It is the single most important and powerful idea in all of managerial decision-making. But they are difficult to handle psychologically and organizationally, which often causes firms and individuals to reach disastrously wrong decisions. Chapter 3 describes devices to avoid these cost pitfalls. Uncertainty is a key difficulty in decision-making. Chapter 4 presents intellectual machinery for dealing with uncertainty in a systematic fashion when valuing and comparing alternatives.
People sometimes enjoy uncertainty, and some even are willing to pay for it in gambling.
More commonly, though, uncertainty is a negative consequence that people will purchase insurance to avoid. Chapter 5 explains how to allow for risk when you prefer avoiding uncertainty. The cost-benefit analysis presented in Chapters 1 to 5 presupposes that you have a single criterion of success on which to compare the various alternatives. But in many of life's situations you have more than one goal in mind. Chapter 6 provides some devices to integrate multiple goals for organizations and individuals.