A mixture of Risks

A Mixture of Risks

In the book Risk Savvy, Gerd Gigerenzer explains the challenges we have with thinking statistically and how these difficulties can lead to poor decision-making. Humans have trouble holding lots of complex and conflicting information. We don’t do well with decisions involving risk and decisions where we cannot possibly know all the relevant information necessary for the best decision. We prefer to make decisions involving fewer variables, where we can have more certainty about our risks and about the potential outcomes. This leads to the substitution effect that Daniel Kahneman describes in his book Thinking Fast and Slow, where our minds substitute an easier question for the difficult question without us noticing.

 

Unfortunately, this can have bad outcomes for our decision-making. Gigerenzer writes, “few situations in life allow us to calculate risk precisely. In most cases, the risks involved are a mixture of more or less well known ones.” Most of our decisions that involve risk have a mixture of different risks. They are complex decisions with tiers and potential cascades of risk based on the decisions we make along the way. Few of our decisions involve just one risk independent of others that we can know with certainty.

 

If we consider investing for retirement we can see how complex decisions involving risk can be and how a mixture of risks is present across all the decisions we have to make. We can hoard money in a safe in our house where we reduce the risk of losing any of our money, but we risk being unable to have enough saved by the time we are ready to retire. We can invest our money, but have to make decisions regarding whether we will keep it in a bank account, invest it in the stock market, or look to other investment vehicles. Our bank is unlikely to lose much money, and is low risk, but is also unlikely to help us increase the value of our savings to have enough for retirement. Investing with a financial advisor takes on more risk, such as the risk that we are being scammed, the risk that the market tanks and our advisor made bad investments on our behalf, and the risk that we won’t have access to our money if we were to need it quickly in case of an emergency. What this shows is that even the most certain option for our money, protecting it in a secret safe at home, still contains additional risks for the future. The options that are likely to provide us with the greatest return on our savings, investing in the stock market, has a mixture of risks associated with each investment decision we make after the initial decision to invest. There is no way we can calculate and fully comprehend ever risk involved with such an investment decision.

 

Risk is complex, and we rarely deal with a single decision involving a single calculable risk at one time. Our brains are likely to flatten the decision by substituting more simple decisions, eliminating some of the risks from consideration and helping our mind focus on fewer variables at a time. Nevertheless, the complex mixture of risks doesn’t go away just because  our brains pretend it isn’t there.

Where Does Creativity Start & End

In his creativity manual, The Users Guide to the Creative Mind, Dave Birss writes about what it means to be a creative person.  He talks about misconceptions that we have regarding creative people, and gives us insights into his personality and what being creative means to him. In a quote he writes, “Being creative isn’t an occupation, it’s a preoccupation.” What he means is that creativity can not be turned on or off. For Birss being a creative person is a full time job. He is always being self aware and trying to identify his thoughts to keep track of his creativity.
Creativity is all about cultivating habits that will build new experiences and fulfill desires to be active. As a preoccupation, creativity is constantly about producing in new areas that expand ones thinking.  The difference between an occupation and a preoccupation for creatives, is that creatives don’t end their work day and step away from what they do. Creatives walk away from one creative endeavor strait into another.  In addition being creative means that you can always take something from one situation and apply it to another.  Learning happens continually as you listen to people talk and provide opinions or ideas (in a constructive and non-pushy way) that come from other situations where you have encountered similar problems or obstacles.  At the same time, Birss would argue that creative people constantly find ways to note what they have learned or new perspectives they have gained, so that they can return to those ideas and incorporate them into future activities.