If the essence of strategic decision-making lies in the assessment of potential rewards under uncertain conditions, whole seminars can be taken from the last minute of this year’s Super Bowl between the New York Giants and the Boston Patriots.
For extra flavor and pedagogic potential, both coaches in this 46th edition of America’s great sporting spectacle had to make choices that ran against their deepest, aggressive go-for-broke instincts.
Trailing by two points on the Boston six-yard line, Giants coach Tom Coughlin could come from behind and win with a chip-shot field goal – a high-odds likelihood but never a certainty. So to keep the ball out of the hands of dangerous Boston quarterback Tom Brady, his interest was not an attempted touchdown – but to stay out of the end zone and run the clock near zero before what would be the winning kick.
Whereas, having no chance to win without his offense on the field, Boston coach Bill Belichick’s defense had to allow the Giants a quick touchdown to have any last-minute hope.
The play itself was surreal. Giants running back Ahmad Bradshaw, offered a clear path by the Boston defense, drove for the end zone with all the DNA of his entire playing history – realized his error and tried to stop short – but failed to halt his momentum, stumbling awkwardly for a bizarre and unintended score.
At that point, the decision-theory exercise was complete. The game’s final outcome was then only interesting from the perspective of one of the largest-ever audiences of actual football fans.
As frequently the case, the ultimate outcome did not undercut the validity of either strategy – to which it was equally irrelevant that Boston was unable to score in their last remaining drive, or that the Giants snatched a victory despite Bradshaw’s gaffe.
In other words: Coughlin had the right idea, but his player failed to execute – and he still won the game. Belichick was no less canny, and got precisely his desired result – only to see Brady’s final drive fall short.
As my students in Risk Management come to grasp, it is not just the balance of success or failure of competing alternatives, but the magnitude of the consequences in either direction: a multi-dimensional decision calculus weighs both a huge potential benefit against a modest chance of loss, but also a likely but small upside against an unlikely but possible catastrophe.
Examples run from the deeply personal, through all aspects of commercial and professional behavior, to the highest levels of governmental policy-setting:
- To the feckless Francesco Schettino, captain of the stricken Costa Concordia, the frisson of a near-shore detour overcame his judgment as to the hazard that his ship would land on the rocks.
- To MF Global’s Jon Corzine, now-fallen former master of the universe, the desperate gamble to save his enterprise made it worth raiding the accounts of his customers.
- To central bankers confronting the potential collapse of, say, a General Motors or an AIG or the sovereign debt of a Greece or an Ireland, the ability to quantify and evaluate the “success” of a bailout must include complex and uncertain consequences, economy-wide, of both action and inaction.
The choice-making architecture in all of these – from the football field to the captain’s bridge to the bankers’ boardrooms – traces back to the proposition posed by the 17th century French mathematician and philosopher Blaise Pascal, on how the rational man should wager on the existence of a benevolent god:
There is no downside to affirmative belief, which if ultimately correct gains an eternity of heavenly reward – whereas to doubt has no immediate benefit but if proved wrong carries the punishment of eternal damnation by an angry diety.
It’s getting the downsides properly evaluated that is often the hardest, as I have written elsewhere. Belichick was challenged, because to allow an opponent’s unimpeded score went against the competitive grain – unappealing, but less consequential than the likely prospect of a Giants winning field goal.
Fortunately for Coughlin, on the other hand, his choice had an inbuilt hedge – the undesirable touchdown gave him a four-point margin, putting back on Boston the higher burden of driving the field, within an NFL minute, to answer in kind.
As for Captain Schettino or Mr. Corzine or the world’s purported financial wizards – however sincere their various professions of hindsight regret might be – only the bright sunshine of prosecutions or public inquiry will shed light on the extent to which they were remotely conscious of the potentially catastrophic results of their choices.
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