Death Risk Biases
A recent Journal of Risk and Uncertainty paper confirms very standard results; low risk people overestimate their risks, high risk people underestimate their risks, overall people underestimate risk, and men are worse than women:
Individuals’ perception of their own road-traffic and overall mortality risks are examined in this paper. Perceived risk is compared with the objective risk of the respondents’ peers, i.e. their own gender and age group, and the results suggest that individuals’ risk perception of their own risk is biased. For road-traffic risk we obtain similar results to what have been found previously in the literature, overassessment and underassessment among low- and high-risk groups, respectively. For overall risk we find that all risk groups underestimate their risk. The results also indicate that men’s risk bias is larger than women’s.
We could fill up this blog just with abstracts of papers like this, but what would be the point?
Teach them poker.
So if it's confirmed repeatedly that people suck at estimating risk, what exercises can people do to better assess risk?
E.g., I met a guy in Australia who was launching a startup. He'd been a grad student in the mathy part of computer science known as "machine learning" (Artificial Intelligence without the magic robot promises) and he'd realized he had a talent for poker. He attributed his balls to start the startup and his success to date purely to the poker--it taught him, he said, how to balance risk and reward.
I have kids and would love to know what I can do to help them get a more accurate intuition for risk and reward.