Dr David McGrath
Spine Physician
MB BS (Hons) FAFOM, RACP, FAFMMMaster of Pain Medicine
Decision making, in all areas of life,can be analized,as an evaluation, of competing options (mutually exclusive)
This is a relatively simple process, when "what you see is what you get"
All that is required,under those circumstances,is to write a complete
list, and compare value. Going into a freshfood market is a good
example. The items are easily compared, with a price tag. Value for
money comparisons are straightfoward. The situation, is only made
slightly more complicated, with hidden data, such as, nutrition and
taste information which may not be available. (hence the free tastings).
Decision making, is much harder when we need to project into the
future. Investment decisions, require a judgement, about future
performance of a company or asset. Now we enter, the domain of
probability, or "crystal ball gazing". We have to compare choices on
the basis of expected value and outcome.
Here's the maths.
ChoiceExpected Outcome | Value | Probability of Value Realization | Expected Value |
Choice A | 10 | 90% | 9 |
Choice B | 60 | 10% | 6 |
Choice C | 15 | 100% | 15 |
Choice D | 40 | 60% | 24 |
Choice E | 25 | 20% | 5 |
With these numbers, the rational choice is "D". D was , not the choice with the greatest absolute value (B) nor the choice with the greatest certainty (C), but overall would give the best expected outcome.
The situation is only slightly more complicated,when negatives can occur.
ChoiceExpected Outcome | Positive Event Value |
Probability Positive Event |
Negative Event Value |
Probability Negative Event |
Expected Value |
Choice A | 10 | 90% | -15 | 80% | -3 |
Choice B | 60 | 10% | -40 | 20% | -2 |
Choice C | 15 | 100% | -20 | 30% | +9 |
Choice D | 40 | 60% | -40 | 80% | -8 |
Choice E | 25 | 20% | -50 | 10% | 0 |
Now, the optimal (rational) choice is "C"
Medicine and spinal treatments, often involves many competing choices. Most of them have negative possibilities, which are not always taken into account. When they are considered, in a rational manner, as above, the decision often changes.
©Copyright 2007 Dr David McGrath. All rights reserved