In the decision sciences, a clear distinction is made between risk and uncertainty. You take a risk when you know in advance all the potential outcomes of your choice, and their respective probabilities. This risk description covers things like coin tosses, lotteries and spins of a slot machine. In such circumstances, only cold logic, statistical thinking, and possibly a pocket calculator, should influence your decision about whether to run the risk or not. As soon as some of the outcomes, and/or some of the probabilities, are not known, we enter the realm of uncertainty. In this less ordered domain, reason and statistics become less useful because there is nothing to calculate. Instead, argue decision scientists, one should rely more on one’s intuition, gut feelings and rules-of-thumb. Examples of such judgements include living to be one hundred years old, falling in love, or being killed by a terrorist. Any decision to bet on them – or insure against them – involves dealing with uncertainty… Read more on TCAM’s website
Can you think of an example of an effective working group? I can: a disaster rescue and recovery team. These are groups of men and women who, in the aftermath of a catastrophe, work to rescue the victims and to prevent subsequent loss of life. They are composed of specialists, like engineers, medics, electricians, and dog handlers. In the case of major disasters, such teams are brought in from several different countries. Some of them might never have worked together before. Yet the operation runs effectively. If teamwork is possible in such a diverse group, under intense time and performance pressure, in inhospitable working conditions, and among people who might not even have met before, why can it sometimes seem so difficult in the typical corporate environment?
At least one asset is guaranteed to enrich your portfolio this year: your investing experience. Stick at it long enough and you will encounter practically everything from start-ups to meltdowns, flashes in the pan to flash crashes, slim pickings to fat fingers. You will also discover the financial impact of earthquakes and tsunamis, of both the political and geological varieties. The wisdom of the years, one might argue, ought to make you a better investor. [Read more on TCAM’s website]
First you would think about whether its memory holds any sensitive data, and wonder what the stranger might do with it. Once you’re satisfied there are no ill intentions, you would decide whether you believe the stranger has the ability to repair smartphones. Given the success of the entire transaction depends on the latter, it seems counter-intuitive that this judgment be made only as a second step, yet this precisely what we all do. Read more on TCAM’s website
A half-hour delay in my flight from Heathrow recently offered me some unexpected time to browse the stores at Terminal 2. I had hoped that some Christmas gift ideas would reveal themselves to me. Somewhat selfishly, however, I ended up looking for something for myself in the men’s clothing department of John Lewis’s. I lifted a printed shirt from the rail and searched the underside for the garment label. A store assistant, recognising that I need good light to see anything these days, gestured for me to move towards him where the light was better. Continue reading
A friend of mine contacted me to share news of what he considered to be a remarkable coincidence. In an e-mail (liberally dotted with exclamation marks) he informed me that his wife goes to church with the sister of the UBS rogue trader, Kweku Adoboli. Crikey.
He was flabbergasted to discover that he was linked to the until recently jailed trader by a chain involving just three links. It is quite surprising but, in reality, not that improbable. In fact, as Microsoft uncovered when it investigated the flow of some 30 billion e-mail messages, everyone on the planet is probably linked to everyone else by just six steps. Indeed, I have just discovered that I am just four introductions away from the fraudster myself.
Although we are all rather closely connected to the famous and the infamous, we are usually unaware these connections exist. Even when we know they are there, we still do not know which of our friends, relatives or co-workers is the first crucial link. The person on your left could be signposted Adele; the one on yourright, Donald Trump.
 To be exact, 6.8 steps.
Hardly a week goes by without some sorry tale of a lost reputation. If it isn’t a politician accused of ruthless betrayal, or a bank’s name sullied by the fraudulent activities of its traders, it is the country itself that suffers the ignominy of being stripped of its triple-A sovereign debt rating. Reputations are clearly things that people, firms and nations can have, and lose. But what are they? Where do they come from? What are they worth? And what does one do to repair a tarnished one?…
This cheeky slogan, on postcards, mugs and screensavers, provides as much encouragement and motivation to modern office workers today as it did to the US Army Corps of Engineers during the Second World War. Whoever coined it, though, was certainly not talking about human decision-making, as the opposite might well be the case: tough decisions take a while, but impossible ones are easier.
In a recent ‘behavioural’ review of the biblical tale, the Prodigal Son, I was finally able assuage my usual annoyance with the counter-intuitive reaction of the title character’s father to the boy’s return. I understood the wisdom of the father’s action for his own personal well-being, but the parable still irritated a little. This is because, as a father, I struggled to imagine myself being able suppress the urge to scold the child for having squandered half of the family wealth. The expression “I told you so” would probably have rolled more easily off the tongue than “kill the fattened calf for a feast.” It was only after reviewing the episode for a second time that I realised my hasty conclusion was mostly due to the way the story was told.
Over Christmas I became reacquainted with the parable of the Prodigal Son. It is a frequently told story from the New Testament, yet it so often provokes grumbles amongst its audience. And this muffled disapproval always concerns the father’s behaviour. Although everyone can understand the actions of the selfish but ultimately repentant title character, and one can also sympathise with his steadfast but ultimately resentful brother, the father’s response to the return of his lost-but-now-found son strikes many as disproportionate. ..Read more on TCAM’s website