Latest / Art of the Question / The Science of Decision Making - Prof. Gerd Gigerenzer - #27

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The Science of Decision Making - Prof. Gerd Gigerenzer - #27 · Art of the Question

• Julius Moorman: You've been studying rationality for for such a long time. ⁓ how did you first get interested in the topic and why? No. I got interested because I was observing myself about making decisions. So I was curious. How do you do that? And what I learned in at the university was quite different from what I observed at People did, or I did. So ⁓ what did I learn? ⁓ maximizing expected utility, hm? Bayesian probability updating, logic. Beautiful systems. And sometimes you could use them, but for most real world decision making no. So for instance, I in a former career I was a musician. And ⁓ tw was about a dozen years on the stage until I was facing my ⁓ dissertation defense and had to make up my mind what I'm going to do with the rest of my my life. So should I stay on the stage or ⁓ try an academic career? Hmm. And that's lots of uncertainty because in I did not know about the academic career. I yeah. I did a bit teaching at the University of Munich, but then ⁓ that was a big risk for me, because I couldn't know whether I will ever make it. And music was the safe thing, yeah, because and also earned much more money on the stage than as an assistant professor. And ⁓ so I took the risk and tried the academic career. But I didn't do any calculations about all the possible consequences. How could I know that in the future? And ⁓ all the ⁓ all the probabilities. So it was heuristic decision making. You think about what really matters for you and go with it. Right. And that's that's so interesting because I've made a similar decision in my life. I started out my career as a tax lawyer. I studied tax law. I worked at the at Deloitte for a couple years ⁓ as an international tax advisor. ⁓ but I was very unhappy there. I I knew I wanted something else in my life, ⁓ and I wanted to do something more creative. And ⁓ I knew that I really enjoyed writing, which was part of my job as a tax lawyer, but of course in a very different way. So one day I decided I wanna become a journalist and I wanna write stories and I wanna have interesting conversations with people, right? But of course, going into this new journey as a journalist, of course, I had a similar experience. Will this work? Will I even get hired as a journalist? Because I had no published work. ⁓ and also it turned out to be pretty difficult to get my first job. Of course, after you land your first job, it was a little easier. ⁓ but I had a similar experience in the sense that I was making good money. I knew what was expected of me, but I quit that life in order to pursue something that was uncertain, but I knew deep down would make me a lot happier. So I really resonate with your with your story there. Why do you think ⁓ that is that we that we still made those decision ev decisions even though if you were to draw it out ⁓ maybe on paper it would have been smarter to to stay the course. Yeah. There's a distinction between situations where you can calculate the risk and those where it can't. The latter are called uncertainty. So when I was facing the decision, stay on the stage, do music, ⁓ I could not know that the entire a huge business of yeah bands was basically falling apart due to technology being more and more replaced by now ⁓ by artificial systems. ⁓ and so that's just one a one idea that ⁓ you don't know what the future brings. And we have to face that. You have to face the uncertainty rather than pretend I can do a calculation and that would be the better thing to do. And in that situation like you, ⁓ you are feeling that do something different with your life. And it may be more satisfying, but but you couldn't know nor could I. So you have to bet. And that's part of it. Courage, take risks and you live only once. Yeah. And and what is it that you learned in school specifically that you disagreed with based on your personal experiences? So I studied statistics, I studied probability theory, and I love these systems, but they have a limited application. You basically need a stable world. So if the statistics from yesterday should be ⁓ informative for what's happening tomorrow. The world needs to be stable. Otherwise you better forget the number. Yeah. And and so there's a distinction ⁓ between situations that are uncertain, and uncertainty can be because things are changing. Like in COVID nineteen times. There was no way to predict where the virus is going and and and situations where the world is stable. So if you play ⁓ the roulette at a casino, don't nothing new can ever happen. It's always a number between zero and thirty six. No thirty seven can happen. In real life Thirty sevens happen. Yeah. So so so that is something ⁓ that ⁓ w was it was it what you what you learned about that the the world was actually viewed as something that was predictable, ⁓ whereas in real life the world is more chaotic and and ⁓ b ⁓ black swan events can happen? Yeah. So mm the some Parts of our world are fairly predictable and others are not. That's the big difference. So that means ⁓ that you can use ⁓ standard tools like probability tools, logic for some problems, but not for all. That's the big th thing. It's very simple, but many Smart people think there would be one tool for everything. It's a big dream. I think of a toolbox. We need more than one. And