vault backup: 2025-07-29 16:54:53

the-failure-of-risk-management.md

@@ -29,14 +29,12 @@ Expected Value (Probability × Magnitude)
 alone can not predict or inform risky decisions,
 except for risk-neutral parties.
 People and organizations are risk-averse
-...
-
-* [ ] Finish this paragraph.  (see chapter 6) ➕ 2025-07-04
+%% TODO: ... %%
 
 ### Expert Opinion Must Be ~~Adjusted~~
 
 Expert opinion is valuable despite its flaws.
-...
+%% TODO: ... %%
 
 The book details the statistically observable tendency for people
 to underestimate risk and to be overconfident in their beliefs.
@@ -60,7 +58,8 @@ given the number of German pilots and their overall victory/defeat figures,
 there was a ~30% chance an individual would achieve The Red Baron's record
 _by luck alone_.
 
-He later refers to the tendency to overvalue competence
+He later refers to the popular tendency
+to overvalue competence and undervalue luck
 in the role of achieving improbable accomplishments
 as the "Red Baron effect".
 
@@ -89,24 +88,32 @@ that X industry lacks the data to use quantitative models.
 
 ### _Exsupero Ursus_
 
-> Chapter 9 p.195
-
 Hubbard uses _exsupero ursus_ to describe the tendency of his detractors
 to dismiss quantitative methods as inappropriate to their industry-specific risks.
-He provides another analogy in which one car is picked of two (ordinary) cars 
-because the other car can't fly.
+
+> [!quote] Chapter 9 p.195
+> Suppose a car buyer had a choice between buying two nearly identical automobiles, Car A and Car B.
+> The only difference is that Car B is $1,000 more expensive,
+> has fifty thousand more miles, and was once driven into a lake.
+> But buyer chooses Car B because Car A doesn't fly.
+> Neither does Car B, of course,
+> but for some reason the buyer believes that Car A should fly
+> and therefore chooses Car B.
+> The buyer is committing the exsupero ursus fallacy.
+
 Based on this strawman it is clear Hubbard believes his detractors are _correct_
 that qualitative methods can not capture the entire nuance of risk probability,
 but that they are failing to acknowledge that their preferred alternatives
 are not demonstrably more effective at doing so.
+
 The nuance Hubbard dismisses without addressing is the possibility of model _improvement_.
-A most competant detractor would be aware of the apparent contradiction
+A most competent detractor would be aware of the apparent contradiction
 but argue that their methods will eventually surpass quantitative methods
 if they are further developed.
 Such a position would additionally contextualize Hubbard's observations
 that detractors become emotional in their defense.
-To them, Hubbards methods represent an attractive short-term gain
-excluding a long-term payoff.
+To them, Hubbard's methods represent an attractive short-term gain
+that would exclude a long-term payoff.
 
 Hubbard's dismissal rubs me wrong
 because it reads exactly as he describes the "at least we're doing _something_" argument