Decision-making in Uncertain Circumstances
Jos Nieland, Teacher, Netherlands, SIG Leader
When we're dealing with severe uncertainty, should we start to use heuristics (rules of thumb) instead of complex models?
Taleb thinks that using (simple) heuristics is, in the fourth quadrant (wild randomness and complex payoffs - see figure), an alternative for making these decisions based on complex models and scenario's. Using complex models in the fourth quadrant can even result in higher impact Black Swans.
Greg Gigerenzer (Max Plank Institute for Human Development) has the same idea. He gave a talk at Zurich Mind Conference on heuristic decision-making with the title: "Heuristics make us Smart". He shows that relative simple heuristics have better results in (daily) practice and decision making under uncertainty than complex models.
Gigerenzer thinks that using less data in decision making under uncertainty can lead to better...