Fermi questions, named after an Italian physicist, are increasingly used by top companies to test the ability of job candidates to think on their feet.
The questions do not have a single correct answer, but are rather an opportunity for the candidate to show an ability to ‘work things out’, with seemingly little relevant information at hand.
So, how many hotdogs are there in a cow? Start by breaking the question down into small problems, the answers to which can be used to arrive at an educated guess.
How big are you? How many times bigger is a cow? How big is a hotdog? By starting out with something familiar, you are able to extrapolate an answer that may be in the right ballpark.
In “Risk Intelligence: How to live with uncertainty,” academic Dylan Evans uses this example to illustrate how to use your existing knowledge to come up with a probable answer – and avoid the lazy response: “I have no idea”.
Evans defines risk intelligence as: “the ability to estimate probabilities accurately”, something not many people are good at. “People overestimate their chance of winning the lottery, while they underestimate the probability that they will get divorced,” he wryly observes.
Evans himself was the victim of an unlikely risk. In 2010 he was accused of sexual harassment by a colleague at the university where he worked, after he showed her a scientific paper that dealt with sex among fruit bats. He was sanctioned by the university, but challenged their decision and ultimately had it overturned by the High Court in Dublin.
Risk intelligence includes the ability to gauge the limits of your own knowledge and leverage what you do know, to help make decisions. This is vital to being able to cope with uncertainty, an important requirement for success in life. As is pointed out, risk is not only about potential dangers, also about the chances of success.
There is a test designed to measure your risk intelligence quotient, which usefully lists the steps necessary for assessing the truth or falsehood of a statement. These include taking stock of what you know of the statement; and deciding if the information you have makes the statement more or less true. The outcome of this should give you a “hunch” or guess about the statement. Assigning a value - a number between one and ten, for example - to your level of certainty about the statement, forces you to think more precisely about probable outcomes.
And that perhaps is the biggest concern about the book. Risk intelligence may well become the next catchphrase in business, but it does seem to be an attempt to elevate taking a guess into a science – albeit by forcing people to take the trouble of thinking before shrugging their shoulders.
However, Evans does provide other examples of how quantifying risk has entered the business world, where overconfidence is as much a problem as a lack of confidence among leaders. The UK government for example, insists that all appraisals and evaluation include an “optimism bias” in capital costs, to get around the all too common tendency to ignore past lessons.
Shell also developed risk intelligence training for its geologists to improve their estimations of where to drill for oil. Companies have realized that it is possible to train their people to make better, more educated risk assessments.
The book is dry, academic and not an easy read. But, within the dense detail are useful tips about how to calculate probabilities, think through possibilities more carefully and take more considered decisions.
