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What is your risk IQ?


DeaconTheVillain

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Most people probably haven't heard of risk intelligence. What is it?

It is the ability to estimate probabilities accurately, it's about having the right amount of certainty to make educated guesses. That's the simple definition. But this apparently simple skill turns out to be quite complex. It ends up being a rather deep thing about how to work on the basis of limited information and cope with an uncertain world, about knowing yourself and your limitations.

http://www.slate.com/articles/health_and_science/new_scientist/2012/05/risk_intelligence_how_gamblers_and_weather_forecasters_assess_probabilities_.html

Test

http://www.projectionpoint.com/

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73.62, got a little overconfident at points and that hurt me but I guess that's still a decent score.

seems like if you just put 50 % you'll do great...i'll actually take the test later.

Yep...

By now, you may have realized there is an easy way to game this test. If you always select the 50% category unless you are pretty certain that a statement is true or false – and if the test contains equal numbers of true and false statements – you will score very highly, perhaps very near 100. Our commercial Expert Test takes such gaming strategies (and more) into account.
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This is a point here that I make pretty frequently. People do an awful job of really calculating risk (they also do a bad job of calculating benefits so this seems to really only be focusing on one side of it) in complex system.

And in a free market system where the very basis is the idea that people can make good decisions that has large consequences.

I was watching a thing on the money that JP Morgan (I think on PBS), and they were interviewing another investment banker and she was talking about how the underlying problem from the mortgage securities was the complexity in the system and the system is still very complex.

If the system is too complex for the investment bankers to properly calculate risk, how are normal individuals?

The same thing is true for medicine. There is really no good way to determine if your doctor makes good decisions or not. Your doctor doesn't really know if he/she makes good decisions over the long term. The system is to comlicated to follow and do those types of calculations in a meaningful way (unlike say gambling where you can get pretty good feed back pretty quickly).

I've actually been reading and thinking about this in the context of Cold War decision making. Someday I'd love to publish something on it. It is clear that for the most part the people in charge did an awful job of determining risk/benefits. Only the Carter administration seems to have been reasonable.

(I got an 86, but I've been thinking about these things quite a bit and figure out that 50% should be the answer to most of the questions immediately and have been thinking about this stuff some for a while.)

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Seems to me that most highly-successful people would probably have a low score. To really be a risk taker I think you have to have a bit of naivete and/or a poor calculation of risk.

For instance, come to me with just about any business idea, I could tell you a million (very good) reasons why it wouldn't work. I consider that a personal weakness.

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86 percent. There were a lot of things that I thought I knew, but wasn't sure enough to say so.

by zoony

Seems to me that most highly-successful people would probably have a low score. To really be a risk taker I think you have to have a bit of naivete and/or a poor calculation of risk.

For instance, come to me with just about any business idea, I could tell you a million (very good) reasons why it wouldn't work. I consider that a personal weakness.

Or it reflects different personality types and job needs. Perhaps for an entrepeneur, a low score is good. For an advisory or research "profession" like a doctor, lawyer, scientist, architect or accountant, a high score may be good. It is important in my profession to be able to recognize what I do NOT know, so that I can check into the subject and be sure. Makes me a bad risk-taker, but a good advisor.

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Seems to me that most highly-successful people would probably have a low score. To really be a risk taker I think you have to have a bit of naivete and/or a poor calculation of risk.

For instance, come to me with just about any business idea, I could tell you a million (very good) reasons why it wouldn't work. I consider that a personal weakness.

I'm with you on having a natural tendency towards critiquing ideas into oblivion. It's definitely not an asset unless you're working with someone who has the opposite problem and isn't prone to taking offense. However, I'd still say being an accurate assessor of risk doesn't necessarily lead to risk aversion. The people who attain high degress of sustained success would almost certainly have to be pretty good at both recognizing and working around risk. The fundamental difference between that person and a guy like me would probably come from our own valuation of personal effort, time, and finances as a resources.

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Got a 78.15

Seems to me that most highly-successful people would probably have a low score. To really be a risk taker I think you have to have a bit of naivete and/or a poor calculation of risk.

For instance, come to me with just about any business idea, I could tell you a million (very good) reasons why it wouldn't work. I consider that a personal weakness.

I don't think it's a weakness at all. If you are able to identify a million reasons something won't work, that's a million steps toward success. If you see the risks, you know exactly what you need to avoid or fix before you can make something successful instead of trying and failing over and over again because you didn't foresee a problem in your plan.

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Seems to me that most highly-successful people would probably have a low score. To really be a risk taker I think you have to have a bit of naivete and/or a poor calculation of risk.

For instance, come to me with just about any business idea, I could tell you a million (very good) reasons why it wouldn't work. I consider that a personal weakness.

There's nothing wrong with seeing all of the risk if you also see the benefits.

The key isn't risk, but risk/benefit.

Though I'm starting to wonder in modern society if most people can really determine risk/benefit at a level that isn't really just random guesses for most things.

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In some ways, this ties in to the "Dunning-Kruger effect," a psychological phenomenon in which people who are more ignorant are also unaware of the level of their own ignorance, and thus have great confidence in their own opinions. Meanwhile, those who are more learned have more understanding of the limits of their own knowledge, and tend to be less confident in their opinions.

http://rationalwiki.org/wiki/Dunning-Kruger_effect

As a snotty liberal intellectual type, I feel like I have seen this phenomenon played out many times on the Tailgate on subjects like global climate change... but then again, I'm not absolutely sure. :ols:

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