Kempkey Insurance and Risk Management Services

The Turkey Illusion

Nov 14, 2016

Consider the case of the turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race “looking out for its best interests.” On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

The reality is we don’t live in a world of certainty (thank goodness), yet as humans we appear to have a desire for certainty, a motivation to hold onto something rather than question it. We need to fit a story or pattern to a series of connected or disconnected facts. This is further exacerbated by many an expert creating false certainty by deluding us into thinking our future is predictable.

As Ben Franklin said “In this world nothing can be said to be certain, except death and taxes.”

Meanwhile, the world of statistics has evolved to distract our thinking about risk. Consider the fact that the term known risk, or simply risk, is for probabilities that can be measured, such as in the outcome of a coin toss, or the odds in winning the lottery. This is opposed to uncertainties that cannot be measured. In everyday language, we make a distinction between “certainty” and “risk,” but the terms “risk” and “uncertainty” are mostly used as synonyms. They aren’t. In a world of known risks, everything, including the probabilities, is known for certain. Here, statistical thinking and logic are sufficient to make good decisions. In an uncertain world, not everything is known, and one cannot calculate the best option. Here, good rules of thumb and intuition are also required.

So, there are two kinds of illusions of certainty. The first is to confuse a world of risk with one of certainty – the zero risk illusion. The second is to confuse a world of uncertainty with one of known risk – the turkey illusion. Be aware of these illusions so they don’t affect your ability to make good decisions.

Comments

  • Posted by Fred Walter - November 16, 2016

    Great insight Ed. Thanks for this.

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