On assessing risk when grand transformative hopes, and often hype, becomes policy.
Can you truly predict the ripple effects of a black swan event? How do you manage emerging risks like climate change that are being incorporated into new policies? Guntram F. A. Werther, Ph.D., Research Professor, Integrative Business Applications Group – MSCM, The Fox School of Business, Temple University, Philadelphia, PA. explores idea risk, why our risk models will fail, and how to manage our own lack of knowledge.
The opposite of forecasting and assessing the consequents of an emerging world-changing large-scale and large-impact rare event (LSLIRE) (1) and/or so-called black swan is forecasting and assessing the consequents of an idea to create a world-changing large-scale and large-impact rare event outcome through policy.
Both are radically transformative processes involving whole system changes, the former disrupting via an unplanned destruction of existing arrangements and the latter disrupting via an idea-driven plan to construct new arrangements. When an idea operationalises and becomes active via policy, it is termed a schema (2).
From LSLIRE and black swan to the schema black box
The argument against being able to forecast and assess risk and other consequents of true black swan events is that they come out of nowhere. They are by definition unpredictable and cannot be forecast. Werther (2013) argued that most acclaimed black swans are not that, and thus were and are reasonably foreseeable and can often be forecast by using holistic assessment (1). A parallel argument is asserted here for foreseeing and expressing the necessary and sufficient conditions for achieving – that is, for constructing – an idea-driven world-changing schema.
Opening a world-changing schema’s black box
Such bold ideas arise surprisingly regularly, and latterly there have been several ideas of truly world-changing scope and scale that have attracted serious discussion and policy debate. These include such ideas as stopping or reversing climate change by fostering or forcing very broad human and societal behavior changes, like the U.S.’ Green New Deal idea of transforming U.S. society as a whole into a claimed more sustainable path. Or the idea of shifting to electric and self-driving cars with very broad transformative impacts on society, while completely changing work through an AI meets robotics pathway. And much farther along as an actual policy, a twinned schema that has failed repeatedly for about 2,500 years – building a sustainable united Europe – presently the European Union – and globalisation regime (3).
Mostly we don’t bother with seriously assessing such grand ideas until a proposed world-changing idea, supported by hopes and often hype, manifests as a policy and thus becomes formally a schema to which time, effort and resources are devoted for its implementation. Such schema at transformative scale often have a black box aspect to them in that nobody has a clear idea about how to actually do them. They are very bold proposals, now policies, for transforming an entire complex system. Because of their goal of transforming society or the world as a whole it is valid, even necessary, for risk managers and similar others to provide structured insights and risk guidance about such a schema’s path and potentials for implantation. How?
Models will fail
Because these schema work at world-changing levels involving both technical and societal complex adaptive change aspects, an integrative and holistic approach is necessary to assess them and/or forecast their outcomes. Model building will fail.
This assessment requirement was foreseen in the work of Przeworski and Teune’s The Logic of Comparative Social Inquiry which rejected models as useful for conducting these kinds of complex adaptive system-level change inquiries in favor of a holistic approach to dealing with a system’s past and emerging syndromes (4).
To provide a proof for plausible transformation, Mackie’s idea of an INUS condition can be adapted to explicate a stream of non-redundant elements (N) that are sufficient (S) for a, or any, reasoned demonstration that the world-changing schema can possibly occur (5). Such a proof must also deal with restraining blockages impeding a successful schema outcome; the conditions that if present make the schema’s achievement impossible or very implausible. Think of it this way: for any schema’s successful path all the sufficient factors must be present while all the blockages cannot be.
Mackie was concerned with proving formal causation. Thus his unnecessary (U) and sufficient (S) elements refer to each one path among the many possible paths to an outcome. Formally, Mackie sees it this way. Because there are many ways to an outcome, each single factor of a (any) successful proof is related to the effect as individually insufficient (I) to produce it but as a non-redundant (N) factor linked to other non-redundant factors of an unnecessary (U) but sufficient (S) condition. A lit match plus oxygen plus proper fuel produce a fire, but so does having an electrical short plus oxygen plus proper fuel; and many other such successful combinations. None of that happens if, for example, it is raining.
I am using the INUS condition requirement to show merely that any path is provable as being possible.
The overall logic is that absent plausible support for some stated specific and realistic pathway at syndrome-change level that contains the minimally sufficient factors to produce the desired outcome condition and avoids the blockages for the world-changing schema’s realisation, ‘success’ will not likely occur. In short, the default risk judgment favours failure. With a stated pathway that avoids blockages, the sufficient factors can be individually and integrally assessed for risk.
Some examples, in plainer English
To purposefully transform one syndrome into another, adequate non-redundant factors for a sufficient condition must integrally occur. Blockages cannot.
