What Are The Odds Of Being Irrelevant?

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Modelling Business Decisions and their Consequences

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What Are The Odds Of Being Irrelevant?



I had the distinct honor of taking several classes from the brilliant scholar William C. Dowling, who taught at the University of New Mexico prior to his teaching career at Rutgers. Professor Dowling had a simple test for evaluating any given sentence’s syntax, which he nicknamed “SAS,” an acronym for Simple Analogous Sentence. Confused between “That team is the one to be avoided” versus “That team are the ones to be avoided”? Since “team” is singular, replace it with an analogous singular noun. Which sounds better, “That item is the one to be avoided” or “That item are the ones to be avoided”? The SAS method points to the clear winner.

Meanwhile, Back In The Project Management World…

I’m thinking something, well, analogous should be employed in the world of Project Management. Yes, yes, I’ve been harping at length about the need to return to some level of science in the management science world, but I readily admit that there’s an art to successful Project Management, and the SAS method struck me as an excellent tool to evaluate competing strategies. For my first eval, let’s take a look at our friends, the risk managers.

Consider the following scenario: you are in a casino in Las Vegas, or Atlantic City, and there’s a game where people can bet on the flip of a verifiably fair coin. Since the most competitive casino games (craps and black jack) give around a 0.5% advantage to the house, the coin flip is very attractive. You approach the actual coin flipper but, as you do, you notice a fellow standing next to her, wearing suspenders and round, wire-framed eyeglasses. Clearly he’s not part of the security team, but he’s not actually standing in your way, so you step up to the table to place a bet.

“Fifty dollars” the coin-flipper says pleasantly as you put down a bill with Grant’s portrait on it. She displays a silver dollar, and shows you each side so that everyone is in agreement about which is heads and which is tails. “Call it in the air!”

“Wait!” exclaims the suspender-clad fellow.

“Who are you?”

“I’m the house risk manager. Are you aware that the odds are 50% that you will lose your money?”

“Of course. It’s also 50% odds that I’ll double my money.”

The risk manager sighs, as if he is the one having to endure the statement of the obvious.

“Would you like to know the recent history of this coin’s flip performance?”

“No. That’s irrelevant, since the coin is verifiably fair.”

“But, if this coin were to have been flipped the previous five times with the same result, wouldn’t that fact be of use to you?”

“No. Again, it’s irrelevant. Don’t you have someone else to irk? I want to get on with my coin flip.”

“Call it in the air!” the coin flipper says again, as she flips the coin.

“Tails!”

“Tails it is!” she exclaims, as she places a crisp $50 (USD) bill over yours.

You scoop up your winnings, and push a $5 tip into the coin-flipper’s jar.

“Just then you changed the dynamic!” the suspender-clad fellow exclaims. “Since you probably would not have tipped had you lost, the original wager’s odds have changed, from a 50/50 chance you would either lose $50, or win $50. Now we see that it was a matter of losing $50 or winning $45, meaning that the adjusted odds were NOT in your favor.”

“Yeah, so?”

“So you should not have placed that bet.”

(Long silence.) “Thanks for sharing.”

Now consider the following analogous PM scenario, where you are about to embark on a $5M (USD) information technology project and, breaking with the organization’s previous techniques, have selected an Agile/Scrum PM approach. At the first meeting of the project team, there’s a fellow in attendance wearing suspenders and round, wire-framed eyeglasses whom you don’t recognize.

“Who are you?”

“I’m the company’s risk manager. Are you aware that the odds are 50% that you will overrun this project?”

“Historically that’s the trend. It’s also 50% odds that I’ll come in on-time, on budget, or even underrun.”

The risk manager sighs, as if he is the one having to endure the statement of the obvious.

“Would you like to know the recent history of this organization’s IT project performance?”

“No. That’s irrelevant, since I’m deviating from the usual technical approach.”

“But if this organization were to have overrun the last five IT projects, wouldn’t that fact be of use to you?”

“No. Again, it’s irrelevant. Don’t you have someone else to irk? I want to get on with my project team meeting.”

(At the closeout project team meeting, nine months later…)

“We submitted our last deliverable, and came in just $50,000 over budget. Good job, everyone.”

“How can you say that?” the (uninvited) risk manager asks. “I told you that there was a 50% chance you would overrun, and you did just that!”

“Okay, well, A, it was a 1% overrun, B, the fee more than made up for it, and, C, the follow-on work coming from this organization’s demonstrated expertise in this particular type of project has led to the creation of an entirely new division. That’s how I can say ‘good job everyone.’ And, just by the way, the only one of these outcomes that was contained in your original risk management plan was the possibility of the overrun.”

“Just then you changed the dynamic!” the suspender-clad fellow exclaims. “Since you didn’t include the parameters of those scenarios in the original risk analysis, we had no way of calculating a stochastic range of the probabilities of those outcomes.”

“Yeah, so?”

“So we had no way of quantifying that eventuality.”

(Long silence.) “Thanks for sharing.”

I’m familiar enough with GTIM Nation to know that several of you are eager to post in the comment section “(Long silence.) ‘Thanks for sharing.’” And that’s okay, just as long as we’re clear who came up with that line first.

 

 

Posted on: December 17, 2018 10:02 PM | Permalink

Comments (5)

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Nice post. Thanks for sharing

Very interesting, thanks for sharing

Love the analogy between coin flipping and risk management in a project, specially with numbers to make it more sound.
As requested by you "Thanks for sharing" eheheheheheh... Keep it up

Eheh funny approach! Having fun reading your blog postings.

LOL, as a risk manager, I really wish more people actually took the time to understand risk. Most people are really careful with their own money, but if it belongs to someone else they are more than willing to gamble with it. Thanks for Sharing!!!!!

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