HOW WE ASSESS RISK OR HOW TO BE A FOOL
23rd February, 2016


When it comes to risk assessment, it turns out that our rationality is often compromised — seriously.

This formula (attributed to Peter Sandman): Risk = Hazard + Outrage, will expose most (if not all) of our risk irrationality.


Research prior the 80s found the correlation between the hazard of a risk and upsetting nature of the risk to be incredibly low, on average the correlation was about 0.2 and with a percentage of variance — 0.04.


In a more colloquial term, the conclusion was: the risk that kill people is very different from the risk that get them really perturbed.

In some other words: when outrage is high, even though hazard is low, we overestimate risk. Same way, when outrage is low, and hazard is high, we underestimate risk.


Few examples to clarify:

If you have an option to donate to a charity that: a) Caters for cardiac patients or b) Caters for terrorism victims. I assume that there will be an overwhelming skew of funds directed to the terrorism victims. So the question is — why?


Let me answer with another question. How will you feel when you hear the news of a person who dies of heart disease versus a terrorist attack? Which one get you most upset? … That’s the outrage factor in play.


The less the familiar, the more the outrage; likewise the more the familiar, the lower the outrage (The probability that someone dies of heart disease down your street is way too high, compare to that of terrorist attack. [With very few exceptions — the northeastern part of my home country will be a notorious exception]


It turns out cardiovascular disease is the top cause of death worldwide and the number of terrorism death victims terribly pales in comparison. (Just google)

I covered a United Nations Foundation event on clean cook stove last year summer at Washington DC as a science journalist, and I found out that “there are about 4.3 million deaths annually as a result of exposure to smoke from traditional cook stoves and open fire worldwide, which implies that a life would be claimed by cook stove smoke in 8 seconds. This mortality rate surpasses the death from malaria, HIV and tuberculosis combined” Isn’t that astounding!


On pure statistics ground, your money should go to a cardiac center or a clean cookstove non-profit. However, this argument might be faulted from a moralistic point of view, but never with numbers.


You feel more in control while driving, but in flight — you are scared off (after all, you don’t even have an idea what the pilot looks like) The outrage is high, consequently perceived risk shoots up. Even though the data shows that more people die of car accidents than plane crashes.


Another question: do you really bother about global warming? or does global warming bothers you? Be brutally honest. My best guess is No(for both questions); why? Because outrage goes up when you think something bad is going to happen to you (I guess we are hardwired to be selfish); and when you think is going to happen now rather than later, it’s even worse. In the case of global warming, outrage is low even though hazard is high, so to ‘most of us’ there isn’t any risk.


This is generally called the perception gap: The distance between what the facts say and how much fear you feel. The bigger the gap the messier it could get.


To wrap this up I think your money should go to terrorism victim’s charities just as for cardiac patients (terrorist threat should be diminished), workout to prevent heart disease (at least do you best), be careful when you drive, remember ‘the data’ on your next flight, and yes global warming is real!

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Athens, United States
  • Risk Assessment

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