Tuesday, July 26, 2011

Ain’t So

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc

www.RSDsolutions.com

info@RSDsolutions.com

 

It’s not what we don’t know that hurts, it’s what we know that ain’t so.

 

Will Rogers

 

The American humorist Will Rogers may have been a pundit of risk management without anyone knowing it. 

 

 

How often does someone in risk management (and we are all in risk management whether we have the title or not) speak up and say something that is thought to be a truism is anything but?  The field of risk management deals in uncertainty – a fact that seems to be frequently forgotten.  Yes – I understand the mathematics of uncertainty – and yes I appreciate their use.  However I also appreciate their overuse and the power associated with them.  Nassim Taleb of course has written about this point in many different forums (his book “Fooled by Randomness is still underappreciated in my opinion). 

 

The quest is always on for mitigating or lessening what we don’t know.  And that quest should continue.  However there also needs to be a continuous ongoing quest to examine what we do know to make sure that it is (a) valid, and (b) still valid.  Things change.  Risk management changes.  Axioms do not change, but we have very few (any?) axioms in risk management.

 

However how many managers and risk managers (even marketing managers) have under-appreciated Will Rogers simple statement.  I fear it is way too many and too few are ignoring the words of a humorist from the early part of the last century.  Actually I fear that way too many risk managers are ignoring simple statements.

 

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