Monday, April 11, 2011

Seven rules for risk and uncertainty

John Carlos Baez blogs at "Azimuth", a kind of 360 look at number of grand challenges, the current focus of which is climate change. Baez is a mathematical physicist, so a lot of his posts are steeped in formulas and technically oriented.
However, for those of us with a more ordinary grasp of mathematics, a guest post by Curtis Faith caught my attention--and it's readable by all.

Faith lists his "seven rules for risk and uncertainty" which are taken from his book "Inside the mind of Turtles", a treatise on financial trading risk.
By Faith's reckoning, the seven rules are these:
  1. Overcome fear,
  2. Remain flexible,
  3. Take reasoned risks,
  4. Prepare to be wrong,
  5. Actively seek reality,
  6. Respond quickly to change, and
  7. Focus on decisions, not outcomes.

The one that gave me a double take, especially from the view of project management, is the last: "Focus on decisions, not outcomes". Frankly, I'm an 'outcomes' guy.

However, a close reading of Faith's point is that when facing decisions about risky outcomes, especially those that may have calamitous outcomes, the rule really is :
Don't be paralyzed in the decision process by the impact of the decision's likely outcome; make a decision based on an integration of best practice, experience fit to the circumstances, and the impact of not deciding.

The other rule that seems a little unusual as stated is "Actively seek reality".  Here again, one has to read between the lines.  An alternate construction: "Constantly monitor the situation to ensure relevance and applicability of risk assessments and responses."

Perhaps I'll conclude with Rule 8: When reading rules  1 - 7, translate them into a relevant project context.

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