Saturday, January 23, 2016

Book: Risk Intelligence by Dylan Evans

"He who knows best, best knows how little he knows." - Thomas Jefferson

Risk Intelligence by Dylan Evans is all about thinking about risk and uncertainty in a coherent manner. I didn't find the book to be a 'game changer' but it is packed with lots of great examples and quotes, and it is also written in a clear style that is very easy to read. Had I not already read a fair few books on risk and human biases, I'm pretty sure Risk Intelligence would have been a eye-opener.



- Experts often think they know more than they do.

- Almost everyone overestimates how long the both good and bad feelings will last. ...  most people are reasonably happy most of the time, and most events do little to change that for long. ...Yet most people persist in thinking that powerful events must have long-lasting emotional consequences.

- "However sure you are that you can easily win,....there would not be a war if the other man did not also think he had a chance" - Winston Churchill.

- "The human understanding when it has once adopted an opinion...draws all things else to support and agree with it." - Francis Bacon

- "Worldly wisdom teaches that it is better to fail conventionally than to succeed unconventionally" - J.M. Keynes.

- As one expert gambler, the Irish race bettor J.P. McManus, told me, a nice who has lost all his bets at the racetrack in the morning may be so desperate to back a winner before going home that he stakes everything on a horse he has never heard of in the last race of the day. J.P., on the other hand, could always take it or leave it. His motto was "There's always another race."

- "Ignorance more frequently begets confidence than does knowledge" - Darwin

- "If you want to succeed, double your failure rate" - Thomas J.Watson, founder of IBM

Notes to self, made while reading

- Risk Intelligence (RI) concerns judgement based on rational calculation and well calibrated intuitive feelings, as opposed to being misinformed by biases (e.g. overconfidence, availability heuristic, wishful thinking, confirmation bias, etc). RI enables the decision maker to feel comfortable and make decisions when faced with uncertainty...

- CSI effect: the jury expects more proof than the forensic evidence can deliver.  Even DNA and fingerprints are about probabilities.

- Airport security: there is a difference between feeling safe and being safe. How much is theatre?

- Some hazards evoke a stronger emotional response than others. Think about terrorism, global warming, homicide, road accidents. Emotion affects risk appetite, and leads to things like the 1% doctrine. 

- Wishful thinking: seeing the world as you think it should be as opposed to how it is.

- RI is easily distorted by the madness of crowds, the influence of the herd.

- Without underplaying the value the basic statistical knowledge, RI doesn't necessarily mean a person has a very strong capability for probability theory. A lot can be intuitive. Some games requires probability theory e.g. casinos, but for many aspects of life you don't need to know, and often can't know, the odds of events.

- Be aware when probabilities are expressions of certain events (e.g. coin toss), or are subjective expressions (e.g. assigning a probability to a business failing).

- A frequent characteristic of successful gamblers: "They all knew their strengths and weaknesses very well and were brutally honest with themselves. Many of them kept accurate and detailed records of their earnings and losses, and they reviewed their strategies regularly to learn from their mistakes."

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