Uncertainty and Risk
Resolutions give us the pretense of control over the future. Everywhere, New Year's is a moment to consider our weaknesses and how we might reduce the vulnerabilities they pose—and to do something about the scary powerlessness that comes from thinking about the unsettling unknown of what lies ahead. https://www.psychologytoday.com/us/blog/how-risky-is-it-really/201312/why-we-really-celebrate-new-years-day
Risk is the potential of losing something of value, weighed against the potential to gain something of value. Values (such as physical health, social status, emotional well being or financial wealth) can be gained or lost when taking risk resulting from a given action, activity and/or inaction, foreseen or unforeseen. Risk can also be defined as the intentional interaction with uncertainty. Risk perception is the subjective judgment people make about the severity of a risk, and may vary person to person. Any human endeavor carries some risk, but some are much riskier than others … The essential feature here is uncertainty. Without uncertainty there is no risk, only clear danger.
http://en.wikipedia.org/wiki/Risk
Simplistically stated there may be a risk of being bitten by a venomous snake if one is in the wild, however, if one falls into a high walled snake pit filled with live venomous snakes there is a clear danger.
Risks generally have potentially positive and negative outcomes. Never eating is not a risk, it is a danger. Humans must eat to live. If one does not eat one dies. Eating certain foods have a risk, they may be poisonous, cause an allergic reaction, they can have side effects, etc. Even eating the right foods can have negative consequences such as eating not enough or eating too much.
What good is sitting alone in your room?
Come hear the music play.
Life is a Cabaret, old chum,
Come to the Cabaret.
http://www.stlyrics.com/lyrics/cabaret/cabaret.htm
Interpreted as a metaphor for life, the lyric above suggests taking risks to live life fully. There are risks to doing nothing as well as doing something.
All risks are not symmetrical.
Quantifying Risk
Risk = (probability of accident occurring) X (expected loss in case of the accident)
For example, if performing activity Z has a probability of 0.01 of suffering an accident of A, with a loss of 1000, then total risk is a loss of 10, the product of 0.01 and 1000.
Consider multiple risks then the binomial equation applies.
While this may look complicated it can be explained more simply
as follows:
∑ simply means the sum of all individual accidents with the probability multiplied by the loss.
Risk = ∑ (probability of accident occurring) X (expected loss in case of the accident)
For example, if performing activity Z has a probability of 0.01 of suffering
an accident of A, with a
loss of 1000, and a probability of 0.000001 of suffering an accident of type B, with a loss of 2,000,000,
then total loss expectancy is 12, which is equal to a loss of 10 from an
accident of type A and 2 from an accident of type B.
http://en.wikipedia.org/wiki/Risk
Markets
Free markets allow a best or near best solution to emerge. This is a chaotic process and requires trust. One must ensure “ownership” of the means to produce the idea/process/good. This implies structures must be in place, which may or may not confer advantages to certain players. In a totally free market, the best idea would eventually outcompete and dominate. In the real world, barriers to entry, a lack of access to critical structural advantages, such as the ability to raise capital, to have legal protections, etc. may allow for the “best” idea/process/good to be outcompeted because of these other factors.
Where there is a lack of trust there often exists a power grab, because one does not have faith that the best solution is able to emerge, therefore might can make right.
Please consider this section along with ALL OTHER SECTIONS but especially Happiness (Maslow hierarchy) Basic & Personal Economics. Patience, Power, The Real & Imagined, and Reality. Rational decisions are based on the probability of the outcome times the risk considering the individual's risk tolerance.
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