We all face risk. Every day. Every moment. It’s everywhere.
Every choice we make has consequences, good, bad and indifferent. Even the choice to do nothing is a choice.
So how can we improve our ability to evaluate risks and make good choices that benefit us and those around us?
The brain has an unconscious difference engine that evaluates the probabilistic outcomes we face and determines, for better or for worse, what course of action to take.
That system is swayed by what data we currently have access to, our current emotional state and the perceived magnitude of any consequences.
Sometimes we don’t have enough data or clear data so we make assumptions that have a massive impact on what we decide.
Sometimes our emotional state, be it fear, anger, sadness, doubt or any emotion, especially to excess, can sway our decision for better or worse.
Sometimes lack of data, inadequate measurement tools, and our unconsciously triggered emotional states (including risk aversion) lead us to interpret and perceive differently the magnitude of consequences.
For day to day risk assessment and decision making we often provide clients with a two dimensional chart like the one below, where we measure the likelihood of harm and the size of harm.
RISK = Likelihood of Harm x Size of Harm
TWO DIMENSIONAL RISK ASSESSMENT & DECISION MAKING.
When making decisions we must begin with a reasonable understanding and assessment of risk.
Risk can be determined by looking at the likelihood of the harm as well as the size of the harm.
As you can see in the chart above, if something has an extremely unlikely probability of happening and a minimal size of harm, the decision to do it is relatively easy. Hence Green.
And if the likelihood of harm is near certain or certain and the harm would be major or catastrophic, the decision stop and determine how to mitigate the risk before acting is clear as well. Hence Red.
The Yellow and Orange reflect that as we increase the likelihood or the size of the harm our willingness to take the action without mitigation decreases.
We generally recommend to our clients in manufacturing, oil and gas, industrial explosives, and other industries that they utilize a tool based on this chart to help workers focus on mitigating risks and determine when to stop everything.
If Green, we move forward and stay focused on safety and risk mitigation.
If Yellow we intentionally think through mitigation strategies to reduce the likelihood and size of harm, but continue moving forward.
If Orange we stop and involve management to engage in a formal but rapid risk mitigation process.
If Red, we stop and involve senior management in a formal in depth risk mitigation process and mutli-dimensional risk analysis.
Two Dimensional Risk-Analysis Applied to Coronavirus and Stay at Home Orders.
When first faced with Coronavirus, the analysis was as follows:
If we keep living life as normal, the chance of some people dying was certain. While there was not enough data to determine whether it would be 200,000 or 5 million people dying, we all could reasonably agree that death was certain.
And whether 200K or 5 million deaths, most people would say that is major/catastrophic loss.
And in addition, the overwhelm of our hospital systems due to a massive spike in infections leading to massive death would also be catastrophic.
So it’s clearly a Red situation, especially if we are risk averse, which most people are and especially when the consequences are death, which is a binary outcome.
So the decision was to stop.
Eliminate, mitigate, and minimize the likelihood and magnitude of death right now from Coronavirus and of hospital overwhelm.
If we don’t all stay home, the likelihood of people dying (possibly hundreds of thousands or perhaps millions) is virtually certain. If we don’t stay home, the likelihood of our medical system being overrun and becoming nonfunctional was virtually certain. And since we didn’t have data on actual morbidity rates and saw preliminary indications that it could be as high as 5% from other countries because only those highly symptomatic were tested, and even if it were only 1% or even .1%, the magnitude of the harm and the loss of even 200,000 lives would be catastrophic.
At first glance, applying two dimensional risk analysis, stopping and stay-at-home is a decision most front line workers and front line leaders would make. It makes sense. Shut down everything and stay at home until it passes or we get a vaccine so that there will minimal loss of life from Coronavirus.
There is another consideration, though.
Once we determine that we are in the Red zone, senior leadership must do a formal multi-dimensional analysis and take into account additional considerations.
Easy and simple decisions are ones in which there is little or no cost to mitigating the size or likelihood of harm.
If shutting down indefinitely cost nothing and harmed no-one, it would clearly be the right and easy decision to make.
But Senior Leadership must now look at the situation through a multi-dimension risk analysis and decision making model, specifically considering the consequences of a shut down.
What is the likelihood of harm from a shutdown, and what is the magnitude of that harm?
If we find that by stopping and shutting down, we have another situation with a Red zone on the chart, leaders are in the difficult and unenviable position of having to decide between or amongst negative outcomes where there will be some kind of harm no matter what.
Multi- dimensional risk analysis applied to Coronavirus and Stay at Home Orders.
In a multi-dimensional analysis we don’t just look and the likelihood of harm and the magnitude of the harm and figure out how to mitigate or minimize them. We also look at the cost of stopping and at the likelihood of harm and the magnitude of harm that decision will bring about.
RISK of even catastrophic outcomes that are certain to occur, are often losses we consciously decide to incur because the alternative is even worse.
So applied to the stay-at-home order, what do we see on the chart.
What harm is highly likely or certain to occur?
