We talk about “risk intelligence” and various gurus and philosophers have called it “the capacity to learn about risk from experience and a special kind of intelligence for thinking about risk and uncertainty.” I’m not exactly sure what that means, except you’re going pay a lot find out; and you’re also likely to get involved with estimating probabilities about threats and quantifying vulnerabilities and sophisticated probabilistic models.
But what if you are not very sophisticated? Is there hope? Actually it pays to be “simple” when it comes to dealing with high impact risk. That’s what The Curly Factor is all about.
Curly was a very simple guy. He was easily the dumbest but best loved character of the Three Stooges. There isn’t a culture in the world where people don’t recognize Curly. Since he’s been dead for half a century and made a bunch of low budget “shorts” of questionable quality in the 1930’s that’s a pretty remarkable achievement.
So what is The Curly Factor? In two words:
“coarse behavior. “
No, not the kind of coarse behavior your mother yelled at you about. Curly only noticed very basic signals from his environment. Curly didn’t have elaborate or sophisticated decision making rules. He wouldn’t know probability from a pot roast. But when they passed the hors d’oeuvers at a fancy black tie party, Curly didn’t just take two; he merrily took the whole tray! Subtlety was lost on him.
Curly only paid attention to the essential. We can just as easily substitute “essential” for “existential.”All other information is filtered out.
Is the key to emulate Curly and not the sophisticates with their complicated probabilities and models? In certain instances that is exactly the case.
Although risk “experts” are loathed to admit it, the class of risk that is most threatening …and the ones for which there are no probability distributions…are the risks beyond our control, the ones we didn’t see coming. Traditional risk management isn’t equipped to deal with these killer risks, the ones that can bring your company or government to its knees overnight. There are emerging tools and techniques but that has yet to become part of the profession’s DNA. It’s all about the science of complexity and resilience, but more on that later.
So is the answer to do dumb things? Well, not exactly dumb…more like “less sophisticated.”
Curly engages in what economists call “sub-optimal behavior.” Yes, that means he does dumb things, or at least things that seem dumb to the rest of us. The corporate world has programmed us to go for gains at the margin, get a quick success, to become more efficient, and do the rational thing. You win a lot of short term victories but there is solid evidence species that are prolific and successful in the short term die out after being hit with an unanticipated event. Sub-optimization can often equal survival.
Some of us have developed great talents for dealing with known risks but don’t have the understanding or aptitude for dealing with the uncertainty. Worse yet, people are often programmed and rewarded for focusing on inconsequential or less consequential — it is a safe bet since if you get it wrong, the outcome isn’t catastrophic. But if you want to understand the consequential – the killer risks – you have to change your frame of reference, think about things a little differently.
Try this thought experiment: You are the President of British Petroleum and you have this vision of the Deepwater Horizon disaster a year before it takes place. You see the explosion, the fire, and the months of oil spilling into the Gulf. But here’s the catch: you can’t tell anyone about it. And that means you cannot focus remediation on that drilling platform. What do you do? Where do you focus your corporate risk management efforts?
Yeah, you ignore the subtleties of traditional risk management. You ignore the extraneous and focus like a laser on only that information that is directly relevant to your survival. That is exactly what Curly would do.
Now you understand the advantages of coarse behavior. There is, of course, nothing wrong with traditional risk management techniques; and I am not suggesting abandoning them. They are necessary but not sufficient to survive in today’s global and highly complex environment. If you haven’t developed the insight and the science to deal with uncertainty maybe you ought to think about doing so. Every now and again ask yourself “What would Curly do?” And always take the whole tray when they pass the hors d’oeuvers.
Note: This is a work in progress and I am happy to discuss my ongoing research. E-mail me and I will send you Rick Bookstaber’s original work on coarse behavior called the “Optimization of Coarse Behavior” or you can go to my profile on Linked-In and download it from the Box.net archive there. I take a little bit different approach than Bookstaber, but he is the towering intellect. One warning however, it is a “little” math intense.
John Marke © 2016