend to you, ask them what they would do if it were their mother, brother, or child.” (63)
Another interesting section was on minding your money. He noted that the predictions of financial experts are not typically all that great. His alternative that he proposes is much simpler. “Allocate your money equally to each of N funds.” (93) He advocates this over a mean-variance optimized portfolio. “I have convinced myself that simple is better. But here’s my problem. How do I explain this to my customers? They might say, I can do that myself.” (95) This is true, but wouldn’t it be better to just advocate keeping 1/N as one of the options when picking the best model? I would argue against adding unnecessary complexity, but it seems like the advisor is just bad if they pick models on something other than performance adjusted for other important things (such as risk). He says that when we have “high uncertainty, many alternatives, and small amount of data” we should make it as simple as possible. Alternately, when we have “low uncertainty, few alternatives, and a high amount of data” we should make a model more complex. (96) He advocates allocating savings equally across stocks, bonds, and real estate. (105) That certainly is simple, but it likely is not the best risk profile for many people.
The next part talked about gut decisions. I thought he had a little more faith in gut decisions than I do, but he does make some good points. “A gut feeling, or intuition, is a judgment (i) that appears quickly in consciousness, (ii) whose underlying reasons are fully fully aware of, yet (iii) is strong enough to act upon. Having a gut feeling means that one feels what one should do, without being able to explain why. We know more than we can tell. An intuition is neither caprice nor a sixth sense, but a form of unconscious intelligence. By definition, the person cannot know the reasons, and may invest some after the fact if you insist. To take intuition seriously means to respect the fact that it is a form of intelligence that a person cannot express in language. Don’t ask for reasons if someone with a good track record has a bad gut feeling.” (107) I thought one good point he made was that there is often, and for good reason, a desire for people to only accept evaluations if a person has a list of reasons why. By definition, you can’t explain a gut feeling. I think the important thing is to look at the track record of a person who is sharing their gut feeling – I have known people with very reliably good intuition, and others that are worse than useless.
He goes on to talk about natural frequencies and their superior ease of comprehension compared to conditional probabilities. This makes sense – there is no need to overcomplicate things. He also talks about the illusion of certainty, and how we think we have a better grasp of what is going on with slot machines, for example, than we really do. (136) “If you are highly proficient at a sport, don’t think too long about the next move. If you are a beginner, take your time in deciding what to do.” (137) This goes along with the gut feelings chapter, since you have muscle memory and intuition once you have repeated something many, many times, and the danger of “overthinking” something exists. When you don’t have much experience, though, you have not had enough encounters to develop a reliable gut feeling, and need to resort to other methods.
The next part talks about getting to the heart of romance. One idea I thought was interesting was to toss a coin to help with decisions and then not look at the result. Which result were you hoping for? (149) I thought the discussion about how middle children always get less total attention because if you spread your time equally (1/N), you will never have any time where the middle child doesn’t have to split time with at least one other person (typically), so N is on average larger for the middle child than for the oldest or youngest. (154)
I thought the parts on medicine were really interesting. One of the more discomforting things in the book was the discussions regarding the probability that a person has an illness given a positive test result, and how many doctors were way off when it came to this knowledge/understanding. Regarding breast cancer, “out of ten women who test positive in screening, one has cancer. The other nine women receive false alarms. Yet the 160 gynecologists’ answers, monitored by an interactive voting system offering the four choices above, were all over the map…Only 21 percent of doctors would correctly inform women.” (163) He again promoted the idea of looking at natural frequencies (that is, the frequency of something occurs, rather than probabilities, or conditional probabilities, so saying something like 6 in 1,000 will die from a disease). Regarding Down syndrome, “only one out of every six or seven women with a positive result actually has a baby with Down syndrome.” (172) I really liked the discussion of how doctors have what he calls SIC Syndrome. “Physicians don’t do the best for their patients because they: 1. Practice devensive medicine (Self-defense) 2. Do not understand health statistics (Innumeracy) 3. Pursue profit instead of virtue (Conflicts of interest). (178) He talks about how the benefits of many tests like MRI and CT scans are discussed with little discussion about their drawbacks. These are implemented because of the S (if they did a test they did all they could) and the C (financial rewards for running tests), not because it was necessarily in the best interest of the patient. These tests in particular can even be harmful for the patient, as long-term radiation exposure has negative impacts on your health. I thought the discussion of mortality rate versus 5 year survival rate was interesting, as well. He talks about two different kinds of bias present in diagnosis. Lead time bias is present when diseases that take a long time to kill you are diagnosed much earlier (say, at age 60), resulting in better 5 year survival rates. If you wait until they are much sicker (say, at age 68), the 5 year survival rate might be lower, but it doesn’t mean that a higher fraction of people lived past the age of 70. Another type of bias is overdiagnosis bias. “Overdiagnosis happens when doctors detect abnormalities that will not cause symptoms or early death. For instance, a patient might correctly be diagnosed with cancer but because the cancer develops so slowly, the patient would never have noticed it in his lifetime.” (188) If the same number of people die from a cancer (the numerator), but you dramatically increase the number of people who have some form of it (the denominator), the mortality rate can drop dramatically. Like with x-rays, the biopsies done to better diagnose prostate cancer are not without harm. While some tests and screenings are very useful, it sounds like the PSA screening for prostate cancer is not nearly as reliable. I think one of the takeaways is that it’s important to communicate how reliable a test is, and that not all tests are great. “In addition, almost half of the U.S. doctors falsely believed that detecting more cancers proves that lives are saved. Under the influence of their confusion, they would recommend screening to paitents.” (200) He advises to look at the mortality rates rather than the 10 year survival rates, doing as best as you can to compare apples to apples. He then advocates fighting cancer (and other diseases) with prevention, not screening. This is obvious – it’s better to be proactive rather than reactive – but prevention is something I should have done for a long time, and screening is something I can do while still not adhering to a strict diet or otherwise healthy lifestyle. While we spend a ton of money on research for drugs to cure cancer, he suggests that it would be better spent on education and promotion of healthy lifestyles, since somewhere between 40 and 50 percent of cancer is essentially due to either smoking or obesity/diet/lack of exercise. (221)
He concludes by talking about how it’s important for people to be comfortable with numbers, understanding risks, and that natural frequencies can help with this.
I thought this was a decent book. I thought he was a little more into rules of thumb, but I think the general message of only adding complexity if it substantially adds to the benefits is a good message. I thought he had more of an emphasis on using gut feelings specifically rather than a more general "simple is better" that I would have preferred, but it still made some good points. I thought the discussions regarding how much other people you typically encounter know about risk and statistics is good as well. Given that I have a decent background in math and statistics, it’s beneficial to know what other people are and are not familiar with. I also liked his emphasis on properly accounting for the negative impacts of tests. More generally, what are the costs for doing too much testing and delaying decisions? We often frame things as is this good or bad (narrow framing), when we instead should look at it in the context of all available options.
Overall this was pretty good, especially in how it made you question the analysis you are given, and be wary of creative liberties with statistics.
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Jul 02, 2017 Emma Veitch rated it liked it

