March 15, 2011

A poker player's guide to environmental risk assessement

From our overstocked archives, something that seems applicable to what's happening in Japan right now., Originally published in 1997 in Sam Smith's Great American Political Repair Manual (WW Norton)


Sam Smith

Some simple rules

1. Calculate the stakes as well as the odds.

2. The odds of something happening at any moment are not the same as the odds of something ever happening. In ecological calculations -- especially ones in which the downside could ruin your whole millennium -- it is the latter odds that are important.

3. When confronted with conflicting odds, ask what happens if each projection is wrong. Temporary job loss because of environmental restrictions may come and go, but the loss of the ozone layer is something you can have forever.

4. When confronted with conflicting odds, remember that you don't have to play the game. There are other things to do with your time -- or with the economy or with the environment -- that may produce better results. Thus, instead of playing poker you could be making love. Or instead of getting jobs from some air or water degrading activity, the same jobs could come from a more benign industry such as retrofitting a whole city for solar energy.

5. Don't let anyone -- in industry, government, or the media -- define an "acceptable level of risk" for your own death or disease. They may not have the same vested interest in the right answer as you do.

6. If the stakes are too high, the game is not worth it. If you can't stand the pain, don't attempt the gain.

What poker taught me

I was a poker player long before I started paying attention to environmental problems. One of the things I learned while playing poker is that you can, from time to time, beat the odds -- but don't count on it. That's why you won't find me in Atlantic City or Las Vegas.

The second thing I learned is that even when you do beat the odds, don't count on it happening again. There's a big difference between one good hand and a whole good night.

The third thing I learned is that you can, from time to time, beat the odds -- but you usually have to stay in the game long enough for it to happen. Meanwhile, you can lose an awful lot of money. You have not only to calculate the odds but the stakes as well. And you are always on the edge.


Three scenes from the edge

1. A little girl makes a sand castle. It is a beautiful day and a beautiful sand castle, constructed not far from the edge of the water. The tide has risen only halfway. Then the girl's mother calls her for lunch. They go to a little carry-out near the beach and do some shopping. When they finally return it is high tide. The little girl looks for her castle but the sea has come in and washed it all away. She is sad but her mother says they can come back tomorrow and build another one.

If the little girl had consulted an oceanographer (or even an older kid), she might have learned that the probability of her castle being destroyed approached certainty and that she could have avoided catastrophe by moving the construction site to a safer, if less appealing, location.
On the other hand, should she have been accosted by a conservative columnist, she might have been informed that since the water had been safely rising for four hours and thirty three minutes it was clear that her castle was not in any danger. Anyone who told her otherwise was anti-growth, and a knee-jerk, liberal alarmist.

2. During their vacation, the girl's mother rents a house right at the edge of the beach. It is a beautiful house next to a beautiful beach. It is constructed on stilts between the highway and the first line of dunes. The following winter the mother gets a call from the real estate agent saying that she'll have to choose another location for next summer -- a gale has destroyed the house and several others near it. The agent calls it a "freak storm;" the mother explains it to her child by saying it was an "accident."

In fact, such storms occur in this area every 7 years on average. Over the years some 32 houses have been destroyed or badly damaged just along this stretch of beach. The owners had worried a bit about the danger when they first built the house, but no one else seemed concerned so eventually they stopped thinking much about it. Besides they read an article that said that "scientific support for the notion of a drastic rise in sea level has waned rapidly." The article didn't note that the Intergovernmental Panel on Climate Change had reported that over the past 100 years, sea levels have, in fact, risen four to eight inches. Or that this was enough, according to the Environmental Defense Fund, "to have eroded over 40 feet of a typical barrier beach on the East Coast of the United States." Or that the New York Times reported that "At the most likely rate of rise, some experts say, most of the beaches on the East Coast of the United States [will] be gone in 25 years. They are already disappearing at an average of 2 to 3 feet a year. "

3.  At home or at the beach, the little girl and her mother live on another edge. With nearly six five billion other humans, they exist in that thin layer where the atmosphere and the earth's crust meet. Like many parents these days, the mother finds herself occasionally worrying about the world in which she is raising her daughter. She's confused. For example, there was a 1995 story about global warming in the Washington Post that split the arguments so neatly one could easily reach the author's own conclusion: "When you sort through the confusion, how much you worry about greenhouse warming turns out not to be a matter of science." A MIT professor was quoted who said, "It comes down to personality, it comes down to politics."

Then just two months later, the New York Times reported: "In an important shift of scientific judgment, experts advising the world's governments on climate change are saying for the first time that human activity is a likely cause of the warming of the global atmosphere." When her daughter asks her a question about global warming, she doesn't know quite what to say.

The principles of poker, it turns out, are useful lessons for thinking about the environment as well. Let's return to the sand castle for a moment. There is a 100% probability that the little girl faces ecological disaster. The castle will definitely be washed away. On the other hand, she is only playing a penny ante game. In building the castle, she's engaged in a random act of harmless amusement. Her distress over her loss will be temporary -- after all she can build another one right away. Further, no one -- and nothing -- suffers permanent damage by either the castle's construction or destruction.

With the beach house, the game changes. The chances of destruction are far less, but still objectively calculable. Mathematically minded home owners could have figured what the chances were of losing their houses during a winter storm or, far more importantly, during all the winter storms that might occur during their lifetimes.

Incidentally, these two sets of odds are not the same. If you toss a coin there is a fifty percent chance it will come up tails; if you repeatedly toss a coin, however, there is almost a hundred percent chance that it will eventually come up tails.

Now if the down side of your game is not merely a coin that lands tails up, but the loss of your house -- or a nuclear plant radiation leak or a massive oil spill -- then the probability of something happening ever becomes far more important than the probability of it happening on a particular occasion.

Finally we come to the ultimate game -- a long future of uncertainty and highly disputable odds, in which the ante is the earth and human life itself. Here is the opposite of the sand castle problem: now we have unknown odds but enormous stakes.

So what does poker have to tell us?

It says you have to know when to hold them and know when to fold them. And as a rule of thumb, whatever the odds, you don't want to bet either your house or your planet on a game of chance