Risk and Resilience – Learning Complexity: Leadership Series 4

Here are 3 problems on risk and resilience to be cracked

Problem 1 — Situation 1

Suppose we are given the following facts/observation —

50% of new start-ups fail in their first year of operations.

50% of the balance start-ups fail by the time they reach their third year of operations.

Again 50% of the remaining survives the 5th year of operation

Then 50% of the survivors would go up to the 10th year.

Those who survive the first 10 years of operations live to flourish during the next 15 years without fail.

Now imagine that you are the head of an insurance group mulling over the insurance premium one should charge for different age groups. Further suppose that you are considering two age groups — a) 20 yrs – 30 yrs b) 50 yrs +

For which group would you be charging more premium and why?

Problem 2 – Situation 2 

Imagine yourself as a Jewish prisoner in one of those dreaded and hateful concentration camps. Day by day you start losing hope of survival. After months of inhuman torture you have almost resigned to fate.

Then suddenly one early morning with dawn yet to break out you hear some commotion outside your cell. A fellow prisoner comes and breaks your cell open. You and your fellow prisoners tumble out and join the growing force who overpowers the German soldiers and kill them.

The prisoners break open the gates and rushes out to meet the haze of a bleak winter morning. They start running on the only road they find that leads away from the prison. They know this road well. They know that if they keep running for another two hours they would be out of German clutches and find their way home. So they keep running.

On one side of the road there is a dense forest. And you know that you can make your way home through this dense forest. But you clearly don’t know the way out. However, you know that if you find the right path you would reach home in about 40 minutes to an hour.

You discuss with your friends the option. They refuse to take to the forest.

What do you do? And why would you be doing that?

Problem 3 – Situation 3

Suddenly your 86 yr old father suffers from intense breathing problem and had to be rushed to a nearby hospital. The doctor says it is serious and does not rule out the possibility of a heart attack. They recommend tests and procedures and ask for your consent whether they can do an angiogram and a by-pass if they find blockages.

You are aware of the following facts about your father: —

He has survived a bitter war.

He has survived a partition (India & Pakistan) at a young age and had to leave behind everything in East Pakistan to settle in a strange place.

Years back he had blockages of the arteries (about 70%) but then over a two year period the doctors found all arteries to be clean (0% blockage).

You know that blockage does not necessarily mean a heart attack. It has more to do with millions of special cells in the heart beating synchronously. Going out of sync might trigger a heart attack.

You see on the control monitor that it is a case of breathing problem.

What would you tell the doctor – to go for the angiogram or not? How do you come to that conclusion? If the decision is not to go for an angiogram what is your estimate that he would be back home safe after treatment of the breathing problem alone?

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5 thoughts on “Risk and Resilience – Learning Complexity: Leadership Series 4

  1. Problem 1- Premium would be charged more on the 20-30 segment as risks are more. 50 + segment had already gone past the health hazards of life.
    Problem 2- I would choose the path through the forest. Though its risky but its worth taking for your life. Added one can get a good cover/ camouflage to hide . Problem 3– Take my father back from hospital.

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  2. I see it a bit differently ..

    Problem 1 – Life insurance and health insurance premiums would be higher for the 50 year olds. The risk of a payable event over any defined term of the policy is lower for the younger cohort.

    Problem 2 – “You discuss with your friends the option. They refuse to take to the forest.” is the critical point. While the physical cover in the forest makes good sense. it is over weighed by having a group of friends with whom to share the dangers and respond to them.

    Problem 3- Take my father back from the hospital. When my 90 year old mom was in the hospital recently it was crystal clear job one was to get her out of there as soon as possible.

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    1. But if 50 yr old persons are still disease free or don’t have any pre-existing diseases then the insurance premium would be lower since they have demonstrated their inherent resilience as they faced life. The same can’t be told about the 20 yr persons since they are yet to face life and demonstrate their inherent resilience.

      About the forest — one thing the group forgot is that the Germans would soon find out about the escapade and go after them in helicopters and gun them down in no time since they are completely visible on an open road. The person could have responded better by clarifying this most likely scenario to his friends. That would have saved them all.

      Yes, for the hospital case the possible response is very clear. We agree on that completely.

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  3. Yes. If the insurance company had the choice of insuring only 50 year olds who were healthy, with few illnesses in their past, I agree with you. It underlies the action of US health insurers who have refused to accept people with pre-existing conditions. Consider the question as asked. I think it’s fair to say it allows various contexts to be triggered. As usual the triggered context creates the “right” answer.

    I agree with your point about the best approach would be to convince at least some of the others that a path through the forest is best. But again the question as asked says to me no friends agreed. I would think it possible that strafing by planes occurred to some in the group of friends. Why would they decide against such an obvious problem? Is there something they implicitly know?

    You should know that If I could convince at least two others to go through the forest, I would take that path. My view is that a team of three can often be more effective than a group of ten. But a single person has radically lower resilience than a team.

    Interesting to consider “all of them would survive.” I actually have some direct experience of this hypothetical. Those who survive all tell the same story. It was an act of serendipity – just luck – that some survived when most didn’t.

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