Risk Intelligence

Abstract

Risk intelligence is the ability to estimate probabilities accurately. In this context, accuracy does not imply the existence of objective probabilities; on the contrary, risk intelligence presupposes a subjective interpretation of probability. Risk intelligence can be measured by calibration testing. This involves collecting many probability estimates of statements whose correct answer is known or will shortly be known to the experimenter, and plotting the proportion of correct answers against the subjective estimates. Between 1960 and 1980, psychologists measured the calibration of many specific groups, such as medics and weather forecasters, but did not gather extensive data on the calibration of the general public. This chapter presents new data from calibration tests of over 6,000 people of all ages and from a wide variety of countries. High risk intelligence is rare. Fifty years of research in the psychology of judgment and decision-making shows that most people are not very good at thinking clearly about risky choices. They often disregard probability entirely, and even when they do take probability into account, they make many errors when estimating it. However, there are some groups of people with unusually high levels of risk intelligence. Lessons can be drawn from these groups to develop new tools to enhance risk intelligence in others. First, such tools should accustom users to specifying probability estimates in numerical terms. Second, they should focus on a relatively narrow area of expertise, if possible. Thirdly, these tools should provide the user with prompt and well-defined feedback. Regular calibration testing might fulfill all three of these requirements, though training assessors by giving them feedback about their calibration has shown mixed results. More research is needed before we can reach a definitive verdict on the value of this method.

Appendix

The 50 true/false statements in the online calibration test were as follows:

A one followed by 100 zeros is a Googol	T
Africa is the largest continent	F
Alzheimer’s accounts for under half the cases of dementia in the USA	F
An improper fraction is always less than 1	F
Armenia shares a common border with Russia	F
There have been over 40 US Presidents	T
In 1994, Bill Clinton was accused of sexual harassment by a woman called Paula Jones	T
Canberra is the capital of Australia	T
Cats are not mentioned in the Bible	T
Christianity became the official religion of the Roman empire in the third century AD	F
Commodore Matthew Perry compelled the opening of Japan to the West with the Convention of Kanagawa in 1870	F
El Salvador does not have a coastline on the Caribbean	T
Gout is known as “the royal disease”	F
Harry Potter and the Goblet of Fire tells the story of Harry Potter’s third year at Hogwarts	F
Humphrey Bogart had two wives before Lauren Bacall	F
In 2008 the population of Beijing was over 20 million people	F
In the Old Testament, Jezebel’s husband was Ahab, King of Israel	T
Iron accounts for over 30% of the Earth’s composition	T
It is possible to lead a cow upstairs but not downstairs, because a cow’s knees cannot bend properly to walk back down	T
Lehman Brothers went bankrupt in September 2008	T
LL Cool J got his name from the observation “Ladies Love Cool James”	T
Male gymnasts refer to the pommel horse as “the pig”	T
Mao Zedong declared the founding of the People’s Republic of China in 1949	T
More than 10 American states let citizens smoke marijuana for medical reasons	T
More than 8 out 10 victims infected by the Ebola virus will die in 2 days	T
Most of the terrorists who carried out the attacks on 9/11 were from Saudi Arabia	T
Mozart composed over 1,000 works	F
Natural gas has an odor	F
Of all Arab nations, Lebanon has the highest percentage of Christians	T
Over 40% of all deaths from natural disasters from 1945 to 1986 were caused by earthquakes	T
Over 50% of Nigeria’s population lives on less than $1 per day	T
Stalagmites grow down, and stalactites grow up	F
The Italian musical term adagio means that the music should be played quickly	F
The Euphrates river runs through Baghdad	F
The face on a $100,000 bill is that of Woodrow Wilson	T
The Islamic Resistance Movement is better known to Palestinians as Hizbollah	F
The Japanese were largely responsible for building most of the early railways in the US West	F
The last Inca emperor was Montezuma	F
The most frequently diagnosed cancer in men is prostate cancer	T
The only stringed symphonic instrument that has a pedestal and a crown is a double bass	F
The president of Russia is Vladimir Putin	F
The San Andreas Fault forms the tectonic boundary between the Pacific Plate and the North American Plate.	T
The US civil war broke out the same year the federal government first printed paper money	T
The US Declaration of Independence begins: “We the People of the United States…”	F
The word “robot” was coined by the American science fiction writer, Isaac Asimov	F
The world’s highest island mountain is Mauna Kea	T
The Taj Mahal was built by Emperor Shah Jahan in memory of his favorite wife	T
There are more people in the world than chickens	F
There are no diamond fields in South America	F
Wikipedia was launched in 1999 by Jimmy Wales and Larry Sanger	F
Number of True Statements	25