Friday, January 25, 2008

Dynamic hedging against uncertainty



I recently received positive feedback from Dr. Nassim Taleb (pictured above) about my blog:

Hi there,
Thanks a million.
THis is great.
Best,
Nassim


Previously, Taleb reviewed my essay, "On Healthcare Philosophy: Turning the US Healthcare System Upside Down," positively as well:

excellent!
ciao,
nassim

As noted on my blog, Nassim Taleb (click here for his website) is the author of some exemplary books:
  • The Black Swan: The Impact of the Highly Improbable
  • Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life
  • Dynamic Hedging: Managing Vanilla and Exotic Options.

Please click here to listen to a podcast of an excellent presentation by Taleb. In this discussion, Nassim addresses most of his main ideas. Also, Nassim Taleb will be in San Francisco on Monday, February 4, speaking as part of The Long Now Foundation's seminar series on long-term thinking (click here for event details).


My vision statement - "Dynamic hedging against uncertainty in medicine: an examination and practice informed by skeptical empiricism and epistemic humility (epoche)" - emerged organically (via bottom-up tinkering; not top-down design) from my extensive studies of and reflections on Nassim Taleb's wonderful thinking. Personally, as an opportunistic generalist, I take Louis Pasteur's advice seriously: "Chance favors the prepared mind." I encourage others to tinker with Taleb's perceptive platform; I hope to build on this platform as I delve into the realm of medicine and healthcare, embracing and examining paradoxes - searching versus acting, for instance - along the way. Medicine provides a rich texture for studying uncertainty and the limits of being human; Dr. Jerome Groopman performed this inquiry in his book, How Doctors Think. As an aspiring health ecologist and epistemocrat, I hope to engage this unique texture found in medicine to develop the concept of dynamic hedging against uncertainty. I suspect that clinical judgment has benefitted immensely from sophisticated clinicians who search for practical, real-world ways to hedge dynamically against uncertainty in healing. Healing is a complex action that doctors approach in varied ways. Our bodies are complex systems as well - often encountering the edges of chaos during disease states - so clearly, practicing medicine, the art and science of healing, is a challenging, complex endeavor.


In the face of this complexity, Dr. Ben Carson (click here), the director of pediatric neurosurgery at Johns Hopkins Medical Institutions, provides his personal framework for hedging against uncertainty in his new book, Take the Risk: Learning to Identify, Choose, and Live with Acceptable Risk. As a neurosurgeon who performs new, cutting-edge procedures - separating twins conjoined at the head, for example - Dr. Carson has stretched the limits of being human and has encountered the humble limits of being human: his surgeries to separate conjoined twins have succeeded and failed. Since Carson performs surgeries in uncharted medical territories, he operates in realms where probabilities for outcomes - mortality rates for procedures, for instance - remain unknown, uncertain, or are based upon very small, limited sample sizes (Carson speaks of his personal "batting average" for separating conjoined twins successfully to reflect his limited experience in his field, even though he is one of the world's leading neurosurgeons). Nonetheless, Carson's personal experiences with unknown probabilities are not unusual; in fact, we do not know the probabilities for outcomes of numerous events, actions, and plans in our lives because we do not live in casinos. The variables and processes that drive our world and the interactions of its inhabitants are much more complex and recursive than those found in the sterile environments of games (avoid the ludic fallacy). Given that risk is a concept that couples probability and impact, Carson focuses on impact rather than probability in his personal decision-making framework because he recognizes, based on experience, that events with unknown or perceived low probabilities have shaped his life tremendously.

Before making uncertain or risky decisions, Carson tries to think in new ways, weigh his alternatives, and reach his own conclusions by asking himself four simple questions (p. 105):

What is the best thing that can happen if I do this?

What is the worst thing that can happen if I do this?

What is the best thing that can happen if I don't do this?

What is the worst thing that can happen if I don't do this?

Clearly, Dr. Ben Carson's personal risk-analysis framework assigns more weight to the impact and consequences of decisions and events than it does to probability; an enlightened approach. Needless to say, we do encounter realms where probabilities are fairly certain and clear - Taleb coins these realms mediocristan: simple, non-scalable domains that obey the law of large numbers (i.e. gravity) - however, as our world morphs continuously and becomes increasingly complex and recursive, evolving rapidly in the fabrics of the Information Age - Taleb dubs these realms extremistan: complicated, scalable (see here) domains governed by power-law distributions and fractal/emergent properties - probabilities for events become almost impossible to ascertain. Therefore, when assessing risk and making decisions, especially in extremistan, Carson and Taleb advise us to focus on the potential impact of events and actions (see The Black Swan for more insights on this topic).

Again, I remind interested thought leaders of Nassim Taleb's call for papers (click here) for an upcoming special edition of the International Journal of Forecasting: "Decision making and planning under low levels of predictability." Responses to this noble challenge could help advance our ecological intelligence - "know how" - in medicine and provide physicians and others with practical tools for restoring and maintaining people's health more effectively.

Certainly, practicing preventative medicine represents another excellent way to hedge against uncertainty in healthcare: if I get sick, I know that my diagnosis, the effectiveness of my prescribed treatments, and the ultimate outcome of my illness are all uncertain. Prevention remains our greatest strength in medicine, and proactive, preventative health and wellness techniques like Evolutionary Fitness (see Arthur DeVany here) provide physicians and patients with excellent ways to hedge against the uncertainties associated with disease processes and treatment efforts. Thus, I will continue to hedge dynamically against illnesses via my lifestyle choices; I am thankful for my health.

1 comment:

  1. great post. really cool that Taleb visited the site and commented about it.

    ReplyDelete