Risk analysis is a well developed theory and important in a wide range of fields from medicine to engineering. While it’s true that risk estimates are often based on very sparse real data, there’s often no better way of talking about somewhat rare bad outcomes. So even though there have been very few nuclear accidents, it’s important to estimate just how to build your new power plant to make another event like Three Mile Island or Chernobyl as unlikely as possible, even if the risk can’t be reduced to zero.
Risk focuses on what can go wrong. If we add up all of the risks in life, we know that the probability of a bad outcome reaches 100% since the probability of living forever is in fact zero. No one survives life. The probability of living to 120 years old is pretty close to zero. Death, along with taxes perhaps, becomes our only certainty.
Focusing on the innumerable potential risks in every undertaking and making choices solely on avoiding bad outcomes is paralyzing. One can easily come to spend all of their time avoiding and mitigating risk rather than assessing probability of success and making choices based on reaching desired goals. If you focus on the risk of air travel, you’ll miss that trip of a lifetime. In truth the risk of dying during that trip is so low as to not be a factor in the decision at all.
I propose that risk information be used to chose between alternatives when the chances of success can be improved without great cost. But looking at the path of life as being paved with risk leading to an inevitable death is to be avoided, I think.
We know there is a relationship between risk and reward. Betting on drawing an ace from a deck of cards should pay more than betting on drawing a spade. The ace is a one in thirteen chance. The spade is one in four. The cost of failure is small because the the odds should, over time, make losses even out even though the risk of failure on a single trial is much higher betting on drawing an ace. In no way is betting on drawing the spade a “safer bet†than drawing the ace.
Risk is the flip side of probability. Risk, the probabilty of failure looked at in isolation, leads to fear because we’re examining a bad outcome not in our control. But looked at over time, risk of failure shold even out over time.
Making decisions under conditions of uncertainty is hard because we have just one chance to act. It seems to be all risk, The things that can go wrong loom large. Deciding better involves a change in perspective, having decided to decide and having decided to act, to do, it becomes a matter of what action to choose. By embracing the uncertain nature of the world, the fear that comes from lack of control can be managed