and uncertainty we need simple tools that are robust that it's like focusing on important thing and ignoring the rest. Ignoring is essential. And it should be clear in our world where there's so much information, we cannot read everything. It's the art of ignoring. Finding out where it pays what it pays to read and whatnot. Yeah. And and it that reminds me of of something you you wrote about ⁓ about intuition and ⁓ that sometimes when we are presented with more information that can lead to worse decisions. why do you think that is? No. So let me first define what intuition is. Yes, that's a good starting point. It's a form of unconscious intelligence. So it is a feeling that has three properties. First, it is based on long term experience, so years of experience. Second, ⁓ you feel suddenly What he should do or what he should not do. But third, you can't explain it why you have this feeling. So example, ⁓ if a doctor who knows you well ⁓ thinks today something is different with you. That's an intuition. It's based on long year experience, the doctor, and it's suddenly there and the doctor doesn't know why he or she has this experience. What does a good doctor do? Diagnostics. So that teaches us that intuition is not the opposite of deliberate reasoning as it's often presented in psychology. They are not intuition and reasoning are not opposites. They are like a couple husband and wife who need to work together. In that case, the intuition was first, and without the intuition, so an unexperienced doctor for instance, there would be not Diagnostics. ⁓ it also ⁓ teaches us that intuition is not something arbitrary or ⁓ sixth sense or God's voice, and also not something that only women have. Everyone who has experience with a topic is growing and getting getting better intuitive. So but we live in a society where In certain parts intuition is looked down as something suspicious. And that's not ⁓ you find that in the big ⁓ companies through large corporations. But you find that also in ⁓ in in parts of behavioral economics where ⁓ intuition and reasoning is opposed as kind of two systems and then ⁓ but if something goes wrong, it's the intuition. And so ⁓ so it's very strange and there are other areas of our world where intuition is praised like in sports right we have a nose for hmm and or Einstein in science we wouldn't get nowhere without intuition and the ⁓ Einstein was ⁓ famously said that the intuitive spirit is a ⁓ is a gift and the ⁓ rational deliberate spirit is its servant And we have created a society, he continued, that ⁓ praises discernment and has forgotten about the gift. It still holds today. Yeah, maybe even more so today than ⁓ when Einstein was still alive. I feel we are ⁓ yeah, more and more Trying to have control over our daily lives and sometimes feel like intuition is a bit scary. ⁓ d do you think that we we wanna be in control and that's maybe why intuition kind of has a bad reputation? Yeah. There are several reasons. ⁓ the control is s it's also, yes, control, but it's more an illusion that it's the The deceit that we would be in control. Just just think for a moment. ⁓ What our body does, huh most of us have no idea. And certainly it's better that we're not in control. Trying to to to control the heartbeat or the digestive systems. So same thing. The the way we perceive the world, hmm? That's an inference based on on a mixture between evolution and heuristics. So we have little to say about that. So our conscious is ⁓ it's a great gift, yes, but ⁓ we should not think that it ⁓ has much of control about water. So there's a famous saying that ⁓ if ⁓ What it can some like if ⁓ if the heart would think it would stop beating So yes, so that's one reason. It's a lack of insight. That much of the important functions that keep us alive, including that those who make us desire some things we have never chosen. And specifically there is a a bias towards ⁓ giving reasons for decisions. So if you can't give a reason according to some parts of our society, then ⁓ it cannot be a good decision. And ⁓ I've seen it in lo working with large corporations. where there is ⁓ lots of fear about admitting intuitive decision making, despite their doing it all the time. And then it's much better to make a bad decision that brings the company down, but have a good reason for it. Rather than to make a great decision and say, ⁓ it was gut filling. But that's the world in which we live. No, it's it's very true. And I believe there's a saying ⁓ nobody ever got fired for hiring KPMG or or or Deloitte, ⁓ because people f yeah, it's it's scary to come up with your own ideas. So you see it in corporate life all the time. We hire these very expensive consultants, ⁓ because that's what yeah, the the what the the the logical thing to do. They have all the expertise. ⁓ because if they mess up you can say like, yeah, it was it was KPMG's fault or it was Deloitte's fault. And ⁓ yeah, at least you made a a rational decision by by hiring the the the expertise firm and maybe if they would have made the the the instinctive decision within their own business that they're a part of, ⁓ they they ⁓ may have made a better decision overall. Yeah. No, I'm glad to hear this because you you have been in this world, huh? I've been also I've been studying this world and I can tell you that I worked with a number of large international corporations and ⁓ when I asked the ⁓ decision makers so so the managers into the executive board, huh, how often is a important