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Formerly Guiding Assets, Enterprising Investor is the flagship podcast of CFA Institute and the definitive program for the investment management industry. As stewards of the investment industry, Guiding Assets will feature intimate conversations with some of the most influential people from the world of finance about the topics that matter most to investment professionals. The show will also share crucial insights and best practices to help guide investors to make smart, ethical decisions. Enterprising Investor will continue to help build a better world for investors.

Host: Mike Wallberg, CFA

Producer: Mitchell Forst 

May 28, 2019

In Episode #364, we walk about the difference between risk and uncertainty, and what implication does this difference have for decision making? This distinction is important in finance where pricing and investment decisions often use complex models that use assumed distribution to encapsulate risk. In reality, however, it can be argued that the future is inherently one of uncertainty and cannot be captured via a probability distribution and that a heuristic approach to decision making might be optimal. This leads to the proposition that less is more and that a heuristic approach, using less information, can produce better outcomes than a complex model dependent on numerous assumptions.