Risk Savvy
Risk Savvy

Risk Savvy

This fatalistic message is not what you will read in this book.2 The problem is not simply individual stupidity, but the phenomenon of a risk-illiterate society. (Location 87)

Risk literacy is the basic knowledge required to deal with a modern technological society. The breakneck speed of technological innovation will make risk literacy as indispensable in the twenty-first century as reading and writing were in previous centuries. (Location 90)

When I use the general term risk savvy I refer not just to risk literacy, but also more broadly to situations where not all risks are known and calculable. (Location 94)

Are people hopelessly confused? Not necessarily. Part of the problem is the experts who never learned how to explain probabilities in the first place. (Location 110)

But greater precision has not led to greater understanding of what the message really is. (Location 118)

Journalists are not the only ones who play on our emotions with the help of numbers. Top medical journals, health brochures, and the Internet also inform the public in terms of relative changes, because bigger numbers make better headlines. (Location 165)

Terrorists strike twice. First they assault with physical force, and then they assault us with the help of our brains. The first strike gains all the attention. (Location 218)

The second strike, in contrast, has received almost no attention. In fact, when I gave talks on risk management to international intelligence services and counterterrorism agencies across the world, from Singapore to Wiesbaden, my hosts were repeatedly surprised, having never even considered it. (Location 220)

Where does this tendency to fear dread risks come from? In human history, it was likely a rational response. For most of our evolution, humans lived in small hunter-gatherer bands that may have consisted of up to twenty to fifty individuals and rarely exceeded one hundred people, similar to such bands in the world today. In small bands, the sudden loss of many lives could increase the risk of predation and starvation, and thus threaten survival of the whole group. (Location 238)

If reason conflicts with a strong emotion, don’t try to argue. Enlist a conflicting and stronger emotion. (Location 248)

If a similar attack ever repeats itself, we should not let our brains be misused again for a second strike. Only when we are risk savvy can we resist terrorist manipulation and create a safer and more resilient society. To get there, three tools are essential: understanding the nature of dread-risk fear, controlling it by enlisting conflicting emotions if reasons don’t work, and knowing the actual risk of flying. (Location 259)

However, the best estimate is twelve miles. (Location 265)

The problem is that our educational system has an amazing blind spot concerning risk literacy. We teach our children the mathematics of certainty—geometry and trigonometry—but not the mathematics of uncertainty, statistical thinking. (Location 275)

Finally, nearly two thirds of Germans believe that HIV tests and fingerprints are absolutely certain, and an even higher number place their faith in DNA tests. (Location 336)

The quest for certainty is the biggest obstacle to becoming risk savvy. (Location 366)

a long-standing polarity: Fortuna brings good or bad luck, depending on her mood, but science promises certainty. (Location 379)

Its domestication began in the mid-seventeenth century. Since then, Fortuna’s opposition to Sapientia has evolved into an intimate relationship, not without attempts to snatch each other’s possessions. Science sought to liberate people from Fortuna’s wheel, to banish belief in fate, and replace chances with causes. (Location 385)

Fortuna was tamed, and science lost its certainty. (Location 389)

Our minds have become crowded with numbers and probabilities. (Location 390)

Now it is unthinkable without statistics: batting averages, strikeout averages, and playing the percentages. (Location 391)

Today, traders no longer venture to make their fortunes on the road but on their high-speed computers with the help of mathematical models aimed at predicting the stock market. All the while blindfolded Fortuna is still at work, calmly spinning her wheel, fooling forecasters and plunging Nobel laureates’ hedge funds into ruin. (Location 394)

the probabilistic revolution gave humankind the skills of statistical thinking to triumph over Fortuna, but these skills were designed for the palest shade of uncertainty, a world of known risk, in short, risk (Location 397)

Most of the time, however, we live in a changing world where some of these are unknown: where we face unknown risks, or uncertainty (Figure 2-3, right). (Location 400)

RISK: If risks are known, good decisions require logic and statistical thinking. UNCERTAINTY: If some risks are unknown, good decisions also require intuition and smart rules of thumb. (Location 407)

The risk of losing your fortune in a gambling casino is a calamity for you but a welcome one for the casino owners. (Location 422)

Probability is not one of a kind; it was born with three faces: frequency, physical design, and degrees of belief. (Location 423)

Intelligent decision making entails knowing what tool to use for what problem. (Location 519)

