Quote: (Originally Posted by Genesis)
Just a quickie....
Probability is always a factor in risk evaluation. It has to be.
Okay, quick retort...
Yeah I agree, as far as a classical interpretation goes if for example you're in the insurance business or the builder of CCRs where there are many trials. But the means by which the probability of an event is calculated make no sense when an outcome is binary (as it is when there is only one trial). Whilst it is strictly correct that expectation theory (risk x consequence or any other formulation) can be used as an index or measure of risk
I believe it leads to poor decisions because it understates the weight of the consequence. This is part of why we percieve risk so poorly (my point 1).
Quote:
The problem is that we've got a piss-poor handle on the probability side of the equation, and what we can do to change it to our advantage - the consequence side we all know about.....
My contention is that knowing the rate of occurence doesn't matter in a trial of one. Something either happens or it does not. If the consequence is undesirable, being responsible is about eliminating the event as far as possible or placing contigencies in place to mitigate the consequence. If there is no way to eliminate or mitigate then this is where the decision is made to proceed or not and this is where the personal "risk thermometer" comes into the process. The example from earlier in the thread about Grand Prix drivers "liking it hot" is a classic example they participate in a very dangerous sport but are (especially these days) highly risk averse. Improving the odds to your advantage (as you put it) is something only your insurance company should care about.