Werther (2019) argues, for example, that for the recurring schema of building a sustainable European union and a globalisation regime, ‘success’ is the ‘tail event’ probability. Whenever someone tried this schema for over the last 2,500 years, they arrive at quite similar backlash features amid an inability to construct the necessary and sufficient conditions for its sustainable success. It has never sustainably worked and no one has figured out how to do it. Present backlashes were foreseeable (2).
For a schema that has never been tried, self-driving technology seen via INUS syndrome change requirements shows multiple serious blockages to implementing at even small scale within society (6). Trust is a problem. When too, for example, is the last time anyone saw a human society where most (or any) drivers always came to a complete stop at stop signs or precisely obeyed all traffic rules? Here, as the technology got better, the ability to inject it into human society has not. So far, implementation has been pushed back decades from initial claims; to ‘if ever.’
Dumb ideas hopefully die young. More problematic for risk assessment are promising ideas, but worst are apparently great ideas that nobody has a clue how to achieve within real-world environments when these ideas become schema.
The schema ‘risk of success’ assessment task
Purposely transforming a whole society, or the world, is no small thing. Thus more than a little skepticism is called for when such a schema arises. On the other hand, why toss a desired outcome before comprehensively assessing it, risks included?
The classic way to fault a schema is to find one critical element that cannot, or is very unlikely to, be achieved. For simple systems this can work. The problem is that for very complex, interpenetrated and entangled systems like human societies, there are plausibly a great many paths to any particular outcome. A change in one element of that complex system can cause a change in others. In short, faulting is likely to be a tough, never-ending exploratory task for all the potential work-around pathways that exist in complex adaptive systems; in the syndromes.
The author conjectures this is why a desirable (to some) world-changing idea like constructing sustainable European union and globalisation can persist and draw ever-new proponents in the face of over 2,500 years of failures. There must be a path and the next iterator of the idea, of the next schema, thinks they can do it.
Doing this next iteration, like its predecessors, involves a great deal of time, effort and resources; often lives – so off we go to the next failed iteration; maybe.
A more robust, and certainly less costly, assessment solution at the scale of whole-system transformation involves asking its proponents to find any path to any of the likely syndromes’ outcomes that will achieve the schema goal.
In an open field with many potential solution paths, we ask they find any one.
Doing this only requires that they explain the necessary and sufficient conditions that must arise to sustainably achieve their schema. Risk managers can then assess the specific elemental non-redundant factors and sufficient condition of this plan.
Such an approach is absent; we are doomed to cast, and recast, time, effort and resources toward iterative world-changing schema that may be achievable, or they may merely be someone’s hope plus hype.
The risk management question, then, is how to best assess any particular grand world-changing schema, its sufficient non-redundant factors that produce the desired condition and each stated factor’s risks? The above brief comment provides a way to do that before society spends time, effort and resources in pursuit of what no one can show is plausibly doable.
- Werther, Guntram with Thomas R. Herget. 2013. Recognizing When Black Swans Aren’t: Holistically Training Management to Better Recognize, Assess, and Respond to Emerging Extreme Events. Chicago, IL: Society of Actuaries. (Pp. 57).
- The word ‘schema’ is used because it represents an idea in a framed or structured action. Merriam-Webster defines ‘schema’ as ‘a structured framework or plan’, see: https:// www.merriam-webster.com/dictionary/ schema (accessed 3rd September, 2018); Oxford Dictionaries defines it as ‘A representation of a plan or theory in the form of an outline or model’, see: https://en.oxforddictionaries.com/ definition/schema (accessed 3rd September, 2018).
- Werther, Guntram. On better assessing the future outcomes of ‘grand, world-changing schema’: Seeing present EU and globalisation backlashes as to-be-expected. Journal of Risk Management in Financial Institutions. London: Henry Stewart Publications, Spring 2019: Vol. 12, No. 1, 1–10.
- Przeworski, Adam and Henry Tuene. 1982. The Logic of Comparative Social Inquiry. Malabar, Florida: Robert E. Krieger Publishing Company.
- Mackie, John. The Cement of the Universe. A Study of Causation. Oxford: The Clarendon Press.
- Dougherty, Owen. People are slashing tires on self-driving cars in Arizona. The Hill December 31, 2018. https://thehill.com/policy/technology/423374-people-are-slashing-tires-on-self-driving-vehicles-in-arizona, Accessed 6 April 2019; Nunes, Ashley. Self-Driving Cars Are on the Road to Nowhere. Foreign Policy, July 19, 2018. https://foreignpolicy.com/2018/07/19/self-driving-cars-are-on-the-road-to-nowhere/. Accessed 6 April 2019.