This is why the modern science of intelligence studies the “adaptive toolbox” that individuals, organizations, and cultures have at their disposal; (Location 520)

It is called a heuristic because it focuses on the one or few pieces of information that are important and ignores the rest. Experts often search for less information than novices do, using heuristics instead. (Location 527)

The important point is that ignoring information can lead to better, faster, and safer decisions. (Location 530)

One might think that the study of smart heuristics must be a central activity in many fields. (Location 535)

Modern technologies that many of us believe to be all but infallible, such as HIV tests, genetic analyses, and imaging tests, provide high-tech vehicles for illusory certainty. (Location 551)

Those who believe that it can’t happen to them incur the zero-risk illusion. (Location 560)

the turkey at least tried to calculate the probabilities. (Location 635)

is always better. As we will see, this is a big mistake. In an uncertain world, complex decision making methods involving more information and calculation are often worse and can cause damage by invoking unwarranted certainty. (Location 671)

To make good decisions in an uncertain world, one has to ignore part of the information, which is exactly what rules of thumb do. Doing so can save time and effort and lead to better decisions. (Location 677)

isk aversion is closely tied to the anxiety of making errors. If you work in the middle management of a company, your life probably revolves around the fear of doing something wrong and being blamed for (Location 717)

Gestalt psychologists’ way to solve problems is to reformulate the question until the answer becomes clear. Here’s (Location 740)

Serendipity, the discovery of something one did not intend to (Location 782)

Similarly, some of my own discoveries were never planned, such as the discovery of the “less-is-more effect.” Here is the story. (Location 785)

We’d made an error in assuming that knowing more always leads to better inferences. (Location 791)

The spread of AIDS in Africa was dramatically underestimated by the World Health Organization (WHO), whose computer models assumed that the probability of infection increased with the number of sexual contacts, independent of the number of sexual partners. But ten contacts with one partner lead to a much lower chance of infection than one contact with ten different partners.4 Steady sources of bad errors are the zero-risk illusion and the turkey illusion. For instance, banks (Location 802)

As a result, patient safety in hospitals—unlike passenger safety in planes—is a major problem. The Institute of Medicine estimated that some 44,000 to 98,000 patients are killed every year in U.S. hospitals by preventable medical (Location 831)

whether checklists are used; if the answer is no or not forthcoming, choose a different (Location 877)

The patient explained that he trusted Rothmund and his clinic precisely because Rothmund had immediately admitted his error and corrected (Location 889)

Immediately he was attacked by his peer surgeons for making facts about patient safety public, and, rather than praising him for his openness, the press (Location 892)

Defensive decision making: A person or group ranks option A as the best for the situation, but chooses an inferior option B to protect itself in case something goes wrong. (Location 914)

In the case of health care, it fundamentally undermines the relationship between doctor and patient, as we shall see below. (Location 940)

But a substantial number of doctors feel they have no choice but to order unnecessary tests, drugs, or surgery, even at the risk of hurting the patient. (Location 942)

There are far too many lawyers in the United States, more per capita than in any other country except Israel, and the number of law students is increasing steadily. (Location 951)

The radiation exposure from one CT study involving several scans is about the same as for the average atomic bomb survivor from Hiroshima and Nagasaki who was located one or two miles from ground zero (which was around 40 mSv; range: 5–100 mSv).18 (Location 981)

In such a situation, the FDA recommends a thorough clinical examination and warns against X-rays: (Location 995)

“Could you please tell me what’s known about the potential harms of dental X-rays for children? For instance, thyroid and brain cancer?” (Location 1011)

Why would a doctor give one answer when I asked what he recommended, and another answer when I asked what he would do if it were his mother? (Location 1030)

Don’t ask your doctors what they recommend to you, ask them what they would do if it were their mother, brother, or child. (Location 1033)

What is the benefit of the treatment? –50 percent of what? (of those who get treated once? or five times?) –How large was the “success” among those who were not treated? –What precisely do you mean when you say “success”? What are the harms (Location 1061)

Very soon after the treatment she went blind. In his records, the specialist listed my mother as a successful treatment. (Location 1067)

People need to be encouraged to talk about errors and take the responsibility in order to learn and achieve better overall performance. (Location 1077)

About ten people worldwide lose their lives every year from shark attacks, while thousands die on the road. Studies document that many people fear what likely never will hurt or kill them, while joyfully engaging in dangerous behavior. (Location 1090)

Remarkably, underneath these cultural differences lies a common psychology, one not based on direct personal experience. (Location 1112)

