Managing Risk: How to Make Better Decisions

Before the autumn of 2008, what did Thanksgiving turkeys and rating agencies have in common? They assumed that stability was increasing, and then they were blindsided by Doomsday. Thanksgiving turkeys were used to being fed every day, and suddenly they were taken to the chopping block. Much like Wall Street. Rating agencies and top managers of major banks never saw the crash coming. Dodge the chopping block. Learn to tell the difference between stability and false stability.

In the latest installment of Big Think Edge, psychologist Gerd Gigerenzer explains how to analyze risk. The author of Risk Savvy: How to Make Good Decisions, Gigerenzer teaches this exclusive workshop, where he stresses understanding the critical difference between calculable risk and uncertainty.

“The problem here is that mathematical models that are made for a world of known risk, like probability theory, are applied to a world of uncertainty,” explains Gigerenzer. “And here one doesn’t know whether they work or not. But nevertheless the dream to calculate everything in advance is very strong.”

Learn the guiding principles for analyzing risk to make better decisions in a world of uncertainty. Sign up for a 14-day trial to Big Think Edge and receive free access to online study guides and video lectures from leading experts.

For more on Gigerenzer’s insights on managing risk, watch this clip from Big Think Edge:

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