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News and thoughts. Read at your own risk!

"Crazy" political choices can be very rational

27/6/2016

 
​There is much angst about the anti-elite masses making "crazy, irrational, uninformed" choices such as Brexit or supporting Trump. It's not actually irrational.

In some risk modeling work I do, you calculate the likely range (actually probability distribution) of a company's financial results going forward and compare it to the bare minimum they actually need to achieve to survive. The smaller that safety margin, the less risk the company can take to ensure failure is tolerably unlikely. Paradoxically, at a certain point it makes sense to take *more* risk: when the baseline outcome is actually below the bare minimum needed, what in (American) football is called a Hail Mary pass makes rational sense. A (say) 25% of success is better than guaranteed (continued) failure.

The same is true for the sizable economically-dispossessed, security-concerned, and angry chunk of the population today, whether UK, US, or elsewhere. The current trendline is unacceptable to them, so any alternative is better. A high-risk "crazy, uninformed" one is quite rational -- especially given the paucity of choice.

The establishment strategy of trying to starve the disruptive alternative of its support base merely by highlighting its "craziness" will have limited effectiveness, especially over the long term. It needs a better, more broadly acceptable alternative whose baseline outcome is more broadly embraced to reduce the attractiveness of a blow-it-all-up Hail Mary.
Trent R link
19/4/2021 17:51:46

Lovely blog thanks for taking the time to share this.


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    Martin Pergler

    Principal, Balanced Risk Strategies, Ltd..

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