Cultural differences are not entirely without cause. Houses in Germany are almost always built from stone, while houses in the United States are often built from wood, where fire can and has caused more damage. (Location 1128)

Why then do senior managers of major companies still pay for these meaningless predictions? Some might not know because banks don’t publish what you see in (Location 1381)

Fear of personal responsibility creates a market for worthless products delivered by high-paid experts. (Location 1385)

These treat the highly unpredictable financial market as if its risks were predictable. (Location 1413)

To use a phrase by Nassim Taleb, if you did so you would be fooled by pure randomness. (Location 1432)

I believe in the power of simple rules in the real, messy world. They may not always help, but the first question should nevertheless be: (Location 1448)

Allocate your money equally to each of N funds. (Location 1457)

thought, ‘You know, if the stock market goes way up and I’m not in, I’ll feel stupid. And if it goes way down and I’m in it, I’ll feel stupid.’ So I went 50-50.”9 He did what many investors do: Make it simple. And 1/N is not only simple, it is the purest form of diversification. (Location 1459)

Second, the more alternatives, the more we should simplify; the fewer, the more complex it can be. The reason is that complex methods need to estimate risk factors, and more alternatives mean that more factors need to be estimated, which leads to more estimation errors being made. In contrast, 1/N is not affected by more alternatives because it does not need to make estimates from past data. Finally, the more past data there are, the more beneficial for the complex methods. (Location 1505)

Trust is typically based on surface clues, such as whether the adviser listened, smiled, and maintained eye contact. If so, customers generally invested in whatever their adviser recommended and spent the rest of their precious consultation time engaged in small talk. (Location 1575)

But conflicts of interest may be harder to spot. (Location 1586)

When someone offers her an investment option, she responds: “You have fifteen minutes’ time to explain how it works. If I still don’t understand it, I won’t buy it.” A simple rule like that can reduce global spread of damage. (Location 1613)

A wise investor will still diversify and buy stocks—just not in the complicated, obscure way dreamed up by big banks and Wall Street firms. The point is that transparency helps create a safer world, while complexity can fuel potential disaster. (Location 1616)

My research with managers suggests that the higher up they are in the hierarchy, the greater their reliance on gut feelings. (Location 1702)

Nonetheless, students are likely to learn that intuitive judgments, like visual illusions, are deceptive. (Location 1711)

They tend to resemble cockpit culture, while large (Location 1761)

When Maidique interviewed experienced top managers, some of the rules they intuitively used crossed the border into consciousness. Here are three such rules that some CEOs use to develop and maintain institutions: (Location 1778)

Hire well and let them do their jobs. Decentralize operations, decentralize strategy. Promote from within. (Location 1780)

First listen, then speak. If a person is not honest and trustworthy, the rest doesn’t matter. Encourage people to take risks and empower them to make decisions and take ownership. (Location 1799)

Innovation drives success. You can’t play it safe and win. Analysis will not reduce uncertainty. When judging a plan, put as much stock in the people as in the plan. (Location 1802)

We know all the details (such as last year’s sales figures) and can explain them after the fact. For “predicting” the past, the complex strategy did the best job in the studies. When it came to the uncertain future (such as next year’s sales figures), however, both of the simple rules made better predictions than the complex method. (Location 1871)

That’s hindsight; they already know what happened and can pick some story from their broad range of knowledge that fits the facts. (Location 1875)

This is one of the celebrated “cognitive illusions” that are allegedly engraved in stone in our brains. (Location 1929)

Let me explain it for the Monty Hall problem. The crucial step is to think of a number of contestants, not just one. Let’s take three, who each pick a different door. (Location 1931)

The Monty Hall problem posed by Marilyn and others before her involves a world of risk, not uncertainty. (Location 1946)

Probability theory provides the best answer only when the rules of the game are certain, when all alternatives, consequences, and probabilities are known or can be calculated. Here is my question: Is switching also the best choice on the real game show? (Location 1947)

Choose the alternative that avoids the worst outcome. (Location 1976)

It’s called “minimax” because it aims at minimizing your losses if the maximum loss scenario happens (Location 1978)

In fact, applying probability theory to uncertain worlds can leave you with a goat—another case of the turkey illusion that risks can be calculated. (Location 1992)

As always, start with a number of games. To make it simple, consider playing the game six times. This is the top of the tree (Figure 7-3, right). (Location 2001)

