# Risk Assessments and Preferences By:: [[Brian Heath]] 2023-04-30 Risk assessments are odd things. The more you dive into assessing the risk of something, the more you realize risk is just a preference. With physical systems, risk assessments seem straightforward. Will this bridge collapse? Calculate the maximum load and determine whether the maximum will ever be reached. While the structural maximum is known with high precision, determining whether the maximum load will ever be reached is a matter of guesswork and preference. How many cars can fit on the bridge at once? How heavy are the cars that day? Is the wind blowing, and is it hot or cold that day? To be safe, multiply the possible maximum load by three to ensure the bridge is extra strong. But, making the bridge three times stronger has a cost. Preference enters the risk equation. Do you dare place a price on human life if the bridge were to collapse, but you saved $10,000,000? While physical systems are well-known, humans and humans-in-the-loop systems are less understood and predictable. For example, can one predict the stock market? How does one go about assessing this kind of risk? Should you give someone a loan? Can you accurately assess whether they can pay you back based on a few tax documents and historical trends? A million things could happen to would prevent them from paying you back, including the proverbial bus hitting them on the way to work. Again, it comes down to preference because risk is not absolute. There is no correct way to calculate risk. In the end, risk assessment is just thinking, choosing the dice you want to roll, and hoping you don't lose everything prematurely. I suspect Risk Assessments became a thing when natural risk takers won big while those who are not lost out. Risk takers don't do risk assessments, their preference is just doing what feels right, and we only hear about the ones who made out like bandits. We never hear about those who lost everything. Those who don't naturally take risks want the glorious upside with none of the downsides. Too bad this doesn't exist, regardless of all the risk assessments you put together. But maybe the 200-page report will help you sleep at night. #### Related Items [[Analytics]] [[Risk Analysis]] [[Probability]] [[Systems Thinking]] [[The Human Condition]]