Baseball and risk management

One day we will send a man to the moon and bring him home safely.

One day we will elect a black President.

One day the Montreal Expos will win a World Series.

One day we will drive flying cars to work like George Jetson.

When you imagine a time line of the 20th century, at any moment on the continuum, these events were either a certainty, very likely or very unlikely. Space and time matter.

Every season statisticians and talking heads prognosticate about how likely it will be that a team could win the Championship. But often our beliefs (read: hope) are inconsistent with the experts’ stats or Vegas odds makers. That gap between the two values is a function of our understanding of the issue, our knowledge, experience and passion, and the space and time the prediction was made.

I grew up an Expos fan in Montreal. On Opening Day in the mid-80s, we skipped school and packed the Big O, our hearts filled with optimism. This is the year.

Championship in April: Likely.

While our prediction was often based on last season’s record, it was often enhanced more by our passion than by the skills of their pitching staff, batters and manager. So once they took that dreaded west coast road trip in July, dropping 8 out of 9, and falling 10 games back, it usually felt like the season was over. By October, it was.

Championship in October: Very unlikely.

Risk management is the same way. At any moment in time there hundreds of uncertainties which could harm your organization and the impact and likelihood of each one is never the same in April, July or October. The uncertainties are always in flux and each one is a function of the knowledge, experience and culture of the people making the predictions.

My point is in order to make an objective risk assessments on an ongoing basis, you need all available information (i.e., wins-losses, batting average, on base percentage, ERA, etc.), but you also need to back out the passion and emotion so you can assess the risk truthfully.

3 comments for “Baseball and risk management

  1. November 5, 2010 at 12:30 am

    Point made and point taken. Great post. I’m inspired to write a similar post on soccer, which would be the sport to use in my neck of the woods, but I’ll refrain from copying your ideas. I don’t know how you come up with these analogies. I wish I did sometimes, because it would make my blog more fun to read.

    • riskczar
      November 5, 2010 at 6:27 am

      Imitation is the sincerest form of flattery. You can can always write something like “I was reading Riskczar’s post and…” then go into your idea “but let’s look at this in football terms…”.

      I am glad you like some of this stuff. I like to educate but I also enjoy entertaining as well.

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