This scene provides us with a useful guideline for how to win a competition: (Location 2078)

Maximizing here means to estimate how much each of the pros of marriage is worth (the utility), estimate the probabilities that these will actually occur with the person in question, multiply the probability of each reason by its utility, and add all these numbers (Location 2169)

an uncertain world, however, where the weights and probabilities are not knowable, the entire calculation may be built on sand. The alternative is to use rules of thumb that are likely to lead to a good decision. One class of rules of thumb is one-reason decision making: (Location 2174)

One class of rules of thumb is one-reason decision making: (Location 2176)

Find the most important reason and ignore the rest. (Location 2177)

Research has shown that people often base decisions on one good reason only. Moreover, such decisions can be better than when trying to consider all reasons.2 (Location 2180)

Franklin’s bookkeeping method is taught today as the method of maximizing expected utility, also called rational choice. (Location 2202)

there is no evidence that their algorithms lead to romantic relations that are superior to traditional ways of finding partners and lead to kissing fewer frogs.5 In fact, I recently met my calculating friend and found out that he is now divorced. (Location 2222)

37 percent rule: Let the first thirty-seven women pass and remember the highest dowry so far. Then choose the first woman with a higher dowry than that. (Location 2246)

This rule increases the chance of winning from one in one hundred to about one in three. That’s not certain, but the wise man now has a much stronger chance of ending up with a wife and a job. (Location 2248)

The 37 percent rule is mathematically elegant because the number of options one lets pass is equal to N/e, where N is the number of alternatives (in our example, one hundred), and e ≈ 2.718 is the base of the natural logarithm system. (Location 2250)

People’s minds are tuned to the uncertainty of the real-world mating game, which differs in important aspects from the dowry problem, where there is one right choice and the chances of finding it can be calculated. (Location 2254)

helps. It’s not necessary to investigate 37 percent of all partners. About 10 percent is sufficient, while going for the “optimal” 37 percent rule leads to worse results and takes more time. (Location 2261)

1. Set your aspiration level. 2. Choose the first alternative that meets your aspiration level and then stop searching. (Location 2266)

If it proves to be too high, it can be lowered, step by step. (Location 2268)

While it is spinning, you will likely feel which side should not come up. (Location 2279)

That’s your inner voice. You don’t have to make any complicated calculations to hear it. And you don’t have to bother looking whether heads or tails came up. (Location 2279)

Even in the Western world today “popping the question” is often left to the male partner. In a historical context this one-sidedness is curious, given the traditional belief that women have better intuitions about romance. (Location 2285)

“Who has better intuitions about the right romantic partner: men, women, or neither?” This question was asked in personal interviews with a representative sample in each country. (Location 2288)

And when it came to other personal intuitions, such as understanding other people’s intentions, these were again considered to be women’s domain. (Location 2309)

Men do have on average more knowledge about investment, which makes them more confident, expect better returns, and trade more often than females. (Location 2313)

Although women have less knowledge about the stock market, they take fewer undue risks and rely on successful simple heuristics such as “buy what you know” and “invest equally.” (Location 2315)

This is the same rule, 1/N, that was more successful than Nobel Prize–winning portfolios in stock investments (chapter 5). And it works for children too. (Location 2329)

All in all, parents spent the least time with middle children. (Location 2334)

Moreover, the advantage for the oldest and youngest is the greater the more years the siblings are born apart. (Location 2343)

Medicine today resembles the church in the sixteenth century. What we need is a reformation. Few doctors are trained to judge and evaluate a scientific study. I myself chose to be trained as a surgeon to avoid two things: statistics and psychology. Now I realize that both are indispensable. Guenther Jonitz, president of the Berlin Chamber of Physicians (Location 2410)

happened. Over the course of a few days, six hotels’ stars vanished into thin air. Was this due to annoyed customer complaints on the Internet? Reports of cockroaches scuttling underneath king-sized beds? Or guests electrocuted in the bathtubs? None of this. (Location 2422)

For many years fancy hotels have hosted continuing medical education (CME) conferences, which doctors are required to attend in order to renew their license. All over the world, the pharmaceutical industry organizes such events. (Location 2427)

Returning favors, however, is not what health care should be about. Many doctors appear to swallow the bait. (Location 2433)

This organization issued guidelines that CME should no longer be conducted in luxury hotels, but in other hotels adequate for the purpose. (Location 2438)

stars. CME had become too good a business. Similarly, in the United States, the Loews hotel Lake Las Vegas removed the “resort” from its name to avoid putting off pharmaceutical groups, and other hotels followed suit. (Location 2439)