Somewhere between 3 and 4 stars. I did really, really enjoy this book but it wasn't quite the all-encompassing mind-exploding stream of consciousness brilliance that I hoped it would be. I think that the author (GG) is absolutely bang-on on pretty much everything, but a few little bits and pieces got lost in translation. Perhaps, it was too "popular" for me and I might have appreciated more detail, more depth on some of the threads he explores. I also felt overall the book was a bit "bitty". The Somewhere between 3 and 4 stars. I did really, really enjoy this book but it wasn't quite the all-encompassing mind-exploding stream of consciousness brilliance that I hoped it would be. I think that the author (GG) is absolutely bang-on on pretty much everything, but a few little bits and pieces got lost in translation. Perhaps, it was too "popular" for me and I might have appreciated more detail, more depth on some of the threads he explores. I also felt overall the book was a bit "bitty". There is a focus on heuristics and his idea that "fast thinking" (rules of thumb) can be as good as "slow thinking" (formal decision tools). There is a bit about giving people health information - that everyone can learn to understand health risks/statistics, and what it means to convey clearly and accurately, info about health. That was the part I really "wanted" and was most drawn into in the book. There were examples ranging from banking, mad cow disease, swine flu, aeroplane safety, driving, whatever - but this all contributed to, in places, there being a lack of a "central thesis". My biggest criticism is that there really are two "central theses", and they didn't quite hang together - for example, I didn't really grasp why the "heuristic" idea feeds into, or interplays with the stuff about communication of statistics in health. Do these form part of a single worldview about making good decisions? I wasn't really sure. Thinking slow, could be as compatible with the communication of absolute risks, as rules of thumb. I wanted GG to explain this to me in much more depth. I would have preferred a single entire book on the communication aspects, and with more depth on the principles and evidence for this. Things I loved:
- The graphics and examples
- The compelling and clear explanations
- The empowering nature of his proposals - everyone can understand this, even school children who haven't yet been taught fractions
- The generality of application of some of the ideas
Overall, I felt that everyone who cares about how information in health should be communicated, should read this book, but I would like to follow it up with some of GG's papers, and perhaps (to read the opposite side of the story), some of the "nudge" literature (Kahnemann etc) and maybe Nassim Taleb (which I've been putting off for a while).
Interesting to read this in the week that Speigelhalter said "A sloppy attitude towards statistics has led to exaggerated and unjustified claims becoming commonplace in science" (in a public lecture) - https://www.theguardian.com/science/2.... I get the sense GG has been saying this stuff for decades, nearly, but it's taken a long time for formal explications of risk to be set out for the public in a sensible way. Here's to more of that. ...more

