Risk Savvy – how to make good decisions is one of the latest books I have read and is a very interesting read. It is a practical guide to making better decisions. The author, Gerd Gigerenzer takes numerous examples from the field of finance, health and personal lives to show how irrational we can be at times. The author shows how risk-taking is essential for innovation, fun and the courage to face the uncertainties in life. But he adds that amid these uncertainties, the people we trust to lead the way, be they financial advisors or doctors sometimes take decisions which are not necessarily in our best interest. There can be various reasons to this. It could be down to the simple fact that they do not quite know how to assess risk properly or how to read statistics and probabilities. It is worse, however, when they guide us to take certain investments because it actually helps their companies bottom line for example. Filled with numerous examples including how you can get risk savvy by taking matters in your hand and trusting your gut, this is a recommended read in the field of behavioural psychology. Some quotes from the book
We teach our children the mathematics of certainty – geometry and trigonometry – but not the mathematics of uncertainty, statistical thinking. And we teach our children biology and not psychology that shapes their fears and desires.
When modern technology is involved, the illusion of certainty is amplified.
The quest for certainty is the biggest obstacle to becoming risk savvy.
Calculated intelligence may do the job for known risks, but in the face of uncertainty, intuition is indispensable.
Learn by failing, or you fail to learn.
Even a broken clock is right twice a day.
Conflicts of interest are the rule rather than the exception. They are build into the system, and customers need to understand them. There is no way around basic financial literacy if you don’t want to be taken in every time.
First listen, then speak. If a person is not honest or trustworthy, the rest doesn’t matter.
Learning to live with a good-enough choice and the possibility that there is something better out there is necessary in an uncertain world. A risk-savvy child can be as effective as a fancy warning system. Don’t teach for tests, teach for life.