There are occasions when rational analysis and the formal estimate of the situation will not produce the answer that we feel in our bones is the right one. Then we temper the estimate, turn to our experience and intuition, screw up our courage, and make the decision as we know it ought to be. This sound and reliable mental process is known in the technical jargon of the trade as “taking a calculated risk.” Its translation most of the time runs roughly something like this: “Damn it, I can’t explain it, I just know it is right.” Paradoxically enough, it usually is.
But every now and then even the ablest commander may come a cropper; his efforts may produce not necessarily a catastrophe but something less than complete and painless victory. Then his critics can belabor him at great length with their matchless hindsight. That leaves the commander with an empty glove somewhere out in left field.
So what I propose here is a specific set of formulae for the calculation of risk:
A—Profit if successful
B—Cost if not attempted
C—Cost of attempt that fails
D—Cost of attempt that succeeds
E—Probability of success
A<0 Stop here and drop the project
A>0 Profit possible, investigate further
A/B= Inducement
A/C= Degree of hazard
>1 encouragement
<1 discouragement
A/D= Gain
B/C>1 Can’t lose (E is then irrelevant)
B/C<1 Elements of risk
C/D>1 Elements of risk
A<D Can’t win
C/D<1 Utopia (?)
A X E<B(1-E) No go
A X E>B(1-E) Go.
These are a few general postulates. In calculating the risk for a specific situation it is always necessary to state the limits of the particular problem, a requirement which can be met with brevity and clarity and in complete concord with the concept of the calculation process. Here is one such specific situation:
If:
A>C>B>D
then:
C/D<E/(1-E) Go
C/D>E/(1-E) No go
To insure success in its use, there is only one condition that must be met: the factors involved must never be expressed in arithmetic quantities. That would blunt the fine edge of judgment and obscure the true balance of intangibles. If this condition is scrupulously adhered to, then the use of these formulae offers a priceless dual advantage.
For the victor it will add a rare quality of intellectual brilliance to his assured rank of major or minor genius. To the unfortunate victim- of- circumstances- beyond- his- control it offers a dignified justification. The critics will be so involved in re-calculation that their audiences will soon give up in sheer boredom. The ones who were already in accord with the victim’s decision will have long since understood it anyway.