Some hotels, however, wrongly thought the number of stars was what counts, and decided to play it safe. (Location 2442)

After doctors learned how to translate confusing probabilities into natural frequencies, 87 percent were able to figure out themselves that the best estimate was one in ten (Figure 9-1, bottom). There were also a few “hopeless causes” who still believed that most women with positive tests would have cancer (left side). But even they would have seen the light if we’d had more time. (Location 2490)

Based on this, my estimate is that about 80 percent of doctors do not understand what a positive test means, even in their own specialties. They are in no position to counsel their patients adequately, nor can they critically evaluate a medical journal article in their own field. (Location 2508)

Lack of risk literacy has taken its toxic toll on this woman’s emotional life. (Location 2523)

Roughly one out of every three women ends up getting a false positive result at some point. Someone needs to tell them that a suspicious result likely means that there is something wrong with the test, not with their bodies. (Location 2525)

The first one, which confuses many people, uses conditional probabilities. (Location 2537)

For instance, sensitivity is the probability of getting a positive test if the person has the disease, written as p(test positive|disease). (Location 2539)

you begin with a number of people (here, one thousand women), who are divided into those with and without the condition (breast cancer); these are again broken down into two groups according to the new information (test result). The four numbers at the bottom of the right tree are the four natural frequencies. (Location 2555)

About 10 out of every 1,000 babies have Down syndrome. Of these 10 babies with Down syndrome, 9 will get a positive test result. Of the remaining 990 unaffected babies, about 50 will still have a positive test result. (Location 2602)

Genetic technology will impact our emotions and values. Some parents see genetic optimization as a great possibility and a basic right; others are morally appalled by the thought of designer babies. (Location 2647)

The ethical turmoil arising from genetic screening has attracted much attention. What’s not in the spotlight is that most doctors and patients will not understand the results of this both fascinating and controversial technology. (Location 2652)

I asked the CEO whether his (immensely profitable) company would consider it an ethical responsibility to do something about this key problem. (Location 2684)

When this happens, the health industry may lose the trust of the public, as happened to the banking industry. Surprised by this analogy, the CEO took a short breath before hastily dismissing that possibility. (Location 2687)

the dean of a medical school denied that medical students don’t learn statistical thinking. (Location 2689)

I offered to test his students and to help develop a curriculum ensuring that every young doctor finally understands medical evidence. (Location 2691)

1. practice defensive medicine (Self-defense), 2. do not understand health statistics (Innumeracy), or 3. pursue profit instead of virtue (Conflicts of interest). (Location 2705)

Now people seek care when they are well, and doctors encourage healthy people to be diagnosed and eventually treated. What should one do? 1. Go for regular health check-ups, or 2. Visit a doctor only when it really hurts and then go straightaway. (Location 2792)

If the doctors are syndrome-free and well informed, they will provide you with the evidence: Sixteen studies with a total of 180,000 adults (under 65 years of age) investigated whether regular check-ups decrease cancer mortality, cardiovascular mortality, or total mortality. (Location 2796)

Not visiting a doctor when you’re not feeling palpably sick carries the risk of overlooking something that could be cured early. It’s up to you to decide which strategy is best for you. (Location 2801)

The answer is that when it comes to screening, differences in survival rates don’t tell us anything about differences in mortality rates. (Location 2844)

The first reason is called lead time bias. Imagine two groups of men with invasive prostate cancer. The first consists of men in Britain, where screening for prostate-specific antigens (PSA) is not routinely used and most cancer is diagnosed by symptoms. (Location 2847)

Everyone survived only three years, so the five-year survival is 0 percent. (Location 2851)

Prostate cancer is not a deadly strike out of the blue. In fact, it is highly common. Consider a group of five American men in their fifties. (Location 2884)

the bathroom all the time.” An icon box can save you from incontinence and impotence. We are told again and again that if you find prostate cancer early, your life might be saved. A plausible story, but it’s on shaky ground. The result is the “Great Prostate Mistake,” as Richard J. Ablin, the man who discovered the prostate specific antigen (PSA), has called it. He condemned PSA screening and the business made with his discovery:12 Testing should absolutely not be deployed to screen the entire population of men over the age of 50, the outcome pushed by those who stand to profit. I never dreamed that my discovery four decades ago would lead to such a profit-driven public health disaster. The medical community must confront reality and stop the inappropriate use of PSA screening. Doing so would save billions of dollars and rescue millions of men from unnecessary, debilitating treatments. PSA tests may be useful for diagnostic purposes, such as after surgery, but not for screening. (Location 2951)

