Taleb on the Limitations of Risk Management
Nice paragraph on the limitations of risk management in this occasionally interesting interview with Nicholas Taleb:
Because then you get a Maginot Line problem. [After World War I, the French erected concrete fortifications to prevent Germany from invading again—a response to the previous war, which proved ineffective for the next one.] You know, they make sure they solve that particular problem, the Germans will not invade from here. The thing you have to be aware of most obviously is scenario planning, because typically if you talk about scenarios, you’ll overestimate the probability of these scenarios. If you examine them at the expense of those you don’t examine, sometimes it has left a lot of people worse off, so scenario planning can be bad. I’ll just take my track record. Those who did scenario planning have not fared better than those who did not do scenario planning. A lot of people have done some kind of “make-sense” type measures, and that has made them more vulnerable because they give the illusion of having done your job. This is the problem with risk management. I always come back to a classical question. Don’t give a fool the illusion of risk management. Don’t ask someone to guess the number of dentists in Manhattan after asking him the last four digits of his Social Security number. The numbers will always be correlated. I actually did some work on risk management, to show how stupid we are when it comes to risk.
David • October 3, 2008 9:27 AM
He’s completely wrong about the Maginot Line. Divide the French front into the right (facing Germany), the middle (southern and eastern Belgium), and the left (central and western Belgium). In World War I, the Germans attacked along the front, most intensely and successfully on the French left.
Between the wars, the French built the Maginot Line on the right, to conserve on defenders. They put the best part of their army on the left, where the Germans had attacked in WWI and where early German attack plans in WWII were directed. They left weak forces in the center, where they considered the terrain very bad for attacking through (as shown in the Battle of the Bulge in 1944).
In 1940, the Maginot Line did its job very well, and the strong French and British left wing advanced according to plan. The main German attack was in the center; while the terrain was unfavorable for attacking, it was possible to move troops through it to attack at the French center. This led to the cutting off and the defeat of the strongest Allied forces.
The lesson is not that the French were overall stupid and unimaginative. The lesson is that they were defeated because the Germans were able to do what the French had considered impossible: launch an attack through the Ardennes Forest.
The worst security problems are going to come through completely unexpected attacks, similar to what the US military appears to be calling the “unknown unknowns”. The French guarded against any attack they considered possible, and were swiftly and decisively defeated.