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Mar 31, 2018 Michelle rated it liked it

Shelves: 2018, non-fiction, workish

Good overview of common sense decision and risk taking principles. Chapter 6 about leadership and intuition was valuable to understand some of the cray decisions I’ve seen taken in my career. Suggest skimming this and honing in on chapters of interest to you.

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Aug 27, 2020 Anne (ReadEatGameRepeat) rated it liked it · review of another edition

I think this was an interesting read, but since I read his other book, Reckoning with Risk, earlier this year I didn't get as much from it as I thought I would. The author recycles a lot of his points and facts, so it didn't bring many new things as I thought it would. ...more

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Nov 28, 2020 Benjamin Williams rated it really liked it

I’d give this book a 3.5 if I could. First third, great read and info that I found highly applicable. Second third, used the definitions and made the understandable. Last third, I think he has a vendetta against the healthcare industry and sets out to disprove many screenings and preventive medicine and procedures. Not bad stuff, just seemed pretty biased.

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Sep 10, 2017 Jeff Whitlock rated it really liked it

Shelves: read-finance-economics

I love the main point of this book: that an answer to building a better modern society does not lie in paternalistic governments that treat people as "stupid," but in helping people make better decisions through understanding risk and uncertainty.

I love Gigerenzer's vision of educating people in health, financial, and digital risk literacy.

While I understood that people are generally "risk unsavvy" (e.g., people won't let their children swim in the ocean for fear of sharks but will let their 16- I love the main point of this book: that an answer to building a better modern society does not lie in paternalistic governments that treat people as "stupid," but in helping people make better decisions through understanding risk and uncertainty.

I love Gigerenzer's vision of educating people in health, financial, and digital risk literacy.

While I understood that people are generally "risk unsavvy" (e.g., people won't let their children swim in the ocean for fear of sharks but will let their 16-year-old child drive), Gigerenzer formalized my understanding of why this is the case:

- Zero-risk bias (certainty bias): people treat a risk world as a certain world (e.g., DNA tests)
- Turkey bias: people treat uncertain worlds as calculable risk worlds (e.g., value-at-risk models in finance)
- Dread risks: people are biologically wired to fear instances when many people die at once (e.g., a terrorist attack) more than when people die in a slow, steady manner (e.g., car accidents).
- Risk reference class misunderstanding: people often do not understand what class a specific a risk refers to (e.g., when the meteorologist says, "there is a 45% chance of rain tomorrow," people tend to not understand what exactly this refers to: it will rail 45% of the hours during the day, it will rain on 45% of the region for which they are speaking, 45% of meteorologist think it will rain tomorrow, or it will rain on 45% of days for which this prediction is made)
- Relative risk vs. absolute risk confusion:: people tend to be influenced by relative risk changes when the absolute risk change is inconsequential. For example, early breast cancer screening decreases risk of dying of breast cancer by 20%. This sounds impressive, but the absolute risk change of early screening vs. non-early screening is 1/1000 + the group with early screening had 100 false alarms and 5 women unnecessarily had complete or partial breast removal.