decision that you make alone or in a group at the end? A gut decision. Emphasis on the end, because you of course you go first through the data, but data doesn't always tell you what you should do. So ⁓ what do you think, based on your experience, what the aims are? So out of the last ten important decisions you were part, how many were at the end? A gut decision? So on average across a number of corporations from ⁓ the automotive sector to the ⁓ in other industries, so they would say fifty percent of all decisions are at the end a gut decision. But it would never admit that in public because there's fear. If you would say that, huh? I looked We looked through all the data, but the data was ambiguous, so ⁓ I felt that we shouldn't do that. That's my cut decision. Find the executive who dares to do this. Rather ⁓ because of for fear of taking over responsibility, they are asking a manager to find reasons after the fact that delays it for a week or two, or then what you mentioned. Hire a consulting firm which delays the entire process for months, costs money, wastes the intelligence of the young, excellent people at consulting firms who not always understand what game is being played. And then at the end, the consulting firm will ⁓ provide the reasons for the gut decision. I once worked with one of the largest consulting firms of the world, should be unnamed, and asked the principal whether he would be willing to tell me how many of their customer contacts involve ⁓ justifying after the fact already taken decisions. He said to me, Professor Gigransa, if you do not mention my name, I tell you it's over fifty percent. And you can see what a waste of time, of money, of intelligence for hiding God decision, not admitting to them. And then but it's it's good for the consulting co ⁓ companies, huh? That's their business. Yeah. Yeah, no, it sure is. And and that fifty percent number you you raised there, could it even be higher than fifty percent? Because I think we may have a very different that often we go about our day, go about our lives. and maybe the majority of our decisions, maybe eighty to ninety percent of our decisions are made intuitively, but when someone will ask us like, Hey, why did you grab that certain ⁓ brand of ⁓ Cheerios at the supermarket, we will say, ⁓ because ⁓ yeah it it has the best flavor and ⁓ it was a it was a good deal because ⁓ you get more and it is nutritional value. We c after the fact we when we are asked, we come up with all the rational decision making we've did But maybe in the heat of the moment we just recognize the packaging. So could it be higher than fifty percent? It it could be higher. And that are that were the self reports of the managers and executives. Yes. It is also ⁓ the another consequence beside ⁓ hiring consulting companies to ⁓ justify already decisions after the fact. And there is another response I've observed in big companies in ⁓ hiding ⁓ decision making and also getting rid of responsibility. That's ⁓ part of the game, huh? ⁓ which is I call this defensive decision making. Defensive decision making means that a manager thinks option A is the best for the company, but deliberately pursues a second class option B. Why would they do that? It's it's ⁓ it's it's easier to explain. Yeah, and also it ⁓ so good options for a company are often innovative options, risky options that nobody else tried, yeah, and they may go wrong. And then you might say, ⁓ if something goes wrong, then it's me who is responsible. But if I go with the second option, which the others already are doing, ⁓ I'm safe. And defensive decision decision making is ⁓ so in in my studies with large companies, ⁓ you only get this by anonymous decisions or ⁓ y using a person that is high in the hierarchy, that is trust of the others. So the typical company would say, Thirty to forty percent of our decisions are defensive. That is, ⁓ including the CEOs. ⁓ so some of the CEOs, yeah. Would that means they are deliberately pursuing a second best option in order to protect themselves. That's that's ⁓ that's a that's a crazy number and it's a shame. I I hear it reminds me of this quote I once heard. I don't know who's ⁓ who said it first, but it was something along the lines of in an ever-changing world, the only decision that is doomed to ⁓ to fail is ⁓ the one not to change or to or to to to keep doing the same thing basically. Yeah. There are a number of votes of this thing s in in this way that ⁓ the greatest risks are taken by people who want to avoid all risks. Yeah. And and d do you do you think humans even though we often act based on our intuition and intuition is is highly personal. ⁓ do you think humans ⁓ are still predictable in in some ways? Or that are that that that can be anticipated by mareteers or or other people that that may want to exploit our predictability? yes ⁓ humans are always to some degree predictable although they provide a huge problem for AI, so predictive AI, not generative AI. And and all attempts to for instance to predict ⁓ visitivism, so in the US days, ⁓ the judges use ⁓ AI systems that ⁓ give you a risk factor for if you a defendant, whether you turn up an in court or whether you commit another crime. And these these systems they all fail. They meaning there's no evidence that they do better than very simple ⁓ strategies, but they are marketed. And in part they're used for the same reasons as in the big companies. If how can the judge know what whether the defendant will ⁓ commit another