In addition, almost half of the U.S. doctors falsely believed that detecting more cancers proves that lives are saved. Under the influence of their confusion, they would recommend screening to patients. To change this to the better, icon boxes should be standard when doctors talk with patients about medical procedures. (Location 3022)

The first consists of true believers in screening who don’t want to see the scientific evidence or don’t understand it. (Location 3039)

The second group is commercially motivated and has a business plan that puts patients at risk for unnecessary treatments. (Location 3040)

We at Emory have figured out that if we screen 1,000 men at the North Lake Mall this coming Saturday, we could bill Medicare and insurance companies for $4.9 million in health care costs [for biopsies, tests, prostatectomies, etc.]. (Location 3045)

we get when he comes to Emory’s emergency room when he gets chest pain because we screened him three years ago. . (Location 3048)

And across all Western countries, women are still often treated like children: told what to do, but not given the facts needed for an informed decision. A delicate pink health leaflet by the Arkansas Foundation for Medical Care explains:20 (Location 3064)

women get zero information in the rest of this leaflet about benefits and harms that would let them make up their own minds. Instead they are told to tell every other woman to do what they were told to do: “That’s why you should ask your mothers, sisters, daughters, grandmothers, aunts, and friends to have mammograms, too.” (Location 3068)

First, is there evidence that mammography screening reduces my chance of dying from breast cancer? The answer is yes. (Location 3076)

Second, is there evidence that mammography screening reduces my chance of dying from any kind of cancer, including breast cancer? (Location 3080)

In plain words, there is no evidence that mammography saves lives. One less woman in a thousand dies with the diagnosis breast cancer, but one more dies with another cancer diagnosis. (Location 3082)

Second, women who do have breast cancer, but a nonprogressive or slowly growing form that they would never have noticed during their lifetimes, often undergo lumpectomy, mastectomy, toxic chemotherapy, or other interventions that have no benefit for them, leading only to a lower quality of life. (Location 3094)

more serious consequences of chemotherapy can include long-term fatigue, premature menopause, and heart damage. (Location 3097)

For instance, a few women might get cancer from the X-rays; crude estimates are between one and five in ten thousand. (Location 3105)

The writer Barbara Ehrenreich expressed her unhappiness about the infantilizing breast-cancer industry with its pink ribbons, teddy bears, and relentless cheerfulness. (Location 3121)

The belief in the benefits of screening is so firmly entrenched that few women are willing to consider the medical evidence that suggests otherwise. And when they do ask, many are taken in with just four tricks. You will recognize these by now. (Location 3126)

Only early detection prevents women from dying of breast cancer. In rich countries, where screening is common, detection is early, so treatment is more effective. The probability of five-year survival after early-state diagnosis is 98 percent. (Location 3140)

high survival rates don’t tell us anything about whether or not lives are saved. It is painful to see Trick #3 used by the dean of the Harvard School of Public Health, who should know better. The proper Figure would be an absolute risk reduction of one in one thousand, as shown in the fact box. (Location 3143)

Isn’t the fact that mortality rates decline over the years proof that screening works? No, the proof is in randomized trials (see icon and fact boxes). For instance, the mortality rates for stomach cancer have declined since the 1930s in Western countries without any screening. The reason is probably the invention of refrigeration and other improved methods of food preservation. (Location 3219)

Wouldn’t I be best off by screening for all cancers? No, you wouldn’t, because some lead to more harm than gain. For instance, the U.S. Preventive Services Task Force explicitly recommends against screening for cancers of the prostate, lungs, pancreas, ovaries, bladder, and thyroid. Pap smear screening for cervical cancer, in contrast, appears to save lives; this has not yet been tested in a randomized trial. (Location 3228)

Equally alarming, an analysis of fifty-three “landmark” publications in top journals on cancer drugs revealed that the positive effects of most (forty-seven) studies could not be replicated. (Location 3252)

The answer is that out of every one thousand women who took tamoxifen for five years, seventeen developed invasive breast cancer, compared to thirty-three who took a sugar pill. That is, sixteen fewer women developed breast cancer. (Location 3266)

were five additional cases of blood clots in their legs or lungs, and six more women got invasive uterine cancer. (Location 3269)

