Gerd Gigerenzer: "How do smart people make smart decisions?"
People don’t make decisions based on math. In this video, Gerd Gigerenzer explains the worlds of risk and uncertainty and how to make smart decisions.
“If you open a book on rational choice you will likely read the following: Look before you leap. Analyze before you act. List all alternatives, all consequences, and estimate the utilities and do the calculation,” says Gerd Gigerenzer. “This is a beautiful mathematical scheme, but it doesn’t describe how most people actually decide.”
Gigerenzer states this method only works in a world of risk – when all relevant alternatives, consequences, and probabilities are known. But how to make good choices in a world of uncertainty? “Not by calculating, but with smart rules of thumb (heuristics) and intuition.”
Furthermore, Gigerenzer says the choices between two jobs or between partners are all in the world of uncertainty. “You can’t calculate everything, you don’t know the consequences and there will be surprises.”
He highlights four points for smart decision-making:
- Uncertainty: The best decision under risk is not the best one under uncertainty.
Heuristics: Heuristics are indispensable for good decisions under uncertainty. They are not the product of a flawed mental system.
Simplicity: Complex problems do not require complex solutions.
Less Is More: More information, time, and computation is not always better.
Gerd Gigerenzer speaks at GDI’s Academy of Behavioral Economics 2020 on 29 January 2020. Order your ticket now!