What is Risk?

Paul Beninger

Spring 2012

A Multi-faceted View of Risk and Risk Communication

Disclaimers

• Personal reflections– Not a comprehensive survey of ideas

• Focus on a few themes described by others

– Not necessarily representative of Genzyme

Definition

• Risk < Fr risque < It risco– Possibility of suffering harm or loss; danger.– A factor or element involving uncertain danger;

a hazard.

– Broader (more recent) scope• inclusion of opportunity

Themes I

• Perspectives on Risk– Mathematics & Economics– Psychological and Social Sciences– Cultural Sciences

Mathematics & Economics

Peter Bernstein (1996)

Peter Bernstein Against the Gods (1996)

• Antiquity– Past – Present | Future– Future: domain of oracles

• Greeks– Sought their wisdom from oracles– Believed that future was determined by the Fates

» Clotho, who spun the web of life» Lachesis, who measured its length» Atropos, who cut it

• Modernity– Mastery of risk– Past – Present – Future– Future: at the service of the present

Divination

• Desire to receive direct divine guidance for prediction by supernatural means of future events and interpretation of past occurrences– Natural

• Dreams, prophecy by oracle or ecstasy– Artificial

• Animate: birds (augury), entrails (haruspicy), involuntary movements (seizures)

• Inanimate: incense, egg shells, casting lots, astrology

Antiquity

• “Dice” < ME < Latin: dare – to give

• “Astragalus” < Greek: ankle bone, dice– Egypt (3500 BCE)

• “Hazard” < Arabic: al zahr – dice

Antiquity

• “0”– Cipher < Arabic: cifr < Hindu: sunya

• Abacus– < Greek: abax – sand-tray

• Calculate– < Latin: calculus - pebble

Modernity

• 1494: Paccioli – Double entry bookkeeping– How to divide the stakes in an unfinished game.

• 1545: Cardano: 1/6 x 1/6 = 1/36

– Liber de Ludo Aleae

• 1650: Pascal’s “Triangle” – coefficients to (a+b)n

Pascal’s Triangle

11 1

1 2 11 3 3 1

1 4 6 4 11 5 10 10 5 1

1 6 15 20 15 6 11 7 21 35 35 21 7 1

1 8 28 56 70 56 28 8 1

Khayyam (1100); Yanghui (1303); Pascal (1655)

Modernity

• 1700’s: – J Bernoulli

• sampling data and making inferences• certainty equivalent: utility of incremental wealth

inversely proportionate to wealth already possessed– Leibnitz: the importance of uncertainty

• “Nature has established patterns originating in the return of events, but only for the most part.”

– de Moivre: normal distribution

Modernity

• 20th Century– Franklin Knight: Risk, Uncertainty and Profit

(1921)• If you don’t know for sure what will happen, but you know

the odds, that’s risk• If you don’t even know the odds, that’s uncertainty

– Primary Uncertainty: the unknown unknowns– Secondary Uncertainty: the known unknowns

The final frontier…

There are things we know we know.We also know there are known unknowns: We know there are some things we do not know.But there are also unknown unknowns:

The ones we don’t know we don’t know.

Donald Rumsfeld

Modernity

• 20th Century– Kenneth Arrow [father of Risk Management]

• How we make decisions under conditions of uncertainty and how we live with those decisions; “clouds of vagueness”

– John von Neumann• Game theory• Certainty equivalent (Bernoulli) is akin to risk aversion

– Chaos theory• “non-linearity”: results are not proportionate to the cause• “butterfly effect”

Risk Communication

• Historical Notes– 1960’s: anti-establishment tones; e.g.,

• Rachael Carson: Silent Spring (’62), DDT• Paul Ehrlich: The Population Bomb (’68)• Barry Commoner: The Closing Circle (’71)• Natural Resources Defense Council (‘70)

– Innovations• Public appeal• Use of public medium – television

Psychological & Social Sciences

Peter Sandman (1993)

Science of Risk Management

Risk = Impact x Probability

Peter SandmanResponding to Community Outrage (1993)

Risk = Hazard + Outrage

Risk = Hazard + Outrage

• Hazard: science/probability – Quantification assigned by the “experts”

• Outrage: all other factors ignored by the “experts”– Circumstances identified by the “public”

Importance of Outrage

• Risk = Hazard + Outrage

• Outrage– As real as hazard– As measurable as hazard– As much a part of risk as hazard– As manageable as hazard

12 Independent Components of Outrage

Voluntary coerced

Natural industrial

Familiar exotic

Not memorable memorable

Not dreaded dreaded

Slow catastrophic

Knowable not knowable

Controlled by oneself controlled by others

Fair unfair

Morally irrelevant morally relevant

Trustworthy not trustworthy

Responsive Process Non-responsive process

Examples

NaturalTsunami (2004, 2011)

Mount St Helens (1980)

IndustrialBhopal (1984) Chernobyl

(1986)Fukushima, Japan (2011)

DreadedWest Nile Virus (1999)

cyclamates (1969)

Not dreaded

Asthma

Build Trust

• History– Hard to build up, easy to tear down

• Intent– Transparent, honest

• Quality of information– Value added, complete

• Judgment– Open, objective, fair

• Delivery on promises– Follow through, timely

Responsive Process

• Components– Open, and not secretive

• Proactive vs waiting for FOIA– Apologetic, and not defensive

• Admission, contrition, compensation, penance– Courteous, and not arrogant– Shared values, and not confrontational– Compassionate, and not technical

• Anecdote vs facts

The Role of Outrage

• People care more about outrage than about hazard

• Rationale– We all die– We are interested in how we are treated along

the way– High outrage is high risk

• High outrage motivates action

Goals of Risk Communication in a High Outrage Situation

• Reduce the outrage– Acknowledge the bad news– Share information– Share control– Share benefits fairly– Apologize

