jay21 Posted July 26, 2014 Share Posted July 26, 2014 [amazonsearch]Risk Savvy: How to Make Good Decisions[/amazonsearch] It seems that Thinking Fast and Slow has become a seminal text in the value investing world, heuristics have become viewed as detrimental to decision makers. Obviously, it is easy see that they can be helpful for blinking and walking at the same time, but how can they be useful in decision making? This is a question central to Risk Savvy. Here is one quote that I believe summarizes the author's view on intuition: "A gut feeling is neither caprice nor a sixth sense, nor is it clairvoyance or God’s voice. It is a form of unconscious intelligence. To assume that intelligence is necessarily conscious and deliberate is a big error. Most parts of our brain are unconscious, and we would be doomed without the vast experience stored there. Calculated intelligence may do the job for known risks, but in the face of uncertainty, intuition is indispensable. Our society, however, often resists acknowledging intuition as a form of intelligence, while taking logical calculations at face value as intelligent. Similarly, some social scientists view intuition with suspicion and consider it the main source of human error. Some even postulate the existence of two cognitive systems, one conscious, logical, calculative, and rational and the other unconscious, intuitive, heuristic, and error-prone, each working by different principles ... A heuristic can be safer and more accurate than a calculation, and the same heuristic can underlie both conscious and unconscious decisions." Two other important topics include the difference between risk (something you can measure with certainty) and uncertainty. And how people have trouble interpreting statistics. On the second point, consider the example of a medical test. 1% of the population will have the disease and 5% will have a false positive. What is the probability that a person testing positive will have the disease: high, medium, or low? Overall, I am not sure how well the book was constructed as it dealt a little too much with healthcare and I wasn't convinced on what the author said about relationships, but it does raise some interesting points. Link to comment Share on other sites More sharing options...
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