Last week I received an e-mail from a childhood friend that reminded me of a book I had read in College for my economics professor Bulweir Singh. It was written in 1841 by Charles MacKay and is entitled EXTRAORDINARY POPULAR DELUSIONS AND THE MADNESS OF CROWDS. In 1998—long after I had graduated from College Peter Bernstein of Wall Street fame wrote and released his classic book AGAINST THE GODS—THE STORY OF RISK. It is argued by many that these two books have helped form the bases for the field of psychological economics and finance.
Yesterday I wrote about “Group Think” and its influence on Covid-19 mitigation strategies. Today I want to write about risk. My reason behind this madness is to try to explain how good conscientious people can look at exactly the same data and come to different conclusions about how to react to that information. In the 1st article, I explain why people are hesitant to buck popular opinion. AS we study risk it is important to recognize the limits of rationality and the human tendency toward loss aversion (not risk aversion) and to use the technique of “mental accounting” to place choices into compartments that don’t consider long term outcomes. There are limits to rationality just as it must be recognized that fear can be delusional and itself irrational 90% of the time.
Mr. Bernstein gives us a great history of the science of risk and shows how the great thinkers and the enlightenment thinkers used the study of risk as a bridge between the behavioral sciences and basic sciences like physics and chemistry. Understanding risk theory helps us see how the basic sciences and economics are related. Galileo, the Bernoulli brothers, Blaise Pascal, Newton and even Einstein, understood risk theory and were amateur economists all—Einstein even saying that understanding compound interest was more difficult than understanding relativity.
Another point is that understanding risk was an important part in the march of civilization toward where we are today. Like the incorporation of Hindu-Arab mathematics, and the understanding by the Greek Philosophers and Jewish Christian Prophets and Jesus that the abandonment of the belief that events are under the influence of “The Gods” and then embraced the notion that a loving God desired that all men have the opportunity of free will and liberty and because of that we are our own agents and are charged with managing our own lives. Many things had to happen in order for the march forward out of mass slavery and grinding poverty and constant wars was able to proceed.
Fear and risk need to be separated when deciding a course of action. The extrapolation from a small sample to a large sample may make one think that a risk is very high. Giving weight to a catastrophic statistically unlikely event may cause one to act differently if the event weren’t catastrophic or if the event were unlikely to ever occur. I always avoided a cross walk in my hometown—even today 60 years later because a childhood friend lost his life in a car accident at that location.——Irrational. That same location seen through the eyes of a newcomer to that town who had never heard of the accident would be approached differently. I mentioned before that one of my closest friends in surgery residency had made over 100 night carrier landings and flown over 50 combat missions in Viet Nam, but he was afraid to climb up a step ladder because as a 5 year old he had fallen off one—irrational.
The idea of the degree of danger that Covid-19 had for average everyday people was blown way out of proportion. If you were over 70, were immune compromised, or had one of several preexisting conditions the risk was very different. To assign the same degree of risk for all people placing everybody in “the same compartment” was a classic example of “mental accounting”. The extrapolation from small and vulnerable samples and giving overweight to catastrophic outcomes, actually detracted from our taking care of the very people—most vulnerable, in the small at risk group. In our country we did a bad job of taking care of the most vulnerable, because our mitigation strategy that was applied across the board also was applied to them. Isolation for everyone led to fewer and a delayed deployment of resources to those most at risk.
I played golf last year with a young 35 year old man who had a 6 week bout with Covid-19 and almost died. Unusual and far from the norm. 80% of young people under the age of 35% that test positive are asymptomatic. Two years ago one of my former patients who was under 35 had a similar experience and spent 4 weeks in the ICU. She had H1N1 flue. Both experiences were from a small sample size and though real, neither one should have defined a public health strategy. Their stories to cause those listening to be fearful—but not rationally fearful.
The media, politicians, and the experts did a bad job of defining the true risks of Covid-19 to the public. Fear is delusional and irrational. Risk needs to be defined rationally. Maybe the delusional fear and irrational application of science and mitigation strategy says more about a political narrative and opportunity to manipulate public opinion or even create a state of dependency in which citizens are supplicant and government is profligate, than it does about the rational application of science and then the assessment of risk.
The compartmentalization of risk and “mental accounting” taking into account short term ramifications of decisions may miss the big picture. Does our mitigation strategy cause more harm than good for example? Are more people dying from other causes because of our strategy? What about the impact on mental health, drug abuse and the education of our children? What has been lost to all of us by having experts that made those decisions for us not take these risks into account? Could we have made better decisions about our own risk and our own family’s risk than the “experts”?
As Peter Bernstein tells us the worst risk of all is taking no risk. Those that understand risk understand the paralyzing effect of delusional fear.
MAGA “Fight Like Hell”