crime if They are left out. And then there is this yeah, this machine, they give you a number. And even if the judge's intuition is ⁓ c let ⁓ go free, the number is a little bit big on the risk side, then some judges may well get on the safe side and decide against their own intuition. Although there's evidence that this machines really their predictive power is better than chance. So are are are we are we using those pr predictive AI machines ⁓ for for what what are some of of examples of those? ⁓ for instance ⁓ in in courts one of the most ⁓ well known systems is called Compass and it has been used for more than a million court decisions in the US. So used means that the judge is given a number. What the judge then do we do not know. But as I said before, it's quite likely that in case there's a discrepancy between the church's own judgment and the AI, judges will be influenced for the same reason as managers are influenced. And the ⁓ there's a huge industry. Another ⁓ related business is predictive policing. So that's the idea that you predict where the next crime will happen and when and by whom. Yeah that sounds that sounds pretty problematic from ⁓ from an ethical and and legal ⁓ perspective. Yeah That's the other thing. ⁓ the the movies, yeah? Well, you're basically arrested before you even commit the crime. Wouldn't it be the great, huh? Yeah, that was what was a movie. There's a famous movie that plays into this. I I I I forgot the name, but it's a pretty pretty well known ⁓ well known movie. But no, it's very interesting. And Well if we if we talk about r go back to to to rationality ⁓ for a second. how how do you define rationality and and do you think we humans are are rational creatures? Yeah. ⁓ the definition is ⁓ is essential. Yeah. So one standard definition that's used today is what I call logical rationality. That means You are rational if you follow the consistency axioms, like being transitive, and which then ⁓ allow a utility representation. So if you maximize your expected utility, and if you haven't the right information, then you may need to do Bayesian updating. So and there are many ⁓ related forms like Nash equilibrium and so on. The common denominator is that They are basically consistency requirements. So if you think ⁓ or act one way, then it follows that you need to act in a consistent way. So like trendy idea. That is ⁓ probably today the dominant version. Note that it doesn't tell you whether your opinion or actions are are true or correspond to the world. You just need to be consistent. You can have the most weirdest ideas it's just consistent. It also doesn't tell you anything about whether it's moral. And so it misses many aspects that are usually connected with the term rationality. ⁓ In my own research, I ⁓ focus a on a concept that I call ecological rationality, not logical rationality. That means it's a study of how human behaviour, choice and thinking ⁓ matches with the environment, with the world outside, so not just whether it's consistent. And ⁓ that is of ⁓ that's based on ideas for instance of Herbert Simon, who is known both as one of the founders of AI and also a no laureate in economics and Bounded rationale is often misunderstood as irrationality. What Simon Mainz ⁓ meant is ⁓ bounded rational has two bounds. The one bounds are in the mind, yeah. We have a limited memory, we forget and other things, and the others are in the environment. Most environments do not allow for optimization. There's uncertainty, unpredictability. So We need ⁓ to observe how humans deal with this world and he called this satisfising as opposed to optimizing. Satisfising is a term that from Northumbria ⁓ and ⁓ which basically means to satisfy, to take a decision that's good enough. You have an aspiration level that you want to achieve. And if you ha have it if you got there Then you go to the next decision, yeah, rather than trying to spend endless time on finding the best if you can find it. And in intractable problems, which are most of the problems we have, you cannot find the best thing. It makes no sense to s to talk about a chess player that ⁓ they would optimize, that would do the optimal move. No. Chess is intractable. There's no optimal way. I mean, there is actually an optimal way, but no computer and no human can find it. So we have to satisfy some. It's a different philosophy. Yeah. And ⁓ it it also kind of reminds me of ⁓ for example, blackjack. ⁓ there is a a perfect way to to play blackjack that you can ⁓ make a profit from it if you have a perfect memory too ⁓ which allows you to count all the cards so you can know which cards are still in the deck. ⁓ but most people don't know how to count cards simply because they don't have as good of a a memory and therefore they might think that they're playing rationally but really they're they're they're they're not. Is that something Yeah, do you agree that the the similarities there? Yes. ⁓ black check is an interesting case, because certainly ⁓ the player at the moment on the table cannot ca do the calculations. There ⁓ are some basic rules in black check, huh? But they're all too complicated. And the the other way would be to study how players actually do it if they cannot find the optimal ⁓ solution and that's there are a study. Colleagues of mine and former students of mine have studied black check. They're amazingly simple heuristics they can do quite well. For instance, the simplest one I know is ⁓ so in blackjack you have to decide whether take