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November 22, 2006

The Risk Factor in Making Judgments (November 23, 2006)

Rick Leeland

November 22, 2006 

When we evaluate an action plan, we estimate the rate of success based on how often has it succeeded or failed in the past. The concept of probability is prepositional, and constitutes the foundation of judgment. The score of a choice is the rate of success multiplied by the desirability of the choice. Most choices have a degree of uncertainty – while a few of the choices are a clear ‘go’ or ‘stop,’ most fall somewhere in the middle and cause indecisiveness.

There are several basic elements in making rational choice. We choose the best one among alternatives based on a criteria of preference. And we gauge the risk factor based on the uncertainties to help us avoid flawed or incomplete information and unpredicted outcome.