How do you quantify risk intelligence?
I set up an online test to measure risk quotient or RQ. It consists of 50 statements, some true, some false, and you have to estimate the likelihood of a statement being true. The average RQ is not high. There are two ways you can have a low RQ. One is by being overconfident, the other is by being under-confident. You do find people making the under-confidence mistake, but there are far fewer of them.
I set up an online test to measure risk quotient or RQ. It consists of 50 statements, some true, some false, and you have to estimate the likelihood of a statement being true. The average RQ is not high. There are two ways you can have a low RQ. One is by being overconfident, the other is by being under-confident. You do find people making the under-confidence mistake, but there are far fewer of them.
What mistakes do we make in assessing risks?
The need for closure is a really interesting one. If you have a great need for closure, it means you don't like being in a state of uncertainty - you want an answer, any answer, even if it is the wrong one. On the other extreme, there is this need to avoid closure, where you are constantly seeking more information, so you get stuck in analysis paralysis.
Can we increase our risk quotient?
Absolutely. One way is by being aware of different cognitive biases. Another is to play a personal prediction game. Bet against yourself and estimate probabilities of anything: whether your partner will get home before 6 o'clock, or whether it is going to rain, and keep track of them. Expert gamblers are constantly on the lookout for overconfidence, biases and so on. It is hard work, but it means they know themselves pretty well and they don't have illusions. They know their weaknesses.
- Interview with Dylan Evans on Risk Quotient
Take the Risk Quotient test here
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