another card or not. Mm-hmm. Mm-hmm. So do not get over twenty one. Yeah. And the simple heuristic is assume the next card would be ten, of value ten. Totally unrealistic, but it does amazingly well. That's an example example and there are studies about that. And ⁓ the the examples in many parts of our world we can exploit intractability here with with very simple heuristics. And in business you find it again and again, yeah. Successful businesses usually have copied another business and then went from there. The Chinese, yeah, industrial revolution has done the same. Copying, copying the West copying, and now they are buying off. Mm, with our second best decision and trying to to to the the not take responsibility and hiring consulting companies. And and it's ⁓ that is ⁓ that stops innovation, what we are really doing. And it's it's no accident I think that no big ⁓ bank has invented PayPal. And no big media conglomerate has invented Google. It were all smart ⁓ small businesses and when they grow they tend to become no longer very innovative for the same reason. Defend yourself it's about other things. Keep your possession. Yeah, it's is is that something ⁓ companies or or people can can take into account to ⁓ prevent themselves from from not being creative anymore? And and are there ways to to enforce ecological rationality within one's firm or within one's life to make sure that they keep innovating? Yeah. So ⁓ I can give you examples from my own research group with the Max Planck Society. And that is consisted of some thirty-five or so researchers plus students and staff. So and the the danger is always to you to end up with ⁓ very excellent but normal research that is Easy to publish but not innovative. So ⁓ the measures I took is first ⁓ the to have in my group always at least one contrarian. A contrarian is a person who has no fear to contradict their boss, me in that case, huh? In a actual but respectable way. So and the moment you implement such a style, a discussion style, in your own group, that people are not shy, saying, Gerd, I think you have no good arguments for that possession. That keeps my thinking alive. So that's one way to help ⁓ and ⁓ stop to end up in a in a kind of society where it's totally hierarchical and and the arguments don't count anymore. So always have a contrarian. And ⁓ when I ⁓ was asked by ⁓ the an American journal to write the Times ⁓ ⁓ to write about ⁓ the ⁓ these kind of measures, the contrarian. In order to start with a good story, I ⁓ wrote to all my previous ⁓ researchers and these are more than hundreds and about the issue, what I remember, and to my surprise it turned out that Almost all of them believed they were the contrarian. And one even wrote me Gerd, you were the contrarian in our group. So that's that's interesting. So people seem to to think that they are the the the original thinker, the one that is ⁓ going going against the grain. but yeah Probably in practice, ⁓ a lot of people, especially in hierarchical situations, are probably afraid to to stand up. I believe ⁓ many people will know the feeling of ⁓ hearing something in a group discussion and then knowing in their gut that they have a different opinion on it, but that they just swallow their instinct because they don't really feel like confronting the other person about it. Right. And that our systems Which are not very innovative. They're hierarchical where everyone keeps his or her own seat and position, but they're not functioning anymore. And it's a task of the leaders and the structure to change that. Like ⁓ just hiring people who for instance, when ⁓ we're we hired every every year ⁓ maybe three to six postdocs. And there were usually more than a hundred applications. And I was looking always for those who were interested in our research. That's clear. But I would prefer those who were criticizing our research. That's where you learn from that. But you move on. If you take the Personally, yeah, that's the end of science. Yeah. I maybe also ⁓ like similar ⁓ but it can be useful to introduce if you're trying to solve a problem, maybe it's in your business or or something personal, but to get an outsider. So because outsiders are don't have the same biases that ⁓ many people from certain indust industries do. I yeah, I re I remember when I worked at the Dutch News that often when I ⁓ was pitching a story, some of the colleagues would find it an interesting way of doing it because ⁓ it wasn't ⁓ a story that was like perfectly aligned with the journalism school, journalism background, but ⁓ at least in that case they they told me it was ⁓ refreshing to to have this new perspective on things and I can imagine that it could also help to ⁓ yeah if you're trying to solve something to to introduce a person total outsider outsider to to get a a new perspective an unbiased one. You're correct, yeah. If ⁓ the the institution who hires the outsider really wants to get better. And then but ⁓ as we talked before, in many cases you hire an outsider and consulting firm True. No, so there's a there's a difference between hiring an outsider to justify your own ⁓ gut feeling and and ⁓ hiring an actual outsider who is allowed to to criticize the the thing that you're ⁓ doing. ⁓ is is the ⁓ ecological rationality that that you c came up with ⁓ was that a result of the ⁓ very public debate you've had with Kahneman that went on for for a couple of decades? And if so, what was that ⁓ debate actually about and and where did you agree and where