Black Swans and unpredictability Flashcards
What shift have happened in risk management a.t. Furedi?
A shift from probabilistic to possibilistic risk management, which is linked to the shift from unknown to unknowable futures
2009
How does people respond to the unknown a.t. Furedi?
Depends on their culture and history
The culture of fear encourages society to approach human experience as a potential risk to our safety.
What does the culture of fear entail a.t. Furedi?
A routinisation of the expectation of worst possible outcomes. What is the worst that can happen? = what is likely to happen
What consequences are there of acting on the basis of worst case scenarios?
Policies designed to deal with threats are increasingly based on feelings and intuition rather than on evidence or facts.
- and lack of evidence can actually be used as a reason to act and it devaluates the status of knowledge
What does worst-case thinking encourages?
That society adopt fear as a dominant principle for organizing life.
Why are people in the west so afraid, when they have so little experience with poverty and hunger?
Because individuals who are freed from the grinding routine of day-to-day survival can shift their concern from being worried about hunger and chronic disease to a preoccupation with their emotional well-being.
Why is accurate forecasting not possible a.t. Makridakis and Taleb?
Because history never repeats itself, statistic models have been data-mined and underestimates uncertainty as they see events as independent, humans even more due to optimism
What forecasting methods do Makridakis and Taleb prefer?
Statistical models (formal methods), as there are less bias than in judgmental methods 2009
What are black swans?
It is rare events whose probability can not be estimated, and occur infrequent, thereby posing the greatest uncertainty.
What is the problem with predicting low prob events a.t. Goodwin and Wright?
Small reference group that might be outdated –> this gives a cognitive bias because judgment becomes necessary.
Which two types of uncertainty do we talk about?
Black swans: epistemic uncertainty where we lack knowledge of the event itself
Perfect storms: We know the probability of the individual events, but not what the consequences will be when they coincide.
What happens when something is called a black swan?
It is a political choice moving something from one range of solutions to another
How should we risk-manage without prediction?
Doing simulations to build up data, diversify and insure, and accept the volatility (o surpressing volatility increase the possibility for black swans to happen)
What can be predicted?
Anything imaginable - of course to a higher or lesser degree.