My main criticism is that the structure of the book feels a bit random and scattershot sometimes, particularly in the example. It would have been better with more focus. I also would have appreciated more support for his position that simple heuristics perform better in an uncertain world. I intuitively agree with this point, but I would have appreciated more argument for it and more exposition on why this is the case.

Overall, I think this book is well worth the read. ...more

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Apr 05, 2014 Joseph rated it it was amazing

Shelves: non-fiction

This is an excellent book that should inspire healthcare and financial consumers they can understand the jargon of specialists. Rather than making people feel insecure or stupid, Gigerenzer, like all the best teachers, shows patience and gentle encouragement that seemingly opaque statistical jargon can be unpacked and understood even by elementary school children depending on how information is communicated. Bayesian probability is converted to natural frequency using pictorial icons that allow ...more

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Feb 18, 2014 Julie rated it it was amazing

Shelves: first-reads

A First Reads win!

I absolutely loved this book. Although the subject of risk literacy is potentially both dry and confusing (e.g. knowing the difference between relative risk vs. absolute risk), the author presents it in such a way that it is neither. In fact, it is fascinating and easy to understand. (While the author simplifies concepts to make them understandable, there is never a tone of condescension.) More importantly, what he has to say is crucial, IMHO, to changing the trajectory of our ...more

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Oct 16, 2016 Bartley Sharkey rated it it was amazing

Shelves: non-fiction, psychology

I picked this book up at least a year ago and put off reading it until now because it had the look of a typical business compilation of specific examples that would be vaguely interesting but not very applicable to the everyday. Thankfully I was totally wrong in that view and what I got instead was an accessible, practical and ultimately satisfying read from an author who clearly has a chip on his shoulder about the mis-information that's floating around, causing individuals and governments to w ...more

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Feb 17, 2014 Scott Oney rated it it was amazing

Shelves: social-science, non-fiction, self-help, first-reads, innumeracy

Disclaimer: I received this book from a Goodreads giveaway.

I wasn’t searching for a book on how to make decisions, but this book found me. The book covers a lot about innumeracy (the inability to think with numbers) and statistical innumeracy (the inability to think with numbers that represent risk). As a person who likes math and statistics, I found this very interesting.

In the first chapter, Gigerenzer talks about the “pill scare” in Great Britain where the UK Committee on Safety of Medicines ...more

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Jun 04, 2014 Rachel Blom rated it it was amazing

Shelves: non-fiction-general

It's not often you can say that you're really glad you've read a certain book, but it was the case with Risk Savvy. I expected it to be more about decision making in general (which also would have been interesting, I'm sure), but instead the author offers fascinating insight into heuristics and the use of statistics.

Take this example: There's a 30% change of rain tomorrow. Do you know what this actually means? If you do, this book may be a waste of time for you. But if you're not sure what the ...more

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Mar 30, 2014 Justin rated it it was amazing

Shelves: own

I won this book in a goodreads giveaway. This book was pleasantly different than I expected. I was expecting something about the psychology of risk taking, but instead found a book describing how to best take and communicate risks. The book talks in depth about how many predictions fail because they assume all of their variables are known. The book gives simple rules of thumb and a general technique that actually work in real world situations containing unknowns. The author was understandable an ...more

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Feb 14, 2017 Miklos rated it really liked it

It doesn't always flow smoothly, but it's still an immense and thorough guide to help you think better about risk and probability. You'll never look at the medical information or investment advertisements the same way again. Must read for every adult. ...more

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Sep 21, 2014 Fred Rose rated it liked it

Shelves: problem-solving, business-mgmt

Be good at math, ask skeptical questions, have rules of thumb. Yep, any engineer could tell you that.

