© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
May 23, 2014 7:03 pm
Risk Savvy: How to Make Good Decisions, by Gerd Gigerenzer, Allen Lane, RRP£14.99/Viking, RRP$26.95, 336 pages
How many people did the 9/11 terrorists kill? According to Gerd Gigerenzer, more than 4,500 died as a direct result of the attacks. Besides the almost 3,000 slaughtered in the airliners and their targets on the ground, an additional 1,600 lost their lives in US road accidents during the year that followed because they chose to drive rather than risk flying.
Gigerenzer’s statistical analysis of the increase in road traffic during 2001/02 – and its fatal consequences – is one of many powerful examples in Risk Savvy of the way people make bad decisions because they misunderstand risk.
His main target is the medical profession though many other fields, including finance and journalism, receive glancing blows from this German expert in risk communication. Gigerenzer, a psychologist based at the Max Planck Institute for Human Development in Berlin, is merciless in his attacks on those who mislead patients, clients and the public into exaggerated fears or hopes for their treatments and investments.
Some of this misleading comes from deliberate manipulation. But, on the basis of his work with doctors in particular, Gigerenzer believes that the professionals’ own ignorance is as much to blame. “The major cause is the unbelievable failure of medical schools to provide efficient training in risk literacy,” he writes.
Gigerenzer, who has taught around 1,000 established doctors on continuing education courses, estimates that 80 per cent “do not understand what a positive test [in a cancer screen] means, even in their own specialities. They are in no position to counsel their patients adequately, nor can they critically evaluate a medical journal article in their own field.”
Doctors confuse absolute and relative risks, false positives and false negatives, prevalence and incidence, and much more besides. On the whole, the effect is to exaggerate the probability that an individual is suffering from a particular disease following a diagnostic test.
This misunderstanding exacerbates the tendency of doctors, particularly in the US, to practise “defensive medicine”. They order an excessive number of tests, drugs or operations, even at the risk of hurting the patient, for fear that he or she might otherwise sue if a disease is overlooked. Gigerenzer, who spent several years as a psychology professor at the University of Chicago, illustrates this by citing an estimate that American doctors order a million unnecessary CT (computed tomography) tests on children every year – causing a substantial number of cancer cases because young tissues are vulnerable to the significant X-ray doses involved.
Doctors favour less medical intervention on themselves and their immediate family than on unrelated patients. Gigerenzer’s advice to patients, therefore, is: “Don’t ask your doctors what they recommend to you, ask them what they would do if it were their mother, brother or child.”
The book presents less evidence for statistical ignorance and manipulation in the financial than the medical world, not because Gigerenzer thinks bankers are any more risk savvy than physicians but because he has less experience of working with them. But what he does present amounts to a serious indictment of financial professionals who fail to understand or communicate the risks and rewards of their products. The Risk Savvy investment advice is to hold a simple, diversified portfolio with minimum outside involvement.
The long-term solution lies in education. Gigerenzer proposes that more abstract disciplines, such as algebra and geometry, could yield some classroom time to statistical thinking, “the most useful branch of mathematics for life”.
Although English is not Gigerenzer’s first language, he has written Risk Savvy in an engaging style with welcome touches of humour. It is far from being a textbook on risk analysis but will help readers to make better decisions when uncertainty clouds the evidence.
Clive Cookson is the FT’s science editor
Please don't cut articles from FT.com and redistribute by email or post to the web.