Probability

Abstract

Business decisions are often laid on foundations of uncertainty: the contract will reflect assumptions about the oncoming weather and future trends in the price of cement. Capital may be invested in a North Sea oil project on the outcome of twenty random trial bores, with political factors even less predictable than geological. Probability calculations enable businessmen to measure the risks involved in such decisions on a scale where 0 measures the impossibility of an event and 1 the certainty of its occurrence. But such quantification is likely to guide rather than determine the final decision, in which objectivity will be tempered with subjectivity and intuition and acumen play some part in the businessman’s final judgement.