Environmental Risk and Uncertainty: The Role of Subjective Probability

JD Solomon
2 days ago
3 min read

Probability is based on our current knowledge of future uncertain events, which always makes probability subjective. JD Solomon Inc. provides practical solutions for environmental risk and uncertainty. — Probability is based on our current knowledge of future uncertain events, which always makes probability subjective.

Seldom do we run to failure the things that matter most. Take, for example, any one of the three high-service pumps that supply drinking water and firefighting capability to a city with a population of 1 million people. An accurate assessment of the probability of failure is not possible – we simply do not have the data, and never will. In Large Worlds, we don’t run the things that matter most to failure (at least statistically speaking). And, on the limited failures that occur, we seldom do the detailed root cause analysis that is required to determine the causation of the failure. Enter subjective probability.

Subjective Probability

Every event that refers to future occurrences is uncertain. What we refer to as probability is a reflection of our current knowledge. Probability is simply one valid method to express our degree of certainty (or uncertainty) in quantitative terms. Only clairvoyants and fortune tellers can predict the future with complete certainty.

When it comes to risk and uncertainty, all probability is subjective.

Objective, Numeric Analysis

Rational thought, as defined by objective, numerical analysis, is a modern one. Many technical professionals were trained in statistical hypothesis testing and, consequently (and usually unconsciously), have a “baked-in” statistical Frequentist tendency. It is simply flawed thinking that a conclusion drawn from the past will objectively predict the future.

It is not simply by chance that probability and risk originated about the same time, nearly 300 years ago, to help interpret an uncertain world.

So what does this mean?

The Laboratory versus The Real World

In the logic of Small Worlds, where variables can be isolated and assumed to be independent, there is potential meaning in the concept of objective probability.

In Large Worlds, in reality (and not in laboratories), all probability is subjective probability.

Probability is based on our current knowledge of future uncertain events, which always makes probability subjective.

All Models Are Subjective

Beware of those who say we should eliminate all subjectivity by using mathematical/quantitative models. At best, the insights from models help reduce some of the subjectivity but will never eliminate it altogether. All models include the subjectivity of the modeler, and even our cherished Monte Carlo simulations require subjective evaluations of the input probability distributions.

Embrace Subjectivity (and Uncertainty)

Subjective probability is not a flaw in our thinking but a reflection of how the real world actually works. The systems that matter most—our critical assets, our organizations, our communities—operate in Large Worlds where perfect data will never arrive and tidy statistical assumptions will never hold. The responsible path forward is not to cling to the illusion of objectivity, but to acknowledge the role of judgment, experience, and evolving knowledge in every assessment we make. When we accept subjectivity as inherent rather than inconvenient, we make better decisions, communicate more honestly, and manage environmental uncertainty with the maturity it deserves.

See John Moubray and reliability-centered maintenance (RCM) for more on the limitations of historical data for the things that matter most. In addition to early references related to probability and risk, more modern references to personal probability can be found in Frank Knight (1921), and to subjective probability in L.J. Savage (1954) and Kahneman and Tversky (1972). Karl Pearson, Fisher, and Neyman & Pearson are key references for statistical hypothesis testing. See G.L.S Shackle for more on the dynamic nature of knowledge and the limitations of objective probability.

This article was first published by JD Solomon on LinkedIn.

Solomon, J. D. (2018, October 18). Risk and uncertainty: The role of subjective probability. LinkedIn. https://www.linkedin.com/pulse/risk-uncertainty-role-subjective-probability-jd-solomon