About half of all cancers have their roots in behavior. This means that changes in lifestyle and the environment can save up to half of all people who would have otherwise developed cancer. The potential is best illustrated by the fact that immigrants tend to get the local cancer of the country they move to. For example, Japanese in Osaka are much less likely than Americans (Hawaiian Caucasians) to get prostate and breast cancer, but the moment they migrate to Hawaii, the gap narrows substantially (Location 3275)

Ensure that body weight is not too far off the normal body mass index (BMI), most importantly throughout childhood and adolescence. The BMI is a rough measure of whether someone is too heavy for good health. (Location 3317)

Salt and salt-preserved food are probably causes of stomach cancer. The strong decline of stomach cancer in the Western World during the twentieth century is likely a consequence of refrigerators, not of screening or cancer drugs. (Location 3339)

Supplements might have unexpected adverse effects causing cancer. Supplements are only needed for people who have diseases that make it difficult to absorb naturally occurring vitamins. (Location 3343)

Use CTs and other sources of radiation more prudently and only consent to scans absolutely necessary to establish a diagnosis or plan of action, not just to be safe. When the doctor says, “let’s just see what the CT shows to be sure that your child is OK,” remember the SIC syndrome and your unique responsibility as a parent. (Location 3363)

What you will likely see when you pop your head back out is more bureaucracy, more technology, and less individual freedom. What you will likely not see are more competent citizens who have learned to deal with uncertainty. (Location 3387)

Is there a simple solution to a complex problem? In other words, is there something akin to a gaze heuristic or 1/N that solves a problem faster, better, and safer? (Location 3389)

They borrow money from those who don’t need it in exchange for some interest, and lend the money to those who need it at a higher rate. (Location 3391)

Without banks, wealth would grow much more slowly. The cozy atmosphere of traditional banking—checking accounts, bank transfers, credit cards, the ATM—is captured by the 3-6-3 business model: (Location 3393)

As we will see, Andersen’s tale is of timely relevance. Today, bankers weave intricate, magnificent fabrics called “risk models” that promise safety that doesn’t exist. These new clothes are said to measure risk precisely. (Location 3413)

This agreement was 30 pages long and the calculations could be done with paper and pen. (Location 3416)

I have asked central bank regulators: Who understands the consequences of Basel III? Their unanimous answer was probably not a soul. (Location 3421)

Finance mathematics has its roots in games of chance; that is, in known risks. (Location 3425)

In 2012 JPMorgan Chase lost billions even though their value at risk predicted very small risks. (Location 3429)

In 2003 Robert Lucas, probably the most distinguished macroeconomist, said that macroeconomics has succeeded to prevent economic disaster: “Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.”5 Five years later, the world was shaken by the sharpest financial crisis since the Great Depression. (Location 3433)

low uncertainty: the world is stable and predictable, few alternatives: not too many risk factors have to be estimated, and high amount of data available to make these estimations. (Location 3437)

Don’t use leverage ratios above 10:1. (Location 3457)

Leverage increases potential gains, but also losses. It applies not only to banks, but to individuals as well. Here is a simplified example. Adam and Betty both guess that the housing market is on the upswing and buy rental houses to sell them in five years. Each has $100,000 to invest. (Location 3459)

In the same way, banks not only invest the money they have, but money borrowed from others as well. (Location 3468)

The safest banking system would be one with zero leverage, although some degree of leverage can be crucial for growth. (Location 3469)

net. Canadian banks survived the credit crunch relatively well because they were restrained by leverage ratios and had tougher lending requirements. (Location 3473)

The next argument is that a simple rule, like leverage, could be easily exploited. The fact is that complex rules have been gamed by banks, and more complexity makes it easier to find loopholes and twist the thousands of estimates. (Location 3489)

The third, a familiar mantra, is “A dollar in capital is one less dollar working in the economy.”10 Don’t fall for this trick with the term “capital.” (Location 3492)

Capital can be put into the economy, just as anyone’s capital can be put into a house; it’s not a reserve tucked underneath a pillow. (Location 3494)

They thought, “There is a small chance that it will go wrong, but if it does, all banks are in trouble and they’ll have to bail us out.” In other words, profits are pocketed by executives, and losses are compensated by taxpayers. That is not exactly a free market—it’s a moral hazard. (Location 3507)

large banks no longer live in an ecosystem where the Darwinian survival of the fittest reigns. Banking has become about survival of the fattest. (Location 3509)