The harm of an ongoing stay at home order is virtually certain to drive the following direct outcomes:
• Massive Unemployment
(possibly up to 35 million people and the families they support)
• Bankruptcy for Many Businesses
• Millions of School Children Losing Education
• Hundreds of thousands of Children going hungry
(with no access to school lunch)
• Millions of College Students Being Set Back in their Education
• Stress & Psychological Challenges for millions people
• Increased Domestic Violence
• Increased Emotional Stress for Children
• Increases in Divorce
• Massive Disruption in people’s quality of life
• Weight gain and loss of physical health for millions
• Millions of other people going hungry
• Missing Birthday’s, Weddings, Graduations, Funerals and other important family occasions
• States, Counties and Cities to be bankrupt or massively cut services due to revenue shortfalls/recession
• A loss of 5-15 Trillion Dollars to the US Economy going forward due to Recession
• A loss 3-5 Trillion Dollars of government borrowing for direct injection during and after stay at home.
• Millions of people having to liquidate and live on what would have been their retirement funds
• Hundreds of thousands or millions of people losing their homes due to unemployment, business failure, and Recession going forward.
All of these things are terrible. They are a loss of life. They will include some premature deaths, now from suicide, domestic violence, and failure to diagnose life threatening conditions because people are avoiding going to doctors and hospitals for fear of catching coronavirus. There will be future deaths because the massive psychological stress of the lockdown will take some years off of millions of people’s lifespans. There will be future deaths because the massive psychological stress of post lockdown unemployment, lost homes, lost businesses will take some years off of millions of peoples lifespans as well.
But it is more complex.
Stay at home doesn’t eliminate Coronavirus.
It flattens the curve to prevent hospital overwhelm and buys time to develop treatments and eventually possibly a vaccination while delaying the speed at which we develop herd immunity
But it also increases the magnitude and impact of all of the consequences of the shutdown listed above that are impacting 330,000,000 Americans, not to mention the impact on billions of people in less wealthy countries around the world who depend on the US economic engine and will experience loss of life and massive pain and suffering as a result of the shutdown here.
We are in a situation where our leaders and, we ourselves, must evaluate the impact of these consequences, like it or not.
It is an un-enviable position, but true leaders must face these kinds of situations and make these kinds of evaluations.
Our leaders are in the position of deciding life and death. They are also in the position of deciding on the quality of that life.
The key to making those difficult decisions well is the following:
• Leaders must get a real understanding of the true morbidity rate of coronavirus.
Morbidity rate equals number of deaths from the disease divided by the number of people who have it. Worldwide we have no clarity on the denominator. The death rate is different in different locations depending on the nature of that population, the quality of that areas health care, the number of people tested, and whether people without symptoms were included in the testing. That means testing for infection and antibody at scale to determine the actual number of people infected is critical and is key to any good risk analysis and decision making.
• Leaders must get clarity on whether we have immunity after being infected.
If large numbers of people have been infected without symptoms or with minimal symptoms, AND they now have antibodies that confer ongoing immunity, we are much closer to herd immunity.
• Leaders must get clarity on who is truly susceptible to morbidity or severe symptoms so they can be protected.
Those are all relatively straightforward challenges.
Here’s the big challenge.
Leaders (and all of us) must find a way to compare the harms from Coronavirus vs. Stay-at-Home.
We should be able to engage in civil discussions about these kinds of issues.
Our society, our world, must determine what life is to be going forward and ensure leaders make decisions based on those values.
Are we risk-averse as a people and do we want to live in fear? Do we have a risk tolerance and do we make hard decisions that balance the consequences of competing risks in a complex world? Do we want to live in a world of safety from disease with no human contact? Do we want to live in a world where we strike a different balance? Can we accept aggregate and stochastic risk as a part of life?
Here are some things to think about:
• The lifetime odds of being struck by lightning are 1 in 15,300
• The odds of dying in a car crash are 1 in 114
How much do you really actually worry about either of these things?
We don’t.
We just have faith and take them as a highly unlikely part of life.
What are the odds of dying from coronavirus in the US?
• They are anywhere between 5 in 100 and 1 in 3000.
We really don’t know yet, as silly as that sounds.
We don’t have proper testing at scale for infection or for antibodies.
If it is close to 1 in 3000, which some assert due to the massive number of non-symptomatic or mild symptom cases that are never tested, have we just had a massive overreaction? And if it were 5%, which is the currently published morbidity rate taking into account basically anyone who died and tested positive for COVID-19 in the US divided by the number of people who tested positive who are, due to limited testing, highly symptomatic patients, are the costs of staying at home acceptable for the next many months, or must we find another way?
The actual number likely lies somewhere in between. And it doesn’t make the decision easier. We are still dealing with life and death. But it does make the factors that have to be weighed against each other more clear so that hard decisions can be made intelligently.
At the end of the day our leaders will decide when lockdown ends, and provide a plan for moving forward, but we each ultimately will decide how we want to live going forward.
Let’s hope that the risk is lower for all of us that it currently appears.
Let’s hope that we get viable treatments or a cure.
Let’s hope we get a vaccine.
More importantly, let’s be strategic and mobilize resources intelligently towards achieving those ends.
But most importantly, let’s remember the all of the reasons we want to live and why we truly value life in the first place.
“There is neither happiness nor misery in the world; there is only the comparison of one state with another, nothing more. He who has felt the deepest grief is best able to experience supreme happiness. We must have felt what it is to die, that we may appreciate the enjoyments of living. Live, then, and be happy, beloved children of my heart, and never forget that until the day when God shall deign to reveal the future to man, all human wisdom is summed up in these two words,—’Wait and hope.’ ”
– The Count of Monte Cristo – Alexandre Dumas