By Don Creswell, SmartOrg
If the objective of my article in last month’s ValuePoint (“Measurable Uncertainty vs. Unmeasurable Uncertainty”) was to open a dialog, I succeeded. The article drew insightful comments from the decision analysis (DA) community, fellow members of the Society of Decision Professionals, and others.
A former colleague and long-time friend, Sam Holtzman made a number of salient observations, which I am pleased to pass along. Currently founder and CEO of QuDec Inc., Sam is a serial entrepreneur, a pioneer in development of “intelligent decision systems” software and an acknowledged expert in the application of decision analysis.
Sam observed that “Uncertainty is neither measurable nor unmeasurable. It is not a quantity. It is how we describe the world as we experience it. Uncertainty is not a characteristic of objects or processes (fancy word: ontology); it is a consequence of what we know (fancy word: epistemology).” In regards to Kierkegaard (“The future can only be understood backwards but can only be lived forward.”), Holtzman partially agreed, but added the caveat that “we also perceive the past with uncertainty, so our understanding is based on the mental construct we each call ‘the past’ and the narrative we tell ourselves about it.”
Wrapping things up, Sam concluded that “referring to uncertainty as measurable is not so much an oxymoron but a non sequitur. Not being a quantity, measurability does not apply to uncertainty. There is nothing to measure.”
From Switzerland, Kelvin Stott contributed a detailed slide deck from a presentation at the BPE Pharma Summit (February 2013), “Working with Risk in R&D: How to define, measure, manage and embrace it.” Says Stott, “Love it or hate it, risk is a critical part of innovation, and developing new products requires taking significant risks and making big decisions with great uncertainty. But how many people really understand risk–how to define it, how to measure it, and how to manage it? You can’t manage what you can’t measure, and you can’t measure what you can’t define.”
In his presentation, Stott identified “3 Basic Sources of Risk and Uncertainty,” a la Donald Rumsfeld, as “Known Unknowns,” “Unknown Knowns,” and “Unknown Unknowns,” an interesting approach. To delve into ways he recommends addressing the impact of risk and uncertainty on pharmaceutical business decisions, take a look at his full presentation.
I am certain that learned discussions about uncertainty will continue as they have since the days of Bayes in the 1700’s.
Regardless of how one defines uncertainty, the challenge continues to confront decision makers, especially in today’s rapidly changing global environment. Companies in industries that are compelled to make large investments in projects that may not pay off for decades–think pharmaceuticals and oil and gas–have, by necessity, developed sophisticated processes and tools to guide them in making the best decisions possible in light of great unknowns. Management of companies in less risky industries have adopted many of these processes in recent decades as new waves of managers, often schooled in analytics and comfortable with computer-based processes, move into senior positions.