Why You Should Assess Your Decisions Via Narratives, not Probabilities
Since scientists discovered the predictive power of probability, economists have often been tempted to apply the probabilistic reasoning to our societies.
They have tried to explain the chances of success in an investment or market share, by comparing the expected values at stakes. Yet, unlike a simple roll of the dice, financial and human affairs can never be repeated under the same conditions. Each situation is unique, and human actors face problems of which they will never have the last word.
Nevertheless, for John Kay and Mervin King in Radical Uncertainty, it is easy to be fooled by numerical reasoning. Their great clarity and logic blinds us to our own certainties.
Numbers can hide different yet crucial narratives than those already established, and prevent us from considering the specifics of our problems.
Here’s how you can use the power of alternate narratives to find the most appropriate solution to your problem.
The drawbacks of probabilistic reasoning
You certainly have memories of your mathematics class about probabilities.
When you roll a die numerous times, you are certain to have a distribution of predictable results in the form of 50% heads/50% tails. Where does this certainty come from? From the fact that the dice is not made up and does not change shape during the different throws.
This also applies with more precautions to fields such as genetics or population biology. In such cases, the possibilities are fixed and closed: while mutations are rare, the biological structure of our genes is relatively fixed and the reproduction factors are always similar, which makes it possible to evaluate with relative precision the mutation rate or future population growth.
This is far from being the case in the situations we encounter every day, whether it is to evaluate a market situation, decide on a loan or create a marketing strategy. Crises such as the Covid-19 crisis are, strictly speaking, unpredictable and profoundly disrupt the conditions of our calculations.
But is it nevertheless possible to rely on probabilities to favor one course of action over another?
Many economists and politicians have already started to assign numbers to alternatives in their decisions. Neo-classical economists such as Samuelson and Friedman have explained business decisions by probabilistic means.
Condorcet reformed the French judicial structure on the assumption that judges form a false opinion 1 chance in 10, and therefore concluded that thirty judges were necessary to reduce the risk of injustice (calculations that today seem absurd).
The fact is that figures blind us to our certainties, and prevent us from considering the always unique conditions we have to face. Their excessive attractiveness prevents us from accepting other explanations and narratives in our debates.
Acknowledging radical uncertainty
Faced with the appeal of probabilities, an alternative way of making decisions is to privilege narratives and the plurality of perspectives.
But to be able to adopt this method, we must first accept the radical uncertainty that surrounds our actions. For example, some people have taken as granted the outcomes of their own reasoning and calculation, without considering different perspectives.
Professor Roy Meadow of Child Psychiatry has stated that “one sudden infant death is a tragedy, two is suspicious and three is murder, until proven otherwise”. In front of Saly Clark, a woman who saw the death of these two children by SIDS (sudden infant death syndrome), he defended the idea that “that the chance of two children from an affluent family suffering SIDS was 1 in 73 million”. Based on his own calculations rather than the specifics of the situation, he argued against it. In the end, this woman was unjustly accused of murdering her children.
The problem here is not that there was a miscalculation due to a lack of information, but that he dared to put probability figures into phenomena that are too complex to be judged in this way (biological and childbirth processes are too often different). It is precisely this uncertainty about information that must be admitted.
Sometimes one “I don’t know” allows going further in a case than calculations that are slightly related to reality. The benefit of the doubt makes it possible to shed light on other perspectives of explanation.
Knowing when to challenge current models
Robert McNamara was one of the geniuses of post-war military logistics and “quantitative computation” in operation management. His reputation as a great manager made him the Secretary of Defense in the Johnson government. Faced with the escalating conflict in Vietnam, he wondered whether to continue fighting on the ground or leave.
By calculating some factors he chose to weight his decision, he concluded that the US odds were still in their favor. That’s when he famously claimed that “every quantitative measurement…shows that we are winning the war”.
Yet, the ensuing disaster revealed the numerous flaws of the American troops on the ground. McNamara underestimated decisive narratives, such as the popular views and attitudes in South Vietnam, and the “divide and rule” political strategy of the South Vietnamese president Ngô Đình Diệm to stay in power. But it was not only him who was mistaken. There was an impossibility for the government surrounding President Johnson to think different narratives and. McNamara himself was too obsessed with these figures to seriously consider the difficulties of the American Army.
Building alternate narratives
When John F. Kennedy awoke on October 16, 1962, he found himself facing a crisis without precedent in the Cold War that pitted him against the USSR Bloc: the CIA informed him of the presence of missile installations on Cuban territory, within the decisive range of the United States.
But instead of finding a quick solution to confront the threat, he allowed himself to reflect:
“I think we ought to think of why the Russians did this. There must be some major reasons for the Soviets to set this up”.
According to Ryan Holiday in Stillness Is Key, this pause for reflection before even reacting made him realize that the situation was not exactly as it appeared to the Americans. Khrushchev’s reason behind this device was not really to threaten him. He thought that the young President Kennedy was weak and wanted to impress him.
As a result, Kennedy refused the solutions proposed by his advisors : either directly attacking the installations in Cuba, or blocking Cuba by sea and quarantining it. Some of them even insisted on the high chance (up to 60%) that Khrushchev was serious, and recommended attacking it directly.
Yet, despite the provocations, he decided to delay the offensive and allowing both sides time to think, until Khrushchev’s position proved untenable. Kennedy believed in a third narrative, and found time to elaborate it : Krutschev wasn’t really serious and wanted to weaken Kennedy position by fear.
Here, listening to probabilities (the odd for Khrushchev being serious are 60%, not 40%) would have had no good. The idea was to rethink and refine the current narrative to make a strong decision.
That’s what you can learn from decision-making in the face of radical uncertainty. Make good use of it!