Make sure that those who enjoy the benefits when times are good also bear the costs of periodic financial crises. (Location 3512)

You do not need a background in finance to understand the difference between known risks and unknown risks—or to recognize that the belief that risks can be precisely measured in an uncertain world amounts to an illusion of certainty. (Location 3518)

Worst-case scenarios fuel the anxieties of voters and viewers. One trick is to exploit people’s fear of dread risks and increase sales by painting horrific disasters in the headlines, real and imagined. The rise and fall of each is quite similar. (Location 3531)

It is similar to mad cow disease. In the mid-1990s, a new variant of CJD was reported in ten younger adults. (Location 3554)

It was later confirmed that there was no evidence that Tamiflu protects people against the deadly consequences, as had been assumed.15 All that Tamiflu can do is reduce the average time of flu from five to four days, which is what the FDA had concluded earlier. (Location 3595)

A large number of the experts advising the WHO had financial ties to the pharmaceutical firms that produce the drugs. (Location 3599)

Be transparent about the uncertainty, make comparisons with known risks, and explain what can be done. At (Location 3610)

After my talk, the staff members left the lecture room more relaxed than when they’d come in. Laying out the uncertainty hadn’t made them nervous or unhappy. (Location 3625)

The more the media report on a health risk, the smaller the danger for you. (Location 3631)

Why are governments so eager to protect their citizens against dread risks, from cows to swine, and so hesitant to protect the very same people against the risks of financial disaster from investment banking? It should certainly be easier to control banks than viruses. (Location 3637)

down. While other tourists went for the fish flopping on the sand, she said, “Mummy, we must get off the beach now. I think there is going to be a tsunami.” (Location 3656)

Billions are invested in the development of tsunami warning systems, which is a good thing. But technology alone will not help. (Location 3660)

Statistical thinking Rules of thumb Psychology of risk (Location 3681)

When I proposed that they could if given information in natural frequencies, some teachers found it a ludicrous thought, since children ten years or younger have not yet learned proportions or percentages. (Location 3691)

In other words, we teach them the mathematics of certainty, not of uncertainty; that is, statistical thinking. (Location 3729)

Training in abstract disciplines such as algebra and geometry has been claimed to improve thinking and problem-solving skills. If that were true, we would not have so many doctors who do not understand health statistics or lawyers who do not understand DNA evidence. (Location 3730)

This suggests that if we want a new generation capable of solving the problems ahead, we’d better teach them the necessary cognitive skills rather than abstract principles. (Location 3734)

The Roman statesman Seneca, who was Nero’s tutor, said some two thousand years ago, “Non vitae, sed scholae discimus.” We don’t learn for life, but for school. (Location 3745)

Children first memorize, then pass the test, and finally forget. The cycle repeats itself over and over again at school and on throughout college. (Location 3746)

A new breed of corporate-world managers assume that business plans are the road toward better schools, replacing experienced teachers by less experienced ones with lower salaries or by online instruction, or by paying teachers according to the average test scores of their pupils. (Location 3749)

Very few universities are permitted to train teachers, and admission to these elite programs is highly competitive: (Location 3752)

They have a wide choice of what to teach and would refuse to prepare students for standardized tests. (Location 3755)

Hire well and let them do their jobs. (Location 3760)

An estimated 50 percent of all cancers are due to behavior: smoking, obesity, alcohol abuse, eating fast food, lack of physical activity, and unnecessary CT scans. (Location 3774)

The bank charges twelve percent interest on the total debt, adding up to $360 every year. The customer pays $30 per month, which amounts to $360 per year. (Location 3808)

The young were as clueless as the old; the sole difference was found in TV consumption. For every hour in front of the television per day, people were less likely to know the answer. (Location 3810)

Many of the NINJAs (no income, no job, no assets) who lost everything but the shirts on their backs in the subprime crisis didn’t realize that their interest rates were variable, not fixed, and their initial low rates only teasers. (Location 3813)

We “outsource” search, memory, and other cognitive capacities. Most of us can no longer recall long poems or stories, just as we have lost the ability to do mental calculation since the advent of the pocket calculator. (Location 3888)

I began this book with the observation that when things go wrong, we are told that we need better technology, more laws, and bigger bureaucracy. One idea is absent from that list: risk-savvy citizens. Instead, paternalism is seen as the solution. (Location 3894)