Blaise Pascal and the Somali Pirates

Are we confident that our processes are delivering to the right quality and compliance requirements? How did we decide what the right controls, checks and balances are? Do we build in a safety margin or pay for insurance because we might fail? After all, failure has consequences, and insurance and safety cushions can be costly.

For many years I’ve held the view that when managing processes, decisions about controls and risk management fall into a range that has fear-driven on one end and confidence-driven at the other. Admittedly, this omits the groups that are either clueless, delusional, or the different forms of arrogant. Fear or confidence can be very rational or irrational, often affected by our access to information, our knowledge, skill, bandwidth … and endless other influences. But in any of the cases, we make choices and implement decisions that affect how we do what we do and what costs we incur in doing it.

For a long time, most of human history, the decisions about controls and insurance were driven by a lot of subjectivity or by the economic value of the product or delivery. Fear of loss was a big factor. Until someone figured that likelihood of something happening matters and that there are ways of determining that likelihood.

 In fact, the evolution of the commercial applications of probability took decision making on just a journey. When insuring merchant vessels, decisions about risks and premiums moved from very subjective values based on the value of the cargo only to one that comprised value and probabilities and consequences.  Much of that journey’s naissance we owe to the French essayist, mathematician, philosopher and religious thinker, Blaise Pascal. His life and works are essential reads. Additionally, Pascal sponsored and funded work by others, among which was entitled La Logique, Ou L’art de Penser by the Port-Royal monastery in Paris (Pascal also owned a transport company and needed to figure out the cost and level of insurance). The author of the work, Antoine Arnauld said, “Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event.”

The ramifications of this journey transformed decision making and problem solving, all the way to our current approaches that include Six Sigma, Lean and countless modeling algorithms. So in some instances, fear could be replaced by objectivity and the science of prediction leading to prevention and upstream controls. History could be tracked and the data could be complied to provide us with distributions that allow us  to make inferences about the future, should the future be like the past. This gave us lots of opportunities to quantify our risks and improve our decision making and investments in controls or insurance. Now, that’s confidence.

Confidence that is supported by facts is surely better than actions driven by ignorance and fear. This is true as long as the past is a great predictor of the future. Since we rely on these predictions, we become predictable. Often that’s really good, but it can also create blinders when things or others are changing. Some of that has been happening with more frequency and some have happened with severe consequences, September 11, 2001 as a grim reminder. The growth of Somali piracy has certainly redefined the boundaries between fear and confidence as well as the requirements for capabilities and insurance.

So, the basis for fear or confidence may be evolving. The capabilities that serve us well to control the many areas that behave like our past are essential. Are they sufficient?

• When evaluating our process and decision making, do we look at the rates of change we face?
• Are the skills and tools that made us successful and confident balanced against the changes and requirements we must meet?
• Are we investing in responsiveness to change or insurance against the consequences of failure?