Archive for November, 2016

My sister called me ugly, but we are identical twins (Or why we should not shoot the ugly sister)

Wednesday, November 30th, 2016

By Taylor Murtha, QUT Master of Applied Finance student

Risk is the team of scientists in the corner doing the calculations to figure out how close they are to a mission failure. Uncertainty is Neil Armstrong putting his foot on the moon hoping it doesn’t collapse or explode and send him into the abyss. Like identical twin sisters they are similar in appearance but they are different in nature, risk is highly quantifiable whilst uncertainty is not. The human equivalent of risk is Warren Buffett, he makes an assumption about the possible outcomes and their likelihood and makes an investment decision based on that information. The human version of uncertainty is Richard Branson, who doesn’t know all the possible outcomes or the specific probabilities but he thinks it is a good idea so he invests. Obviously Richard Branson is far more interesting then Warren Buffett because he is wild and unpredictable which is the perfect metaphor for uncertainty. (more…)

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