Robert Fulghum* (1986)

• Share• Play fair• Clean up after your own mess• Say you’re sorry

• *Everything I Know I Learned in Kindergarten

Be proactive

• Develop trust• Anticipate issues• Be open and courteous• Communicate feelings more than facts

Cultural Sciences

Douglas & Wildavsky (1983)Schwarz & Thompson (1990)

John Adams (1995)

Patterns in Uncertainty

• Douglas & Wildavsky (1983)– Beliefs about humankind’s place in nature– Risk is culturally constructed– 4 myths

• Nature benign• Nature ephemeral• Nature perverse/tolerant• Nature capricious

Nature benign

– Predictable, bountiful, robust, stable, forgiving– Nature is the benign context of human activity,

not something that needs to be managed, especially by government regulations

– Management style: non-interventionist, laissez-faire

Nature ephemeral

– Fragile, delicate, precarious, unforgiving– Nature is in danger of being provoked by

human carelessness into catastrophic collapse; government controls needed

– Management style: precautionary principle

Precautionary Principle

• The 1998 Wingspread Statement on the Precautionary Principle summarizes the principle this way: – “When an activity raises threats of harm to the environment or

human health, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically.”

• All statements of the Precautionary Principle contain a version of this formula: – When the health of humans and the environment is at stake, it

may not be necessary to wait for scientific certainty to take protective action.

• "Be careful." "Better safe than sorry." "Look before you leap." "First do no harm."

Nature perverse/tolerant

– Within limits, nature can be relied upon to behave predictably

– Regulation is required to prevent major excesses, while leaving the system to manage itself in minor matters

– Management style: interventionist

Nature capricious

– Nature is unpredictable– Nature is beyond our control– Management style: what will be, will be

Schwarz & Thompson (1990)

– Relationships• Individual vs Collectivist

– “Choosing” behaviors• Prescribed Behaviors vs Freedom to Choose

Patterns

The Fatalist The Hierarchist

The Individualist The Egalitarian

Freedom to Choose

Individual Collective

Prescribed Behavior

The Fatalist

– Little or no control over one’s own decisions– Does not belong to groups that make decisions

about others – Accepts fate and sees no point in changing it

The Hierarchist

– Lives in a world that imposes strong group boundaries and binding instructions for behavior

– Social relationships are hierarchical

The Individualist

– Self-made– Drives to control one’s own environment and

the people in it– Success is measured by wealth and

influence/power over other people

The Egalitarian

– Strong group loyalties– Respect for the rules of nature– Democratic decision making– Leadership rule by charisma

Nature Capricious

The Fatalist

Nature Ephemeral

The Egalitarian

Nature Benign

The Individualist

Nature Perverse/tolerant

The Hierarchist

Individual Collective

Prescribed Behavior

Freedom to Choose

John Adams Risk (1995)

How might risk be better managed?It depends upon the perspective.

• Fatalist– We cannot manage risk better; life is

unpredictable.– Insights

• The only law is that there is no law. (John Wheeler)• It may well be better to be dead than confronted

with the daily toll of man’s irrationality. (Norman Dixon)

• Efforts by risk managers to measure our fates are futile. (Richard Feynman)

How might risk be better managed?It depends upon the perspective.

• Hierarchist– “More research” and “More regulation”– Insights

• Belief in the quantifiability of risk• Principle effort of intervention is not reduction of

risk, but redistribution

How might risk be better managed?It depends upon the perspective.

• Individualist– Devolution of responsibility from bureaucracy

to the individual– Insights

• Greater interest in rewards of risk-taking• Champions free markets• Espouses a trial-and-error approach to life

How might risk be better managed?It depends upon the perspective.

• Egalitarian– More caution and cooperation– Insights

• Redress current injustices• Impossibility of value-free science• Applies the precautionary principle

– Genuine efforts to reduce the risk

Quotes

• Carson– Man's attitude toward nature is today critically important simply

because we have now acquired a fateful power to alter and destroy nature. But man is a part of nature, and his war against nature is inevitably a war against himself…[We are] challenged as mankind has never been challenged before to prove our maturity and our mastery, not of nature, but of ourselves.

• Commoner– The first law of ecology is that everything is related to everything

else.

Cultural model: fruitful tensions

• The 4 models cannot be persuaded to agree

• The 4 models should not be persuaded to agree.– Each possesses a small window on the truth

• The importance of the “loyal opposition”

– Each curbs the excesses of the other 3

Cultural model: potential effects when out-of-balance

PervasiveFatalism

UnrestrainedBureaucracy

UnbridledIndividualism

UncheckedEgalitarianism

Hobbesian: life would be “nasty, brutish, and

short”

Kafka-esque: control of process for its own

sake

Ayn Randian: powerful few would run over the many

Orwellian: Procrustean bed of conformity and

uniformity

Themes II

• Perspectives on Risk– Physical Sciences and Mathematics– Psychological and Social Sciences– Cultural Sciences

• Perceptions of Risk– “Objective”– “Subjective”– “Cultural”

.

• You cannot think without abstractions;

• accordingly, it is of the utmost importance to be vigilant in critically revising your modes of abstraction.

Alfred North Whitehead (1932)

.

We shall not cease from explorationAnd the end of all our exploringWill be to arrive where we startedAnd know the place for the first time

T.S. Eliot

Thank You

Bibliography

• John Adams– Risk (1995)

• Peter Bernstein– Against the Gods (1996)

• Douglas & Wildavsky– Risk and Culture (1983)

• Peter Sandman– Responding to Outrage (1993)

• Schwarz & Thompson – Divided We Stand (1990)

Weiljil (crisis) = weil (danger) + jil (opportunity)