The Difficulty of Assessing Uncertainty (includes associated papers 6422 and 6423 and 6424 and 6425 )
Authors: Capen E.C. 
Published: December 2007

What do you do when uncertainty crosses your path? Though it seems that we have been taught how to deal with a determinate world, recent testing indicates that many have not learned to handle uncertainty successfully. This paper describes the results of that testing and suggests a better way to treat the unknown.

Introduction

The good old days were a long time ago. Now, though we must harness new technology and harsh climates to help provide needed energy supplies, we are also faced with the complex problem of satisfying not altogether consistent governments, the consumer, our banker, and someone's time schedule. Judging from the delays, massive capital overruns, and relatively low return this industry has experienced lately, it would seem that we have been missing something. At least one explanation is that we have not learned to deal with uncertainty successfully.

Some recent testing of SPE-AIME members and others give rise to some possible conclusions:A large number of technical people have little idea of what to do when uncertainty crosses their path. They are attempting to solve 1976 problems with 1956 methods.Having no good quantitative idea of uncertainty, there is an almost universal tendency for people to understate it. Thus, they overestimate the precision of their own knowledge and contribute to decisions that later become subject to unwelcome surprises.

A solution to this problem involves some better understanding of how to treat uncertainties and a realization that our desire for preciseness in such an unpredictable world may be leading us astray.

Handling Uncertainty

Our schooling trained us well to handle the certainties of the world. The principles of mathematics and physics work. In Newton's day, force equaled mass times acceleration, and it still does. The physicists, when they found somewhat erratic behavior on the atomic and molecular level, were able to solve many problems using statistical mechanics. The extremely large number of items they dealt with allowed these probabilistic methods to predict behavior accurately.

So we have a dilemma. Our training teaches us to handle situations in which we can accurately predict the variables. If we cannot, then we know methods that will save us in the presence of large numbers. Many of our problems, however, have a one-time-only characteristic, and the variables almost defy prediction.

You may embark on a new project whose technology differs from that used on other projects. Or perhaps your task is to perform a familiar project in a harsh environment. Try to estimate the total cost and completion time. Hard!You cannot foresee everything. And, for some reason, that which you cannot foretell seems to bring forth more ill than good. Hence, the predictions we make are often very optimistic. Even though we see the whole process unfolding and see estimate after estimate turn out optimistic, our next estimate more than likely will be optimistic also.

What happens? Is there some deep psychological phenomenon that prevents our doing better? Because we are paid to know, do we find it difficult to admit we do not know? Or can we obtain salvation through knowledge? As we were trained to handle certainty, can we also find a better way to estimate our uncertainty?