Introduction: An Inquiry-Based Approach

This book introduces a new way of analyzing, measuring, and thinking about mega-risks, a “paradigm shift” that moves from single solutions to multiple competitive solutions and strategies. “Robust simulation” is a statistical approach that yields ranges of answers and requires a process or strategy that takes into account alternate competitive evaluations. To reach this approach, the book systematically walks through the historical statistical methods for evaluating risks. The first chapters deal with three theories of probability and statistics that have been dominant in the twentieth century: deductivist, frequentist, and subjectivist. The book then introduces “robust simulation” which solves the problem of measuring the stability of simulated losses, incorporates outliers, and simulates future risk through simulation of a suite of possible answers. The book emphasizes the importance of flexibility and attempts to demonstrate that alternative credible approaches are helpful and required in understanding a great many phenomena. In its approach, the book is neither assertoric (asserting that a clear answer exists) nor is it via negativa (discrediting alternate theories)—rather it is inquiry based, looking systematically at extant theories to collect and distill all relevant lessons.