3 decision-making truths derived from Uncertainty taxonomy [scheme of classification] and a road sign.

3 decision-making truths derived from Uncertainty taxonomy [scheme of classification] and a road sign.

Dec 10th, 2015

3 decision-making truths derived from Uncertainty taxonomy [scheme of classification] and a road sign. A couple winters ago I saw an interesting road sign: in its own, warped and cynical way it reminded people about The law of attraction (aka the secret), and how we can influence our world, one way or another, with our decisions and, more importantly with the way we take them or what motivates them.

3 decision-making truths derived from Uncertainty taxonomy [scheme of classification] and a road sign.

Lately I found the image below defining a taxonomy of uncertainty in view of decision making. Something clicked in my mind: the two images are actually linked and should be discussed jointly.

Uncertainty taxonomy

3 decision-making truths derived from Uncertainty taxonomy [scheme of classification] and a road sign

To make things simple, let’s summarize the taxonomy this way:

  • The top half (Objective Uncertainty) is where risk analysis is.
    • Epistemology: is concerned with the nature of knowledge itself, its possibility, scope, and general basis. More broadly: How do we go about evaluating risks? or How do we separate true risks from “white noise”? or How can we be confident when we have analyzed the true risks? ORE (Optimum Risk Estimates) is an epistemological application as it is a systematic way by which we can determine when something is good or bad for a business and make knowledge based decisions.
    • Ontology: is concerned with identifying, in the most general terms, the kinds of things that actually exist. When we ask deep questions about what is the hazardous environment of a facility or Is there a risk? we are asking inherently ontological questions. Hazard identification is a ontological action, and PIGs risk matrix would also fall in this category, despite their well known limitations, delivering quasi-rational decisions.
  • The bottom half (Subjective Uncertainty) is where gut feelings and pre-conceived behaviors lie.
    • Moral: here belong all the approaches based on pre-cooked lists and forms, audits, compliance actions. People will deliver Rule-based decisions, without understanding the existence and truth of the risk landscape surrounding the decision.
    • Rule: this is where gut feelings, your rules, i.e pre-conceived behaviors, are kings. This is where, if you are lucky people will remember you as a “genius”, but if you are wrong, people will forget about you. You will join the scores of  audacious intuition-guided decision makers, or the “stupid guys” of the picture above.

We can draw three conclusions from this discussion:

  1. Knowledge guided decisions may not be flashy and prestigious, but are defensible and will increase your long term success record.
  2.  Intuition based decision will give you an adrenaline-fix and open two options: either glory (very seldom) or oblivion.
  3. The above two points are clear in roadwork signage, how come board rooms and high stake decision-makers often forget them?

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Category: Risk analysis, Risk management

One response to “3 decision-making truths derived from Uncertainty taxonomy [scheme of classification] and a road sign.”

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