did you disagree? Yeah. So the ⁓ you're right. ⁓ I have a ⁓ a long debate. I had a long debate with Stanik Danny Kahneman and the the ecological rationality notion came out from Herbert Simon and was different. So ⁓ the ⁓ let's make it simpler, Danny Kahneman and the Hu Amos Versky and the Heuristics and Biases Program that Funded ⁓ is often seen as a critique of neoclassical economics. It is only a critique insofar that they were showing that people did not follow the logical rationality yeah that they ascribed to ⁓ neoclassical economics which is not always in this way. But they were more faithful than most economists about the normative power of the neoclassical economic framework. So expected utility maximization, ⁓ Bayesian updating or just simple rules and the and then when there is a discrepancy between what people did and what logic or probability theory prescribed, the blame was always on the people, never on the theory. And here I disagree. ⁓ probability theory has its value, but it's not a guide to life everywhere. It certainly doesn't work in situations of intractability we talked about or uncertainty. In the world of management you cannot calculate the best options. You have to take bets, courage and take risks. So ⁓ so there is a difference between the normative possession. And the my other interest is the descriptive. So how do people actually ⁓ deal with uncertainty. And Danny Kahneman had also ⁓ tried to to come up with heuristics like availability or representativeness, but they were basically undefined terms. The advantages they can explain almost everything. And while we were making formal model of heuristics that can be simulated on the computer and for the first time showed That this heuristics actually can beat so-called rational models in in in that. And that was one of the things. Excuse me for a moment. Yeah, no worries. Back to ⁓ the ⁓ Kahneman. By the way, for you and those who are interested in learning more deeply ⁓ the inside of this controversy, I have published a ⁓ an article. in the Erasmus Journal for Philosophy and Economics in twenty twenty five, which is titled The Legacy of Daniel Kahneman, a personal view. And here I've tried to do him justice and also our differences. And ⁓ Kahneman has tried to respond to my position, huh? in many ways. So for instance, back in the nineteen nineties, he invited me twice to come to Berkeley where he was a professor, to give a talk, ⁓ criticizing not his person, the ideas. Some of the ideas. Basically the normative position he has, yeah. And and encouraging him to move further, to move away from this logical stand that that he usually had. we and he was asking for having a ten minute reply to my talk. And we did this in the psychology department. He had his reply, I replied to him, and then he invited me again for the cognitive science ⁓ department to the big conference in in Berkeley. ⁓ we did the same and we d had the same spiel in ⁓ at the judgment decision making company. So there was an active interaction, real ⁓ an attempt from both sides to move on the field. And ⁓ but I'm not sure I was very successful with him. And in that paper, the Erasmus Journal for Philosophy and Economics asked me after Danny died to write something. I said, I'm not going to write something now. Because this is the time where everyone praises Damies ideas and Amos' ideas. And I have a different view about that, huh? And let me wait for a year. And then I wrote that. And it's ⁓ I'm trying to give credit to what they ⁓ did. They they ⁓ got the terms of heuristics and also decision making, huh? Back on the table. in psychology, which were mostly forgotten. And that certainly they're that would serve what I was criticizing is that didn't make this heuristics any precise, so that you could actually see when they work, when they're not work. That's the ecological rationality point. And also they kept sticking on the old yeah ⁓ norms of ⁓ logic and probability. And there's an alternative to that. That's the ecological rationality work, which gives people more credit. So ⁓ in the heuristic and biases view, heuristics are pictured negative, they're associated with biases, and we are pictured negatively, because we have this strange works, we ignore information And in our mind and so on. And I try to show when ignoring is a good thing and when not. That's the key difference between the approaches. And and w when is that? Hmm? And and ⁓ w w when would it be good to ignore and when wouldn't it be good to ignore ⁓ that? Yeah. If in every situation that's intractable or uncertainty, you have to ignore information. It's that's an illusion. that you wouldn't have to. And the question is only which to ignore. In the textbook problems that Amos Tworskin Danicana constructed, there is very little information given. And and ⁓ it's basically all situations where you know or they thought they knew ⁓ what the only right answer is. So that's not uncertainty. So you can see this is called risk. So but can you can see the difference if you're given a problem where someone knows the right answer, that's not answered. But if you're given a problem, like almost every problem that we face, where there is uncertainty, where the where the answer is not yet known, huh? And study what do decision makers do in this situation, then you're in the realm of ecological rationality. I is is then if we if we a concrete example that just jumps to mind, ⁓ for example, if you were to ask me ⁓ what is the better decision