Lessons from Gerd Gigerenzer

Gerd Gigerenzer, a renowned German psychologist and director emeritus of the Max Planck Institute for Human Development, has profoundly influenced our understanding of risk, uncertainty, and decision-making. His work champions the idea that in an uncertain world, simple heuristics are often more effective than complex calculations.

On Uncertainty and Risk

"We have to learn to live with uncertainty."[1][2][3][4] This is a central theme in Gigerenzer's work, emphasizing that most real-world decisions are made under uncertainty, not calculable risk.
"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."[1][2][4] This quote clearly distinguishes between situations of risk, where probabilities are known, and uncertainty, where they are not.
"The quest for certainty is the biggest obstacle to becoming risk savvy. While there are things we can know, we must also be able to recognize when we cannot know something."[1][5] Gigerenzer argues that embracing uncertainty is crucial for making good decisions.
"A situation with risk... is one where you basically know everything... Uncertainty, on the other hand, means that all future possible events aren't known, nor are their probabilities or their consequences."[6] This provides a clear definition of the two concepts that are often confused.
"It prevents us from learning to face the uncertainty pervading our lives. As hard as we try, we cannot make our lives risk-free the way we make our milk fat-free."[2] A powerful analogy highlighting the futility of seeking absolute certainty.
"I focus on the most important form of innumeracy in everyday life, statistical innumeracy--that is, the inability to reason about uncertainties and risk."[3] Gigerenzer highlights the widespread inability to understand and work with statistics, which is crucial for navigating an uncertain world.
"The most popular of these numbers is called “value at risk.” No judgment or understanding of the assets is necessary; all you have to do is look at the number. Yet the world of money is an uncertain world, not one of known risks."[1][2] He criticizes the over-reliance on complex financial models that create a false sense of certainty.
"Because these calculations generate precise numbers for an uncertain risk, they produce an illusory certainty."[1] This points to the danger of misapplying tools for risk assessment to situations of uncertainty.
"If we knew everything about the future with certainty, our lives would be drained of emotion. No surprise and pleasure, no joy or thrill – we knew it all along."[1][2] Gigerenzer poetically illustrates the value of uncertainty in making life meaningful.

On Heuristics and Simple Rules

"An intuition is neither caprice nor a sixth sense but a form of unconscious intelligence."[1][2][4][5] Gigerenzer redefines intuition as a powerful tool for decision-making, based on experience and simple rules.
"There is strong evidence that intuitions are based on simple, smart rules that take into account only some of the available information."[1][5] He explains that the power of intuition lies in its simplicity and focus on the most relevant cues.
"Make everything as simple as possible, but not simpler."[2][4][5] Quoting Einstein, Gigerenzer advocates for the power of simplicity in a complex world.
"Simple Heuristics That Make Us Smart: Gigerenzer's groundbreaking research emphasizes the idea that humans often rely on simple heuristics or rules of thumb to make decisions, especially in situations of uncertainty."[7] A summary of one of his most influential books.
"Fast and Frugal Heuristics: Gigerenzer introduced the concept of 'fast and frugal heuristics,' which are decision-making shortcuts that are quick to apply and require minimal information."[7] These simple rules can be surprisingly effective.
"Heuristics are not irrational shortcuts but rather efficient and adaptive strategies that allow individuals to navigate complex environments."[7] He challenges the view that heuristics are always second-best to complex analysis.
"He argues that heuristic reasoning should not lead us to conceive of human thinking as riddled with irrational cognitive biases, but rather to conceive rationality as an adaptive tool."[8][9] Gigerenzer offers a more positive view of heuristics than some of his contemporaries.
"A simple rule in a complex world can outperform a complex rule in an artificially simplified world."[10] This highlights the robustness of simple rules in real-world situations.
The Recognition Heuristic: "It suggests that when faced with two options, people tend to choose the one they recognize or are more familiar with, without further consideration."[7] This simple rule can be remarkably accurate.
The Take-the-Best Heuristic: This involves ranking the most important attributes and choosing the option that is superior on the first attribute that distinguishes between them.[5]
"Intelligent decision making entails knowing what tool to use for what problem."[2][4][11] The key is to match the decision-making tool to the situation.
The Adaptive Toolbox: Gigerenzer proposes that our minds have a toolbox of different heuristics, and we learn to select the right one for the task at hand.[8]
Ecological Rationality: "A heuristic is called ecologically rational to the degree that it is adapted to the structure of an environment."[8] The effectiveness of a heuristic depends on the context in which it is used.
"Less is more."[8] In many situations, having less information and using simpler models leads to better decisions.
"In situations of risk you can calculate the best answer you can optimize. In situations of uncertainty, you can't."[12] A clear guideline for when to use complex calculations and when to rely on heuristics.

