Probability Assessment

Please Don't Use Words to Define Probabilities

In this space we often write about the do's and don'ts of probability assessment and working with uncertainty in general. One of the most fundamental don'ts is that you should not use words to define probabilities. You should more than avoid it, you should never do it. A 15% chance of something happening is exactly that: a 15% chance. Write it as 0.15 if you like, but don't call it a "moderate risk" or say it "probably won't happen".

Backcasting: Telling a Story of $20/bbl Oil

Back in January, I wrote a post about falling oil prices, which were then dipping below $50. While your friendly neighborhood analytic software vendor is not in the business of forecasting commodity prices, we hate to pass up an opportunity to talk about ubiquitous uncertainty, and oil prices are a classic example.

The Almanac Exercise: A Decision Analysis Classic

Decision Analysis Almanac Exercise

If you're a member of the Decision Analysis choir, you can stop reading now. Otherwise, have you ever taken or given an almanac exercise? If not, you should! Here's what it is...

The almanac exercise is a probability assessment game well known within some DA circles, but as I keep reminding my choirboy friends, not everybody comes from ADA/SDG/DFI/EES/UT/etc.

5 Ways to Screw Up a Decision Analysis Project

(Or, how about just a little bit of process to go with that gorgeous decision tree?)

Personally, I've always loved a beautiful model, whether it's based on decision trees, Monte Carlo, dynamic programming, or any other quantitative method. I've made a few beautiful models myself, and have admired many more created by colleagues and DPL users. However, fairly early on in my career I began to notice that the correlation between the beauty of a model and the success of a project (as measured on the armchair decision quality index) was quite small.

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