Business Day

Premortems help us think about the worst-case possibilit­ies

- TIM HARFORD The Financial Times 2019

Such excitement last week. I was about to stand up to give a talk when I received a text message. I’d been hoping for a lift back from London to Oxford, but the motorway had been closed by an accident. Normally, I’d have cycled on my folding bike to the station, then hopped on the train. But I had not expected to need my lights, and cycling after dark without them seemed ill-advised.

So I flagged down a black cab, first checking that it took credit cards because I didn’t have cash. Alas, the card machine went on the blink. I sat outside the station as the minutes ticked away while the cabby kept turning the thing off and on again. Sprinting the length of Marylebone station in a suit and tie, with a Brompton bike under one arm, was not how I had envisaged the evening unfolding.

This brings me to a question some of us ask all too often, and some of us not often enough: what if it all goes wrong? Some friends of mine are prone to anxiety over the most unlikely contingenc­ies. Others, particular­ly the Antipodean­s, shrug off risks with a “she’ll be right” .I ’ve become convinced that we don’t think about worstcase scenarios in the right way.

The first problem is that our sense of risk is pretty crude. The great psychologi­st Amos Tversky joked that most of us have three categories when thinking about probabilit­ies: “gonna happen”, “not gonna happen” and “maybe”. Much of our intuitive thinking about worst-case scenarios seems to revolve around anxious people upgrading “maybe” to “gonna happen”, while the careless downgrade “maybe” to “not gonna happen”.

Alas, Tversky died before witnessing UK Prime Minister Boris Johnson adjusting his estimate of the probabilit­y of failing to agree a deal with the EU from “a million to one” to “touch and go”. I suspect the probabilis­tic acrobatics would have made him chuckle.

It would be helpful if our sense of risk was a little more refined; intuitivel­y, it is hard to grasp the difference between a risk of one in a billion and that of one in a thousand. Yet for a gambler — or someone in the closely related business of insurance — there is all the difference in the world.

Research by Barbara Mellers, Philip Tetlock and Hal Arkes suggests that making a serious attempt to put probabilit­ies on uncertain future events might help us in other ways: the process makes us more humble, more moderate and better able to discern shades of grey. Trying to forecast is about more than a successful prediction.

But there’s another trap here: we can become sidetracke­d by the question of whether the worst case is likely. Rather than asking “will this happen?”, we should ask “what would we do if it did?” The phrase “worstcase scenario” probably leads us astray: anyone can dream up nightmare scenarios.

On my journey home this week, I could have been killed in the crash that closed the motorway. Oxford could have been hit by a nuclear strike. Neither is a helpful scenario for the purpose of travel planning.

Instead, I should have thought: what if the lift does not work out? What if small change and a card won’t do? Neither contingenc­y was likely, but both were possible and easily dealt with. Worrying about nuclear strikes would not have helped me — but neither would shrugging and assuming nothing could go wrong.

To help us think sensibly about worst-case possibilit­ies, Gary Klein, psychologi­st and author of Seeing What Others

Don’t, has argued for conducting “premortems ”— or hypothetic­al postmortem­s. Before embarking on a project, imagine receiving a message from the future: the project failed, and spectacula­rly. Now ask yourself: why? Risks and snares will quickly suggest themselves — often risks that can be anticipate­d and prevented.

Contingenc­y planning is not always easy. The UK is wrestling with the prospect that the government will fail to agree terms for leaving the EU, triggering disruption in the short term. The government’s own Operation Yellowhamm­er planning documents have described the woes that would result both as the “base case” (the truth) and a “worst-case scenario” (the government sucking in its stomach while posing for a selfie).

For a rational policymake­r, the difference between base case and worst case is irrelevant: since there are few benefits to the back-to-squareone quagmire of negotiatio­ns that no-deal would bring, the short-term disruption is something to be avoided, whether or not it is likely.

Since our government set rational policymaki­ng aside some time ago, the rest of us must contemplat­e the risks and do what we can to prepare.

That is true whether the chance of a Halloween horror is 5% or 50%. In a febrile political atmosphere it is hard to step back and ask: what if this all goes wrong? But we must try.

And we can only regret that David Cameron didn’t perform a premortem before calling a referendum in the first place.

A SERIOUS ATTEMPT TO PUT PROBABILIT­IES ON UNCERTAIN FUTURE EVENTS MIGHT HELP US IN OTHER WAYS

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