Risk is the chance that something can go wrong, that something bad can happen. The term “risk management” is a misnomer. No one can manage risk, only do things to reduce its likelihood or severity. We can’t manage risk, therefore the field of risk management focuses on managing controls designed to reduce risk. Effective controls can help prevent bad things from happening.
When we think about the possibility that something bad will happen, our thinking can skew our judgment about controls. In his excellent book, Thinking, Fast and Slow, Nobel laureate Daniel Kahneman describes errors in judgment such as the “possibility effect,” which causes highly unlikely outcomes to be weighted disproportionately more than they deserve. Conversely, the “certainty effect” causes outcomes that are almost certain to occur to receive less weight than their probability justifies. Kahneman writes, “When you take the long view of many similar decisions, you can see that paying a premium to avoid a small risk of a large loss is costly… Consistent overweighting of improbable outcomes—a feature of intuitive decision making—eventually leads to inferior outcomes.”
As the world confronts the corona virus and COVID-19, scientists and medical professionals appear to be the only ones equipped to make a rational prediction about probable outcomes in various scenarios. They have determined rather conclusively that the corona virus presents a large risk of large loss. The rest of us should heed their guidance instead of speculating about improbable outcomes.
Laypeople posting on social media have questioned the economic impact of the response to COVID-19. They cite the number of deaths from causes such as heart disease and obesity that are often preventable but that people, through conscious choices, fail to prevent. They suggest that our society accepts a certain amount of death even when death could be avoided. This line of thinking has two critical flaws. First, leading a lifestyle at increased risk for heart disease or obesity is largely a personal choice that cannot directly cause the death of another person. Second, weighing loss of life is appropriate in a very few situations, and unethical in most others. A military leader planning an invasion might rightly make a calculation in terms of acceptable loss of life. A leader protecting citizens from attack by an invader—human or viral—should not. For a leader to accept loss of innocent life when defending people from attack is unethical.
Well-written op-ed pieces suggest that the economic toll of measures put in place to flatten the curve of corona virus infection may be too steep a price to pay to prevent COVID-19. In fact, we will never know. In risk management, it is never possible to compare the actual cost of mitigation to the actual cost of unmitigated loss. Successful risk management and loss are mutually exclusive. When risk management is completely effective, its cost will seem excessive. If risk management fails, the losses it allows may be unbearable.
I worry about not having sufficient information to make informed decisions regarding the threat posed by the corona virus. I worry about my family, extended family, and friends. We face the risk that something bad will happen. Bad things are happening; the risk has become not just possible but real. And in this environment, people no better informed than me are second-guessing experts. The actions of a few people may undo effective controls and increase the risk we all face. That should worry everyone.
The brilliant journalist Rebecca West wrote, “After any disturbance … we find our old concepts inadequate and look for new ones. But it unfortunately happens that the troubled times which produce an appetite for new ideas are the least propitious for clear thinking.” Let’s rely on experts for their clear thinking during this extreme social, medical, and economic disturbance. Let’s follow their advice. When we come out on the other side of the crisis, we can get together—in person—to develop new ideas about how to do better next time. There will be a next time.