ABSTRACT
This chapter reviews several “everyday” topics that illustrate important principles of decision making discussed in prior chapters. The four “everyday” topics are games of chance, car reliability, the NASA twins study, and riches and luck. The important principles illustrated by these topics include the following.
Uncertainty. Will you get rich if you start a business? Will your college major enable you to find and keep a well-paying job? You can’t answer any questions like these with any degree of certainty. “Sticky theory,” however, refuses to acknowledge uncertainty because “I know the right answer.”
Sources of information. Everyone faces information overload and therefore must depend on others for information. Judgments about the quality of information from others are crucial.
Sampling. Our everyday experiences are all samples of reality. Unavoidably, we draw conclusions from them. But these samples are small and not representative. Be careful what you conclude from them.
Probability. People generally have poor judgments about matters of chance. We underestimate variability in random events, misinterpret random sequences as evidence of causation, and remain oblivious to the accumulation of small chances into much bigger chances over the long term. And we underestimate the chances of failure in matters like marriage, business, and course grades in school.
Causation. By definition, a causal relationship enables prediction and control. Whether we recognize it or not, that is a goal of each of us.
