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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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Risk Savvy summary
Gerd Gigerenzer
How To Make Good Decisions
18 mins
Brief summary
Risk Savvy by Gerd Gigerenzer is a manifesto for the importance of risk literacy in everyday life. It provides practical ways to improve decision-making and cut through complex statistical information to make confident choices.
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Risk Savvy
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Key idea 1 of 9
Risk and uncertainty are fundamentally different.
What image comes to mind when you think about risk? Chances are good it’s a high-stakes poker game in Vegas. Risk, however, is actually far more subtle.
In essence, a risk is any situation in which you have many alternative outcomes, and are aware of them and the probability that they’ll occur.
People often mistakenly think that situations are risky even when they’re uncertain of the consequences. However, risk actually involves a great deal of certainty: you’re not only aware of the possible outcomes but also of the probability of each outcome.
When you play a slot machine, there are only so many possible combinations the machine can generate. A quick look at the design of the machine can give you valuable information on the frequency with which each combination is generated, and therefore how probable each combination is.
Knowing this, you can play slots confident that you’re at least aware of the dangers, since you can prepare for each possible outcome.
Sometimes, however, a situation has only one outcome. In this case, you don’t face risk but certainty. For example, when you place your hand on a hot stove, you know for certain that you’ll burn your hand.
This contrasts directly with uncertainty, i.e., not knowing the probabilities of all possible outcomes, or even not knowing what all the possible outcomes are.
For many, this sounds much like their definition of “risk.” For example, if you’re at a poker table in Vegas, you probably don’t know whether the player across the table has a pair of twos or a full house.
However, the variables in poker are knowable: since there are only so many cards in a deck, only so many possible combinations of cards are possible.
As a counterpoint, weather is often uncertain: tomorrow could be rainy, sunny, cloudy or even snowy – it depends on many factors, not all of which can be known.
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What is Risk Savvy about?
Risk Savvy is an exploration into the way we misunderstand risk and uncertainty, often at great expense to our health, finances and relationships. However, if we better understand risk, we can develop the tools necessary to navigate this highly complex world without having to become an “expert in everything.”
Risk Savvy Review
Risk Savvy (2014) by Gerd Gigerenzer is an insightful book that challenges our perception of risk and helps readers make more informed decisions. Here's why we think this book is worth reading:
- Featuring compelling case studies, the book sheds light on how intuitive thinking can be more reliable than complex statistical models.
- Gigerenzer's clear explanations and practical examples make complex concepts easy to grasp, allowing readers to apply them to their own lives.
- By debunking common misconceptions about risk, the book offers empowering knowledge that can help readers navigate a world filled with uncertainties.
Best quote from Risk Savvy
Fact:
One out of every 26 positive HIV tests is wrong.
—Gerd Gigerenzer
Who should read Risk Savvy?
- Anyone whose decisions greatly affect others
- People involved in the finance industry
- Anyone who wants to make better decisions in their lives
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Risk Savvy FAQs
What is the main message of Risk Savvy?
The main message of Risk Savvy is that understanding risk and uncertainty is essential for making informed decisions.
How long does it take to read Risk Savvy?
The reading time for Risk Savvy varies depending on the reader, but it typically takes several hours. However, the Blinkist summary can be read in just 15 minutes.
Is Risk Savvy a good book? Is it worth reading?
Risk Savvy is a valuable read for understanding how to make better decisions in a complex world.
Who is the author of Risk Savvy?
The author of Risk Savvy is Gerd Gigerenzer.
What to read after Risk Savvy?
If you're wondering what to read next after Risk Savvy, here are some recommendations we suggest:
- Bounce Back by Susan Kahn
- Power by Jeffrey Pfeffer
- Stillness Is the Key by Ryan Holiday
- Don't Believe Everything You Think by Joseph Nguyen
- Switch Craft by Elaine Fox
- You Are What You Risk by Michele Wucker
- Loonshots by Safi Bahcall
- Rich Dad, Poor Dad by Robert T. Kiyosaki
- Good Strategy, Bad Strategy by Richard Rumelt
- The Art of Clear Thinking by Hasard Lee