if I wanna ⁓ drive from from Amsterdam ⁓ to to Berlin. I'm I'm just saying a random random city. car or a bicycle. And then you say, well, car is the better option ⁓ because ⁓ it will take you there much faster than if you go with the bicycle. But Maybe if we choose the car, ⁓ we get into a car accident later and we die. So that wouldn't have happened if we took the bicycle. We will never know if that wouldn't have happened, but ⁓ i these are ⁓ uncertainties. But if you ⁓ present it in a very isolated ⁓ way that only optimizes for time, then obviously the car would be the better option. But real life is much messier. than those very clean examples. Is is that is that a bit of the difference or yes, or just think about ⁓ your decision and my decision we talked at the beginning, changing jobs. This is a world of uncertainty. While ⁓ the typical problems being studied would mean you have exactly two alternatives of jobs. The outcome is a salary of five thousand d dollars in one And of three thousand in the others and the probability that you get is. eight nine and the probability that the other get is is. five four. This is not uncertainty. This is ⁓ the the the prevailing strategy of mapping almost all uncertainty and intractability into ⁓ problems that can be solved by just doing a probability calculation. Yeah. And and do you think there's a difference between ⁓ the big decisions we make, like the ones we discussed, like the life changing decisions, should I change into this new career? And the very small decisions we make on a day-to-day basis. ⁓ when we're in the supermarket, for example, which groceries we pick? The big decisions typically involve more uncertainty. The small decisions like supermarkets some uncertainty, but you can count to find the same thing as yesterday there. Maybe the price has changed. So the big decisions, like life decision, or whom to marry, what job to take, what to do with the rest of your life. They represent the true uncertainty. And even so ⁓ even ⁓ understanding of Communication of words and sentences involves ⁓ a certain uncertainty, it cannot be done by logic. So I give y give you one problem that is ⁓ in one of the famous framing problems. So framing is said to be an error because ⁓ Two ⁓ two ways to frame the same issue. if they are logically the same, then you should not make a distinction. So ⁓ a famous example is ⁓ the ⁓ you have a certain heart condition and you think about surgery, and then the doctor might tell you ⁓ you have a ten percent chance to survive. ⁓ no, let's put it this way you have a ten percent chance to die, or the doctor could say you have a ninety percent chance to survive the surgery. So that you find in ⁓ Thela and Sunstein's book. And ⁓ Thela and Sunstein and go on, it's the same, yeah, and you should not listen to what the how the doctor frames. I think this is a ⁓ this is an example where logical thinking. Totally misses. Humans are intelligent. Logic is easy. Intelligence is deal with answers is difficult. And they know, and we can show this with experiments, that the doctor, if the doctor wants to convey you, do the operation, encourage you, doctors tend to choose the positive frame, 90% survival. If they want to warn you, hmm? They choose the other frame. And people most people understand that despite that some researchers think this is a logical error. It is no error. It's a misconception of under of intelligence. And indeed in that case, if you don't listen how your doctor phrases it, yeah, your health might be damaged. This ties into the concept of ⁓ risk literacy, I I believe, that you are very, very active ⁓ in. Can you maybe explain to someone who doesn't know what it is what l risk literacy means and yeah what what most people will get wrong about it and how we encounter this, for example, in our daily lives, for example at the doctor, but maybe also some other scenarios. Yeah. So ⁓ risk literacy has a number of aspects. that is it it has a a psychological component, so people fear things that don't don't kill them. It has also a numerical component. People don't understand risks. Now we are talking not about uncertainty, we're talking now about risks. So so the ⁓ in a medical example, ⁓ the So the UK has every few years a contraceptive pill scare. The most famous went this way. The ⁓ media reported that women who take the contraceptive pill of the new generation ⁓ generation, ⁓ their risk of getting a thrombosis increases by one hundred percent. Now, imagine you are a young woman and one hundred percent trombosis and ⁓ many British women thought about that, thought in this way, stopped taking the pill which ⁓ caused unwanted pregnancies and abortions. And in the year after this message was ⁓ disseminated, some thirteen thousand ⁓ ⁓ British women ⁓ more than usual got abortions. So the communication one hundred percent more is a relative risk. And it's important to understand the difference between a relative risk and an absolute risk. What was the absolute risk? So this study had actually shown that out of seven thousand women who took the pill of the previous generation, two had a thrombosis and out of sorry, one had a thrombosis, and out of seven thousand who took a new one, it increased from one to two in seven thousand, yeah? An increase from one to two can be communicated as an absolute increase of one in seven thousand, or as a relative increase of hundred percent. From one to two it's hundred percent more. See? The relative numbers numbers don't