Griffin’s Risk Management Superpower

 

The third installment of the feature film series Men in Black features the alien Griffin. Griffin possesses the critical ArcNet shield that can protect the earth against the impending Boglodite invasion. Griffin also possesses an amazing superpower: he can see the many possible futures in store for us. The movie’s writers, director and the actor playing Griffin, Michael Stuhlbarg, exploit this superpower to great comedic effect, first in a scene that takes place in 1969 at Andy Warhol’s Factory, and then later at Shea Stadium where Griffin visualize’s the Miracle Mets’ entirely improbable victory in the World Series later that year. Griffin’s superpower goes an important step further, and this is a key to how the comedy is written. Not only does he see the wide array of possible futures, but he understands, too, which futures are consistent with events as they play out, and which futures are suddenly ruled out by current events. He sees what mathematician’s call the filtration.

Although I call this a superpower, it is also what many neo-classical economists typically assume is a natural feature of decision making by homo economicus. In our models, we imagine that human beings can enumerate the full tree of possibilities playing out in the future, and then that humans can calculate backwards to assign a current value to assets based on an assessment of the probability across all of the future contingencies.

Of course, homo economicus and homo sapien are two entirely different creatures. The Financial Times’ columnist John Kay has recently written a couple of columns reminding us of the various ways human beings demonstrably fall short of the rational approach to risk employed in economists’ models. Whether it’s a bug or feature depends on your view of humanity, but either way, it’s well established. So Griffin’s ability really is alien to the human species, if not to our models of human action.

A lot of risk management exercises are about the task of expanding people’s imaginations about risk. Scenario analysis, for example, is a stretching exercise for the mind. We may never have Griffin’s superpower, but we can be inspired by it.

 

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