Posted by: Nicholas Davis | March 3, 2009

Responding to uncertainty – take 1

Uncertainty can’t be resolved by rationality or logic. While I haven’t yet googled it, my shower-sense tells me that event uncertainty is a function of a set of triggers (which are normally so complex in their interaction they cannot be modelled) and time (since we presume the triggers operate in our normal temporal plane obeying the laws of causality, hence the longer time passes the greater opportunity there is for an uncertain event to occur). Think about the US presidential election. Before the votes have been counted, there is uncertainty as to who won. However this uncertainty is eventually resolved thanks to a series of time-bound limits (for campaigning and voting etc) and the operation of triggers (public opinion, news flow, supreme court decisions etc).

So thinking very hard about uncertainty doesn’t make it go away – no-one can truly know the future. Should we at some point have the expertise and computing power to be able to model the interaction of every particle since the dawn of time, even then we might not be able to resolve uncertainties involving human beings (depending on your thoughts on the existence of free will and the irrevocability of Heisenberg’s uncertainty principle). As an aside, I remember reading somewhere that after a relatively small number of collisions on a billiard table (10?), predicting the precise final resting place of the balls based on initial location and velocity of the white ball requires not just calculating wind resistance and friction co-efficients all over the table, but the gravitational pull exerted by nearby objects (UPDATE: Just realized it was The Black Swan. NNT is getting inside my head!). If there’s that much detail required to predict a break-shot in pool, imagine the model required to predict what I’ll have for lunch today. (mmm, Tuesday – sushi?) (UPDATE: it was quiche!)

So we have a conundrum – we live in an uncertain world, where, as Ian Wilson puts it,

“However good our futures research may be, we shall never be able to escape from the ultimate dilemma that all our knowledge is about the past, and all our decisions are about the future.”

So how do we deal with this? Mainly to clarify my own thinking, I’m going to propose a few categories of common responses to everyday uncertainty and then elaborate on theser when I have a bit more time. Note that not all of these are mutually exclusive. To put this in context, think about a typically uncertain situation. I’m considering flying to London for a meeting on Friday afternoon, but am faced with very tight timing between prior commitments in Geneva and the London session. I’m faced with a decision under uncertainty – do I cancel my previous engagements to give me more time to arrive at the airport or even get an earlier flight, or do I chance the Geneva traffic and BA scheduling?

(1) Hide.

Here, you don’t make a decision at all. You prevaricate, delay, run away, find any way to not have to face the uncertainty of a decision. I could simply decide that the London trip is too difficult to plan, and email my London contacts next week with an apology. (I know that this is a decision by default, but I think the various forms of decision-avoidance deserve their own category.)

(2) Hope.

A second approach is to simply pick an outcome (based on whatever criteria you desire and hope for the best. You appreciate there is uncertainty, but you rely on prayer, wishful thinking, karma or other external mechanisms to sway the outcome your way. To take this option, I might decide to simply stick with the later flight and rely on both good traffic and smooth weather to allow me to make both meetings in good time.

(3) Hedge.

Here you take a decision based on a probable or desired outcome, but place a one or more other bets that will pay off if the world turns out differently.  This is essentially what you do when you buy insurance – it doesn’t pay off when things go OK, but compensates you when they don’t. Here, I might look for a travel insurance policy that would compensate me for a late-running flight, thereby hedging against part of the downaisw associated with me missing my meeting in London.

(4) Have a contingency plan.

You take a decision based on one set of outcomes, but then think and plan about what your next moves would be if the world turns out differently. Essentially, you pre-plan your response, thus preparing yourself mentally and in terms of speedy resource-shifting should this be required. Here, I might inform my colleagues in London that there was a chance I’d miss the flight, see if there might be a later meeting time that could work as a backup, take a spare battery so I could work on my laptop for longer in the event of a grounded aircraft etc etc.

(5) Use research, logic and preparation to control for as many uncertainties as possible.

This is where, like Ian Thomas and his lion-tracking (see post below), you appreciate and accept the uncertainty and then do everything you can to understand it and reduce it to a set of known and unknown issues. This includes both assessing the drivers of uncertainty, but also the potential impact of different outcomes. This way you can both make a better decision up-front, and also have more information to help you efficiently hedge or contingency-plan as required. Here, I might check the weather forecast for storms, ask a taxi driver about traffic at lunchtime and planned road works, investigate BA’s delay record from Geneva to Heathrow on a Friday, consider how critical it would be if I missed the meeting against the cost of changing my previous engagement and so forth. This not only gives me a better chance of the possible impact of relevant uncertain events on my travel timing, but also could provide more information about alternate flights, driving routes or airline compensation that would be useful in the event of a problematic outcome to the uncertain factors.

These responses might seem very obvious, but I sense that we rarely consciously reflect on the tools at our disposal when faced with uncertainty, on what ever scale (I know I struggle). Therefore it is correspondingly easy to fall back on hoping or hiding. Naturally, I think solutions 3 to 5 are increasingly useful – from a perspective of peace of mind and in terms of ensuring that a good decision leads to a good outcome.

What have I missed? Are there other responses to dealing with uncertainty that people do or should display? Certainly there is a whole load of work involved in assessing impact alone. And there is the impact of psychological bias in the process that is important to recognize. Perhaps that would be a good next post…

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