Risk: Life is inherently risky... Everything we do, comes with a risk... Even me making the decision to write this article has many risks, as in: I run the risk of my article not being read or read but not understood or read, understood but criticized... The point is how much risk can one handle in making a decision... Now, in decision making terms, risk could be the inability of an alternative in reaching the objective... Risk is a direct indication of a highly probable nature of the consequences... For a vivid picture, let us say I have two investment options: Option (A) and Option (B)... And lets say option (A) is CERTAINLY going to yield me a return of 10 monetary units.. and option (B) is a 50-50 LOTTERY between a return of 30 monetary units and a return of nothing... The expected monetary payoffs* for both the options would be for (A)- 10 and for (B)- 15.... So in monetary terms, option (B) is better... Now lets define some units, Option (A) is a CERTAIN Rs. 10/- and Option (B) is a 50: 50 GAMBLE between Rs.0/- and Rs.30/-... Lets say I go with the expected pay- off theory and I select option (B)...
Showing posts with label decision. Show all posts
Showing posts with label decision. Show all posts
Risk and Regret- The Art of Decision Making II
Risk: Life is inherently risky... Everything we do, comes with a risk... Even me making the decision to write this article has many risks, as in: I run the risk of my article not being read or read but not understood or read, understood but criticized... The point is how much risk can one handle in making a decision... Now, in decision making terms, risk could be the inability of an alternative in reaching the objective... Risk is a direct indication of a highly probable nature of the consequences... For a vivid picture, let us say I have two investment options: Option (A) and Option (B)... And lets say option (A) is CERTAINLY going to yield me a return of 10 monetary units.. and option (B) is a 50-50 LOTTERY between a return of 30 monetary units and a return of nothing... The expected monetary payoffs* for both the options would be for (A)- 10 and for (B)- 15.... So in monetary terms, option (B) is better... Now lets define some units, Option (A) is a CERTAIN Rs. 10/- and Option (B) is a 50: 50 GAMBLE between Rs.0/- and Rs.30/-... Lets say I go with the expected pay- off theory and I select option (B)...
This or That? The Art of Decision Making I
"The doors we open and close each day decide the lives we live" ....True isn't it??.. Our life is like a "Work in Progress", it takes shape in accordance with the decisions we make... It can come in handy if we know the art of making 'situation appropriate' decisions... Let us first skim through the terms involved in a regular decision making process...
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| This or That?? |
Objective(s): This is the what drives the whole process.... We all have objectives .. to do this.. to do that... to do this and that... Please note that I am deliberately not using the word "Goal(s)" but only "Objective(s)" (Primarily because objectives are more crisp and tangible) and also note that there need not be just one objective, rather there can be multiple no. of objectives each with its own priority.... Sometimes these objectives can be contradictory to one another... Let us take this example for clarity: My objective is to eat tasty and healthy food for lunch.... We have two objectives here: 1) To eat tasty food 2) To eat healthy food... These two objectives might be contradicting each other, like it might be a bit difficult if not impossible to eat something that is both healthy and tasty... Any case maximization of both health and taste would be my ideal requirement... Regarding the priorities, let us assume that I prioritize health before taste...
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