Caspar Berry at eWorld – Unreliable Experts, Risk and Butterflies

At last week’s eWorld conference, the morning keynote speaker was Caspar Berry, ex actor and scriptwriter, professional poker player and now an expert on risk and related issues.

He got the balance right in terms of some jokes, lots of fast-paced and often humorous slides, but also some serious content. He drew parallels between the worlds of business and poker, but he kept it all light in tone, while making some serious points, a couple of which were real lightbulb moments.

Berry started by talking about uncertainty. We often think of it as a negative, with stock market crashes, the refugee crisis, Brexit and so on. Yet uncertainty is exciting, it makes things interesting – take sport as an example. Poker has boomed in recent years, in part because “it makes uncertainty safe” just as great stories do. And it is less dangerous than real sport. (By the way, did you know that statistically, bowls is the “most dangerous” sport in the UK? Think about it  … and be careful with statistics!)

We associate poker with risk, but it is not physical risk. It is risk driven by uncertainty, unknown futures, and the questions of resource allocation around that - much like many aspects of business.

Berry quoted research started by academic Philip Tetlock in 1984 – the “Good Judgement Project”. He asked 284 world experts 27450 questions over 20 years about the future; each expert had to make a prediction abut events in their sphere of expertise and give it a likelihood percentage. They also had to state how certain they were of their prediction.

The result? Some people were better than others, but as a whole, the group performance was no better than random – we would have seen results just as good if we had “thrown darts at a dartboard”.

Why is it so hard to look into the future? Berry talked about the butterfly effect (in chaos theory); the tiniest event can have a major impact elsewhere. Spain might have conquered England with the Armada if the wind had been in a different direction, and the whole world would have gone in a different direction.  Every moment of every day, the smallest factors can change the whole direction of our lives.

“You cannot control the cards”, he said, and then this was one of those lightbulb moments for me. “It is not about getting good hands in poker; it is about making the most of the cards you are dealt”. So he explained that in the professional game, everyone eventually gets the same number of great hands. It is about maximising the return from those hands that matter – and occasionally winning when you had no right to. You might win $100K in one pot and have “failed” if you should have won $200K.

Anyway, we have many mechanisms to help overcome or manage that risk and uncertainty. Brands reduce risk, for instance, as we know what we are going to get. It is always re-assuring when people appear to have the answers, whether they are prophets or financial analysts. But beware - the strongest correlation in the Tetlock study was negative correlation with confidence! So the “experts”  who actually had less confidence in their own predictions were significantly more accurate in their predictions better than those who were over-confident.

So beware of over-confident experts, and “be humble, embrace the concept of uncertainty”-  understand that you can’t avoid it and we can’t control it. “Accept that the world is uncertain, and the turn of the card determines your outcome”. Even the Bank of England failed to predict the last banking crisis.

Which took us to his final remarks around decision making under conditions of uncertainty. Although Berry was running out of time by this point, he advised us to assess probabilities, look at the potential risk and return outcomes and assess different options. That really is at the heart of what he is proposing; look at business decisions from a probabilistic point of view in terms of their likely outcomes, and take risks where that is the right thing to do – but make sure those are calculated risks.

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