By D. Joeff Williams
“Uncertainty.” That word has been repeated often in conversations and discussions I have been a part of recently, whether in my professional life or my personal life. So often I have heard people say, “Well we just don’t know,” or, “There is so much uncertainty right now.”
This really struck me several months ago when the Academy hosted a Capitol Forum webinar called “Cross-Practice COVID-19 Update.” All four Academy senior fellows and a representative from the Risk Management and Financial Reporting Council presented during the webinar. When I looked back over the presentation, each practice area talked about uncertainty. One presenter commented that there are “far more unknowns than knowns”—and it seems like that is still true.
Recently I found an interesting book. I have to admit that the title grabbed me when I came across it; with a title like “Paint It Black—How Rock-N-Roll and Other Tools Are the Best Problem-Solving Techniques,” I just had to buy that book. The author, Rom Werran Gayoso, noted in his introduction how he wanted to help the general public make better decisions by sharing how to “learn the tool and put it into practice” and rock ’n’ roll can help teach us how to do that. Well, that had me.
As I have shared in my past messages, one of my cultural joys is in seeing and learning about painters and their work. My other cultural interest is rock ’n’ roll music and history. More specifically, the genre now labeled as “classic rock.” (I’m not sure what it means when the music you grew up listening to and memorizing all the songs is now called “classic.”) I was a big fan and still enjoy the rock artists of the 1970s and ’80s. Some may recognize the reference in the title of the book to the Rolling Stones song “Paint it Black” that is the opening track to their U.S. release of the album Aftermath. I thought of the uncertainty the group may have felt when they incorporated the sitar into this song. Would their listeners appreciate the new sound? Well, as we now know this song went on to be one of their most popular songs and was inducted into the Grammy Hall of Fame in 2018.
The other part of the book title makes reference to problem-solving techniques. So if you combine rock ’n’ roll (personal enjoyment) with problem-solving techniques (professional skill), then what? I thought, “OK, I need to read this book.”
The book is in fact a collection of case studies and how problem-solving techniques like scenario planning (sound familiar?) can “help envision the future in a structured way.” The author describes how the “world around us is complex and uncertain.” Terms like pattern recognition, decision tree, and nonlinear algorithms are referenced. The other key focus is that these decisions, of course, require making a choice. The author notes that “as we consider the alternatives, we will be forced to think about them and describe them in a clear and unequivocal way so we can declare our preferences; that is to say we will be declaring ‘this’ is better than ‘that.’ … The reader will encounter a structured approach designed to evaluate the alternatives and help in the decision-making.” At the end of each practical case the author presents a worksheet to help work through the situation.
The last practical case the author presents was about someone showing an interest in music and trying to decide whether to pursue the guitar or bass string instrument. This last one struck me as I read it; it reminded me how actuaries deal with uncertainty—in particular while considering our Code of Professional Conduct, as well as the Web of Professionalism that Tom Wildsmith introduced several years ago to help guide us in these situations.
The process of deciding starts with identifying the choices—in this case two—and later suggests seeking at least two approaches to processing the information. Sometimes an actuary in a situation full of uncertainty may encounter even more than two options. As I thought about this, I was reminded of our Code. Here in particular, I see Precept 3 and our actuarial standards of practice (ASOPs) help guide us toward the applicable ASOPs that need to be followed in different situations. Those standards themselves help us to understand the issues to be thinking about and the choices we may need to consider. The Academy’s Applicability Guidelines can also help direct us to which ASOPs could be involved in different work areas. We also see here the use of sensitivities and how valuable they can be in helping understand the options amid uncertainty. In the webinar I mentioned above, David Heppen, chairperson of the ERM/ORSA Committee highlighted the value of stress testing and introduced the approach of reverse stress testing.
The worksheet presented in the book discussed identifying a “content area expert and another authoritative source.” This concept directly harmonizes with Precept 2 and the Qualification Standards and the continuing education (CE) requirements. Our CE requirements help us stay up to date with current techniques and information; Academy seminars and webinars that offer valuable CE allow members to interact with individuals who are experts and may have more experience in those specific areas. I often hear that one of the best ways to start when you are learning a new area of practice is finding a mentor or other expert in that area who can be a resource. Reach out to other actuaries and stay current with the multitude of webinars and ongoing resource materials. These are all tools to help with uncertainty.
It also described how to “recruit at least one trained unbiased observer to document the experience.” When I saw “document,” I immediately jumped up and was reminded of the words of Bill Thompson, one of the Academy’s past faculty members of the Life & Health Qualification Seminar, to always “Document, document, document.” This idea rings similarly with Precept 4 regarding communications and disclosure.
The book case study even included the suggestion that you should “describe how you see yourself in the picture.” This reminded me of our oft-used “look in the mirror” test to help visualize whether you are qualified to complete a certain work product. This test also helps us make those decisions that require professional judgment when there is uncertainty and we do not have specific guidance.
Is uncertainty new for actuaries? No. The examples of actuarial areas that have been faced with uncertainty are numerous. Will actuaries continue to be faced with uncertainty? Yes. Do we have some tools to help navigate uncertainty? Absolutely. In fact, I’m convinced that our toolkit of instruments has us better prepared than most to survive—and thrive—no matter what comes next. Even if someone introduces a sitar.