Exposure
Экспозиция · Экспозиция к риску · Risk exposure
The shape of what happens to you under different outcomes - not the probability of those outcomes. Manage exposure, not forecast.
You don't need to predict the storm. You need to know: if the storm hits, what happens to me? Two people with the same forecasts can have totally different exposures. The one with capped downside and open upside is in a different world from the one with capped upside and open downside.
Most decision quality comes from managing exposure, not from prediction. You can be wrong about the future and still win if your exposure is shaped correctly.
Buying insurance: you might be wrong about the fire risk. You're not exposed to ruin from being wrong.
- 1For any decision, draw two scenarios: «what if I'm right?» and «what if I'm wrong?» - what's my position in each?
- 2Pay to cap the bad-side exposure even if it lowers the average outcome.
This part of the knowledge base is inspired by the book. Go to the Ukrainian edition to explore the concept in depth.
- · Меточка по Талебу - exposure