On Knowledge and Fear

"Knowledge is the antidote to fear."[1][2][4][5][11] By understanding risks, we can overcome irrational fears.
"Always ask: What is the absolute risk increase?"[1][4] Gigerenzer advises people to be critical of how risks are presented, as relative risk increases can be misleadingly large.
"One such emotion that conflicts with dread-risk fear is parental concern."[1][13] He notes that different emotions can be played against each other when making decisions under fear.

On Education and Society

"We teach our children the mathematics of certainty—geometry and trigonometry—but not the mathematics of uncertainty, statistical thinking."[4] Gigerenzer advocates for a greater focus on risk literacy in education.
"And we teach our children biology but not the psychology that shapes their fears and desires."[4] He calls for a more holistic education that includes understanding our own minds.
"Even experts, shockingly, are not trained how to communicate risks to the public in an understandable way."[4] This highlights a critical gap in professional training.
"There can be positive interest in scaring people: to get an article on the front page, to persuade people to relinquish civil rights, or to sell a product."[4] Gigerenzer warns about the manipulation of fear in society.
"Great thinkers often learn, to their surprise, that new ideas are less than welcome."[1][3][5] He acknowledges the resistance to new ways of thinking.

On Medicine and Health

"Physicians don't do the best for their patients because they: practice defensive medicine (Self-defense), do not understand health statistics (Innumeracy), or pursue profit instead of virtue (Conflicts of interest)."[2][4] A stark critique of the medical profession.
"Defensive medicine: A doctor orders tests or treatments that are not clinically indicated and might even harm the patient primarily because of fear of litigation."[2][4] This practice leads to unnecessary and potentially harmful medical procedures.
"In Western countries, for instance, it is legal for physicians to receive “bribes” in the form of cash by pharmaceutical companies for every new patient they put on their drugs."[2] Gigerenzer points out the conflicts of interest that can affect medical decisions.
He advocates for teaching risk literacy to doctors and patients so they can evaluate evidence better.[10]

On Business and Management

"Many a committee meeting ends with “We need more data.” Everybody nods, breathing a sigh of relief, happy that the decision has been deferred."[1][2][4] A common scenario in organizations that suffer from a "negative error culture."
"The culprit is a negative error culture, in which everyone lacks the courage to make a decision for which they may be punished."[1][4] This fear of making mistakes can paralyze decision-making.
"We live in a society where fewer and fewer leaders are willing to take responsibility."[14]
"An intuitive decision is made, but it's not publicized, for fear. Rather someone is told to find the reasons."[14] He describes how gut decisions are often rationalized after the fact.
"Defensive decision-making means that you protect yourself and hurt your own company."[12]

On Rationality and Human Nature

"Cognition requires going beyond the information given, to make bets and therefore to risk errors."[3] Making good decisions inherently involves taking risks.
"Humans appear to have a need for certainty, a motivation to hold on to something rather than to question it."[1] This innate desire can be a significant barrier to effective decision-making.
He is a leading advocate of bounded rationality, which acknowledges the limitations of human cognitive processing.[7][9]
Gigerenzer’s work has had a profound impact on psychology, economics, and decision science by challenging conventional wisdom about human rationality.[7]
"The Turkey Illusion": This refers to the danger of relying on past data to predict the future, as exemplified by a turkey that is fed well every day until Thanksgiving.[15]
The Illusion of Certainty: The false belief that we can predict the future with accuracy.[15]
Positive Error Culture: An environment where mistakes are seen as opportunities for learning rather than something to be punished.[15]
"Social science...should take uncertainty seriously, and heuristics seriously, and then we have a key to the real world."[6]
He calls for a second "probabilistic revolution" to replace the ideal of an all-knowing mind with the reality of a "bounded mind" using an "adaptive toolbox" of heuristics.[8]

Sources and Further Reading:

Books by Gerd Gigerenzer: Gut Feelings: The Intelligence of the Unconscious[16][17][18], Risk Savvy: How to Make Good Decisions[6][16][17][18], Calculated Risks: How to Know When Numbers Deceive You[6][16][18][19], Simple Heuristics That Make Us Smart[6][9][18], and How to Stay Smart in a Smart World: Why Human Intelligence Still Beats Algorithms[9][16][18][19].
Interviews and Articles: Social Science Space[6], Roland Berger[14], Founding Fuel[10], and various YouTube videos of his talks.[12][13][15]

Sources