tell you how big the problem is. The absolute ones tell you that. And for instance, if everyone would understand the simple difference between an absolute and a relative risk, huh? Then in that case, the all these abortions could have been avoided. The unnecessary pregnancies in addition with it. And that's part of risk literacy. I'm sorry, but now the telecom people arrived. No, it's ⁓ it's ⁓ it's no ⁓ no problem ⁓ no problem at all. We ⁓ we finished on ⁓ yeah, and a very interesting example on on risk ⁓ literacy and and how it can be used to frame the same information in two very different ways and yeah, how it can have ⁓ significant real life implications. Is this I I I must imagine that this is also a very powerful tools that marketing agencies or or advertising ⁓ people use ⁓ to their advantage. Yeah. Right. And it's no accident that the ⁓ in that case in the in the UK with the contraceptive pill, the effect was communicated as hundred percent or double, mm, rather than from one to two in seven thousand. Why is it being done? typically it could be ignorance that people just don't understand the difference, they don't know how to communicate, but often it is attention grabbing. Mm. If you would say there's an increase from one to two in every seven thousand Most of the women who stopped taking the pill would have not bothered about that. If you say a hundred percent, then it sounds big. And ⁓ so it's attention grabbing and also it's often part of the marketing thing, yeah. And ⁓ so if you want to ⁓ to market the ⁓ a certain drug that increases Or decreases ⁓ the the chance to get a disease by say from two to one in a hundred, you don't you could say it's a one percentage point decrease, but rather I mean fifty percent sounds better. Yeah. You find this relative risks almost everywhere. Yeah. And and what can people do to ⁓ improve their risk literacy? Can we can we even prevent ourselves from yeah, misunderstanding ⁓ these numbers if they're being ⁓ put out there in such a deceptive ⁓ way or or wrong way? They don't have to be deceptive necessarily. Yeah, of course you can do that. And ⁓ I mean ⁓ d to understand things like the difference between relative and absolute risk. It takes you. I mean if you if you think for ten minutes hard, ⁓ then you got it. A few examples. I have written ⁓ a book called Risk Savi, huh? There's many examples from the real world, how people are misled by these numbers. Read it. And it's quite simple, hm. And the moment you understand you then you see it everywhere that's happening to you. Yeah. Yeah, so just Yeah, so sorry, go ahead. It's a necessary condition for a functioning functioning democracy. If people can be misled and stop thinking by themselves, then that's we ha we have no participating democracy anymore. And there is a problem, ⁓ that the problem is being re reinforced by The over reliance on social media which is ⁓ mostly entertainment, particularly TikTok, where people scroll and scroll and scroll and after half an hour they don't know what they've seen. It's an automatic dopamine machine and ⁓ that you live only once and that's the k the the and thinking is so important as never before, I believe. Yeah. No, I agree. And it's ⁓ it's also it it reminds me of when I used to work for for ⁓ the the Dutch News, for example, we would get these reports ⁓ from from CBS, which is a national institute that tracks all sorts of numbers, the economy, immigration, every statistic you can think of. ⁓ and it was always very important to Yeah, make sure that you use those presented those numbers accurately because of course you can explain ⁓ as we've learned numbers in a very ⁓ yeah, very different ⁓ different way, ⁓ positive and negative, ⁓ which is sometimes ⁓ when I read certain headlines ⁓ frustrates me ⁓ for ⁓ for the very reasons ⁓ we've discussed. But ⁓ yeah, Professor, this was so incredibly interesting. ⁓ before we wrap it up today, is there something ⁓ that we haven't discussed that you would ⁓ still like to mention or or emphasize ⁓ I would basically say ⁓ in our times what we need is people who think more th than before and people who take some time to learn things, difference between risk and uncertainty. That do you when do you need your intuition? When Should you not rely, for instance, if you have no experience with something about risk communication, understanding numbers and also understanding who wants to mislead you and how they succeed because you haven't bothered to think. Well, the thinking a good starting point to introduce more thinking in ⁓ one's life would be to read one of your many books. ⁓ I will also include your article in the the show notes. Is there any other place people can go if they want to see more of your work and read about more ⁓ about what you've published? No, I have a a website. It is ⁓ GERD minus gigaranza.com So Gerd first name minus gigaranza dot com. You find everything though. Thank you. Yeah, I will I will put it of your risk literacy. Go there and yourself. ⁓ And you can also see the ⁓ the ⁓ the ⁓ the spot of my past, yeah. So when I was still playing music, we did ⁓ the T V spot for the first VW Volkswagen golf. It's still there. You will Not recognize me, but ⁓ some time ago, but I'm the person with the banjo. Well, I haven't even seen that, so ⁓ that's ⁓ definitely something ⁓ I'll check out. ⁓ but yeah, thank you so much. ⁓ this was extremely interesting. I've ⁓ I've learned a lot and ⁓ yeah, I ⁓ I really enjoyed this. So thanks a lot. Okay, me too.