Why We Often Miscalculate Risk

 

Assessing risk is part of life. We do it hundreds of times every day, at least. Generally, we think we are pretty good at it. But controlled studies seem to show that we are not. Whether it is deciding whether or not to get a vaccination, invest in a particular stock, riding a bike without a helmet or deciding whether to drive or fly to a destination we actually have a pretty difficult time accurately assessing risk.

"Using evidence or data to communicate risk to the American public can be a fool’s errand," said Eric Horowitz in Psychology Today. "The most publicized “la, la, la, I can’t hear you!” moments involve people ignoring dangers that threaten ideology or political beliefs. Others may choose to ignore risks because immediate short-term pleasures are too alluring."

But often, it is simply that we assess the risk very poorly. Here are several things that may be keeping you for making an accurate assessment of risk in your daily life.

1. The real risk may be unknowable.  Data may be unreliable or unavailable altogether. Or we may be considering a new technology such as self-driving cars or Star Trek Transporters that have no record of performance to consider. 

2. Confirmation bias may color your assessment. When we try to evaluate the risk of taking some action, we find reasons to accept any evidence that supports the decision we want to make and devalue evidence that contradicts it. An example of this is smoking. When smokers are surveyed they overwhelmingly agree that smoking can result is serious health problems. Yet when asked about the risk to them personally many respond that it is very low. They will find reasons and justifications why the real risks do not apply to them. "I only smoke 5 per day" or "My parents smoked and lived into their 90s".

3. Sense of being in control. We tend to greatly underestimate risk when we feel we are in control of a situation. For example, studies show that people consistently overestimate their skill as a driver, or feel safer driving than flying. Similarly, we will usually overestimate the risk of situations that are new or unfamiliar to us.

4. Tribal norms. We tend to associate and spend time with people to agree with us and believe, mostly, the same things that we do. We tend to avoid those who do not. We choose sources of news and information that line up with our existing preconceptions. Social media reinforces this bias by showing us more and more of what we already accept as true and less and less of what we do not.

What can we do to improve our risk assessments and make more effective choices and decisions?

Rely on expert opinion and experience rather than strictly relying on our own hunches or gut feelings. The more you know the better choices you can make.

Actively seek out information that opposes what you believe about the risk. Be alert for your natural bias to exclude data that does not support your preconception. Of course the opposing opinions you will find are not necessarily correct but at least you are exposed to alternative thoughts on risk.

Consider the costs and payoffs. The fact that you think something is, or is not, risky does not necessarily mean that you should or should not do it. It may simply not be worth it. If you have celebrated a little too hard at the local pub, you might find the risk of driving home to be low. Its not far, you have done it many times, there won't be much traffic. And that may be true. But the consequences of being involved in an accident or worse are so severe, the low risk may not justify taking the chance.

So, punk. Do you feel lucky?