For each of the following situations, indicate the minimum odds of success you would demand before recommending that one alternative be chosen over another. Try to place yourself in the position of the central person in each of the situations.1
1. Ben, a 45-year-old accountant, has recently been informed by his physician that he has developed a severe heart ailment. The disease would be sufficiently serious to force Ben to change many of his strongest life habits—reducing his workload, drastically changing his diet, and giving up favorite leisure-time pursuits. The physician suggests that a delicate medical operation could be attempted, which, if successful, would completely relieve the heart condition. But its success could not be assured, and in fact, the operation might prove fatal.
Imagine you are advising Ben. Listed below are several probabilities or odds that the operation will prove successful. Check the lowest probability that you would consider acceptable for the operation to be performed.
___ Place a check here if you think Ben should not have the operation no matter what the probabilities.
___ The chances are 9 in 10 that the operation will be a success.
___ The chances are 7 in 10 that the operation will be a success.
___ The chances are 5 in 10 that the operation will be a success.
___ The chances are 3 in 10 that the operation will be a success.
___ The chances are 1 in 10 that the operation will be a success.
2. Don is the captain of Alpha College’s football team. Alpha College is playing its traditional rival, Beta College, in the final game of the season. The game is in its final seconds, and Don’s team, Alpha College, is behind in the score. Alpha has time to run one more play. Don, as captain, must decide whether it would be best to settle for a tie score with a play that would be almost certain to work, or, on the other hand, should he try a more complicated and risky play that could bring victory if it succeeded, but defeat if not.
Imagine you are advising Don. Listed below are several probabilities or odds that the risky play will work. Check the lowest probability that you would consider acceptable for the risky play to be attempted.
___ Place a check here if you think Don should not attempt the risky play no matter what the probabilities.
___ The chances are 9 in 10 that the risky play will work.
___ The chances are 7 in 10 that the risky play will work.
___ The chances are 5 in 10 that the risky play will work.
___ The chances are 3 in 10 that the risky play will work.
___ The chances are 1 in 10 that the risky play will work.
3. Kim is a successful businesswoman who has participated in a number of civic activities of considerable value to the community. Kim has been approached by the leaders of her political party as a possible congressional candidate in the next election. Kim’s party is a minority in the district, although the party has won occasional elections in the past. Kim would like to hold political office, but to do so would involve a serious financial sacrifice, since the party has insufficient campaign funds. She would also have to endure the attacks of her political opponents in a hot campaign.
Imagine you are advising Kim. Listed below are several probabilities or odds of Kim’s winning the election in her district. Check the lowest probability that you would consider acceptable to make it worthwhile for Kim to run for political office.
___ Place a check here if you think Kim should not run for political office no matter what the probabilities.
___ The chances are 9 in 10 that Kim would win the election.
___ The chances are 7 in 10 that Kim would win the election.
___ The chances are 5 in 10 that Kim would win the election.
___ The chances are 3 in 10 that Kim would win the election.
___ The chances are 1 in 10 that Kim would win the election.
4. Laura, a 30-year-old research physicist, has been given a five-year appointment by a major university laboratory. As she contemplates the next five years, she realizes she might work on a difficult long-term problem, which, if a solution could be found, would resolve basic scientific issues in the field and bring high scientific honors. If no solution were found, however, Laura would have little to show for her five years in the laboratory, and this would make it hard for her to get a good job afterward. On the other hand, she could, as most of her professional associates are doing, work on a series of short-term problems where solutions would be easier to find, but where the problems are of lesser scientific importance.
Imagine you are advising Laura. Listed below are several probabilities or odds that a solution would be found to the difficult long-term problem that Laura has in mind. Check the lowest probability that you would consider acceptable to make it worthwhile for Laura to work on the more difficult long-term problem.
___ The chances are 1 in 10 that Laura would solve the long-term problem.
___ The chances are 3 in 10 that Laura would solve the long-term problem.
___ The chances are 5 in 10 that Laura would solve the long-term problem.
___ The chances are 7 in 10 that Laura would solve the long-term problem.
___ The chances are 9 in 10 that Laura would solve the long-term problem.
___ Place a check here if you think Laura should not choose the long-term difficult problem, no matter what the probabilities.
This series of situations is based on a longer questionnaire. As such, your results are meant to indicate a general orientation toward risk rather than to act as a precise measure. To calculate your risk-taking score, add up the chances you were willing to take and divide by 4. (For any of the situations in which you would not take the risk regardless of the probabilities, give yourself a 10.)
The lower your number, the more risk taking you are. For comparative purposes, a risk-index score of lower than 4.0 suggests you have a relatively high-risk profile. Scores of 7.0 or higher suggest risk aversion.
People differ in their willingness to take chances. High risk-takers, for instance, are more likely than their low-risk counterparts to pursue entrepreneurial business opportunities or engage in sports like rock climbing and hang gliding.
An understanding of risk is important for decision makers because it helps shape the appeal of decision alternatives. When you evaluate decisions, alternatives differ in their degree of risk. Low-risk seekers are likely to identify, value, and choose alternatives that have low chances for failure. Right or wrong, that often means alternatives that contain minimal change from the status quo. High risk-takers, on the other hand, are more likely to identify, value, and choose alternatives that are unique and that have a greater chance of failing.