Risk Savvy: How to Make Good Decisions

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

Not making a decision or procrastinating in order to avoid responsibility is the most blatant form of defensive decision making.

Altogether I have taught about one thousand doctors in their CME. 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.

Studies indicate that people who rely on aspiration rules tend to be more optimistic and have higher self-esteem than maximizers. The latter excel in perfectionism, depression, and self-blame

My experience is that it can pay not to open the menu. If it’s a good restaurant, I use this rule of thumb:
Ask the waiter: What would you eat here this evening?
I don’t ask the waiter what he or she would recommend.

Having a gut feeling means that one feels what one should do, without being able to explain why. We know more than we can tell. An intuition is neither caprice nor a sixth sense but a form of unconscious intelligence.

Don’t buy financial products you don’t understand.

portfolio managers and other investment professionals working for investment companies and major banks or preparing for a career in financial engineering were asked to determine the “volatility” of a certain stock.14 If the price of a stock moves up and down rapidly, it has a high volatility. If it almost never changes, it has a low volatility. Every stock has a volatility, which is expressed as a number. Only three of eighty-seven respondents were able to provide the correct value for volatility, and most underestimated it.

In six of the seven tests, 1/N scored better than mean-variance in common performance criteria. Moreover, none of the other twelve complex methods was consistently better at predicting the future value of the stocks.

when Markowitz made his own investments for his retirement, he did not use his Nobel Prize–winning method. Instead, he employed a simple rule of thumb called 1/N:
Allocate your money equally to each of N funds.