Imagine that a friend takes a coin from her pocket and offers you the following gamble. If the coin is tossed and lands heads she will give you £110, but if it lands tails you must give her £100. Would you accept the gamble, or walk away? Curiously, captured in this situation are the key components of all our behavioural decisions, from what to wear in the morning to whether or not to go to war with another country.

The Four Features of Uncertainty.

First to choose whether or not to accept the gamble we have to consider what the outcomes might be – the coin will land on heads and you win, or tails and you lose. Second, because we never know for sure what is going to happen in the future, deciding always involves uncertainty. And third, to address this uncertainty effectively we need to consider four fundamental things: the available options, the possible outcomes of these options (heads or tails), the payoffs of the options, and the probability of these payoffs (in this case 50/50).

People who fail to take proper account of these four features of uncertainty are doomed to a life of sub-optimal decision-making. People who process information about them accurately, quickly, and comprehensively make better decisions.