Why consider uncertainty? The value of knowing how little you know

What time should you leave to catch a plane flight? We all know intuitively to leave extra time for traffic and other uncertainties. But, how much time? Most risk analyses still ignore uncertainty, using single estimates of frequency and consequence. When is it worth the effort to estimate the uncertainties explicitly? I'll introduce the Expected Value of Including Uncertainty (EVIU) and show how it depends on the structure of your decision problem and value (or loss) function, not just the level of uncertainty. I'll illustrate it with common examples, including setting exposure standards, sizing electricity generation capacity, preparing for a pandemic ... and, of course, when to leave for the airport.

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Uncertainty: A Guide to Dealing with Uncertainty in Risk Analysis

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About The Speakers

Max Henrion

Max Henrion

CEO, Lumina Decision Systems

I am the founder and CEO of Lumina Decision Systems. I was lead designer of Analytica, about which PC Week said "All the problems of the common spreadsheet are fixed in Analytica, and the Jeeves Advisor, online consumer decision support. I am adjunct Professor at Carnegie Mellon, where I used to teach full-time. I was founding President of the Association of Uncertainty and Artificial Intelligence. I coauthored a book Uncertainty (Cambridge Univ Press), two other books, and over 60 refereed articles.