Risk Intelligence: How to Live with Uncertainty [Hardcover]

There are many books discussing how to deal with risk in the sense of future events that cannot be predicted with total accuracy: dice rolls, stock price movements, whether you will get cancer or be injured in an automobile accident. The focus of this book is on a different but easily confused topic: how to make decisions when your knowledge is uncertain. The first topic is the studied by probability theorists and statisticians. The second topic concerns the underlying information on which you base decisions. This book takes us through the fields of philosophy and both individual and social psychology. Outside of some highly structured risk-taking activities, as are found in casinos and financial markets for examples, dealing with uncertainty is a more useful skill than probability analysis. It is also much easier to learn, primarily because it depends on common sense and simple logic rather than abstract mathematics.

It's possible to enjoy this book as an account of popular science, similar to those written by Malcolm Gladwell and Daniel Kahneman. There are colorful accounts of fascinating research conducted by the author and others including why US weather forecasters have better risk intelligence than those in the UK, the difference in risk thinking between ordinary serious tournament bridge players and top international champions and specific defects in medical risk intelligence that lead to less-than-optimal patient care (this is a particular focus of the author as he taught in a medical school). These ideas are applied in surprising but convincing ways to decisions large (like precautions against terrorism) and small (like letting your child ride a bicycle to the park).

It's also possible to get much more out of this book: practical advice on how to make better decisions. In the author's striking metaphor, the information we need for decisions is like objects in a room illuminated only by a single candle. Some information we know very well, like objects close to the candle. Other things we cannot know much about, like objects far from the candle in the corners of the room. Dealing with both kinds of knowledge is straightforward. If you know all about something it is easy to plan, if you know nothing you make a plan that will not be disastrous in any plausible scenario, or perhaps you treat the situation as a gambling game and pick the choice with the highest estimated expected outcome.

Where people often go wrong is with the objects in between, things we have some useful knowledge about, but do not understand completely. For example, I can form some judgment about the likely investment returns of the stock market over the next ten years based on the variety of returns observed in the past, but I also know that things change and the next decade might be quite different from any preceding decade. When you choose a job, a house, a spouse, a pet or anything else; you are not picking blindly, but do not have full information either. Virtually all untrained people make systematic errors of overconfidence (treating uncertain knowledge as certain) and underconfidence (ignoring information you do have because it is incomplete). And surprisingly, people who exhibit high risk intelligence in one domain (expert horse handicappers, for example) are no better than average in other domains. Worst of all, there are social forces and educational practices that actually encourage poor risk intelligence.

Risk Intelligence describes tests the author has made available on-line for evaluating your risk intelligence and exercises for improving it. Good risk intelligence appears to other people as decisiveness, having reliable instincts, being calm under pressure, learning fast and having few regrets. If you have ever envied those traits in others, take heart, because they are the result of learnable skills, not inborn psychology.

To live is to own uncertainty. Now we have an owner's manual.

First of all let me state that I think the subject of this book which is basically understanding the probability of every day life of the individual and society is extremely important. I love books that discuss probability and risk and try to teach people how to deal with them better. It's such an important part of modern life because our native skills were not made for the 21st century.

This is a very easy read, almost too easy for someone who already has some understanding of the subject matter. My only complaint is that the author treated the topic too lightly. However, I understand that to do otherwise would probably have eliminated many potential readers. So for the general reader he probably took the right approach.

My favorite parts were the chapters on why risk intelligence matters, Bayes's Theorem, and expected utility.

This is a very good overall introduction to everyday reasoning about probability and therefore I recommend it.

After stumbling across this book and reading a little about it I was intrigued. The concept seemed obvious and I was surprised I hadn't come across anything like this before. However, after purchasing and reading the book I was bitterly disappointed. Dylan Evans has clearly researched this topic extensively and cites numerous studies relating particularly to human psychology but the book itself contains, in my opinion, a lot of waffle and Evans fills the majority of the 200 pages or so with excessive descriptions without really getting to the point.

For example, on pg 192 Evans quotes Donald Rumsfield: "There are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don't know. But there are also unknown unknowns; there are things we do not know we don't know." This quote is self-explanitory, however Evans goes on for the next 9 and a half pages explaining what known knowns, unknown unknowns etc are which I feel is a complete waste of time. This is a common theme throughout the book which I feel could have been written in half the number of pages instead of trying to bulk it up and trying to make it look more impressive with excessive information. There are a few interesting points Evans makes but not enough to turn me into an expert gambler! which I had hoped I would have gained some more insight to, call me naive!