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Feb 24, 2021 Nv rated it liked it

A strikingly relevant read for the hysterical Covid world. Wanted a humanistic antidote to the traditional behavioral economist view of life and GG’s articles were most closely aligned with a perspective I wanted. This particular book might not be the best entry point though, it’s clearly meant for mass consumption and goes into no detail at all. Still, his philosophy of risk, intuition and errors in decision making comes out clearly, and it’s refreshingly old-school, in a world that’s quite clu ...more

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Jul 15, 2017 Pelle rated it it was amazing · review of another edition

This is a very good book about common misconceptions in understanding risks in everyday life as well as decision theory.
People are persuaded to undertake medical screenings without any additional benefit, because the underlying probabilities of studies are misunderstood by doctors. The finance industry gives consistently wrong projections of future market prices, nevertheless many people trust them their money. Gigerenzer shows that having no screening at all or invest your money yourself by ap This is a very good book about common misconceptions in understanding risks in everyday life as well as decision theory.
People are persuaded to undertake medical screenings without any additional benefit, because the underlying probabilities of studies are misunderstood by doctors. The finance industry gives consistently wrong projections of future market prices, nevertheless many people trust them their money. Gigerenzer shows that having no screening at all or invest your money yourself by applying simple rules such as "1/N" is usually the better solution.
But this book is not only about the wrong interpretation of probabilities, it shows the limits of probability theory by introducing (at least for me the distinction was new) the distinction of risk and uncertainty. When dealing with risk one can usually calculate probabilities as all relevant factors are known, while in situations of uncertainty it is not good to apply probability theory but thumb rules and trust your intuition.
Furthermore Gigerenzer investigates error cultures in two different environments (pilots vs. doctors) where the latter has no error culture which leads to defensive decisions (self protection). Gigerenzer brings this, in order to explain why doctors prefer to send patients to screenings which might no be necessary at all. It is furthermore something that I have observed myself in many (big) organizations and is in my opinion a major source for bad decisions and operational risk.

To summarise, the book has a clear focus on examples from medicine (probably due to Gerd Gigerenzer's own background). Hence, the financial market side is only covered a little, although I am convinced that one would find equally many cases, where probabilities or statistics are misused when calculating risks. One can however see, that Gigerenzer's background is not in finance, as he criticizes the high leverage ratios of banks and the argument of banks that raising capital is too expensive. He seems to think that raising equity is without costs (which actually has usually higher costs than debt) as he recommends this to banks instead of taking debt. Nevertheless, I think his diagnosis of leverage ratios being too high is correct, only the solution is too simplified. This shall only be a small sidenote and does not affect the content of the whole book much at all. If one is more interested in the misuse of probability theory in financial industry, Nassim Taleb's books can be recommended as additional literature.

Overall, I can recommend this book to really anyone, because everyone of us has to make decision when their outcome is uncertain and this book delivers some advice how to deal with such situations and how to find quick and good solutions.

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Jun 17, 2017 Lisa Cromwell rated it really liked it

This review has been hidden because it contains spoilers. To view it, click here. I did not realize when I started reading this book that I was one of many who was so uninformed on how how to be more risk savvy. Something simple that the author brings up early on threw me for a loop. If you were informed by your weather man/ woman/ newspaper that there was a 30% chance of rain, what does that mean to you? 30% of what? If you were one of many woman from the 60's and on that were informed of the "risk" of getting blood clots from taking birth control pills and how the third gen ...more

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Sep 10, 2019 Thomas rated it liked it

Shelves: science, 2019

I think just about everyone could benefit from reading the second chapter (on the difference between risk and uncertainty - I don't have the math skills to enter into the more academic aspect of the debate, but it seems like a meaningful and true distinction in a world of real decisions) and the chapters on financial and medical decision making. The other chapters are a little more hit and miss, I think. From my layperson's perspective, one way to think about how to situate this book would be th ...more

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Oct 19, 2020 Richard Meadows rated it really liked it

Remember all the popular behavioural economics research on how we’re all hopelessly biased and irrational? Gerd Gigerenzer is not a fan. He might sounds like a fictional villain invented by J.K. Rowling, but he’s the real-life nemesis of Daniel Kahneman and friends.

Gigerenzer argues that our ‘fast and frugal’ heuristics are often superior for decision-making, that intuition serves us very well indeed, and that too much information makes us worse off in conditions of uncertainty.

Risk Savvy is mos ...more

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About Gerd Gigerenzer

Gerd Gigerenzer

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Gerd Gigerenzer is a German psychologist who has studied the use of bounded rationality and heuristics in decision making, especially in medicine. A critic of the work of Daniel Kahneman and Amos Tversky, he argues that heuristics should not lead us to conceive of human thinking as riddled with irrational cognitive biases, but rather to conceive rationality as an adaptive tool that is not identica ...more