Greetings Mathematical Humans,
Understanding the difference between risk and danger is one of many key to grasp the overall philosophy of the quantitative methods of social sciences.
These terms are often used interchangeably in everyday conversation, but in the realms of statistics and decision-making, they have distinct meanings.
Risk is a probability.
Imagine you’re about to cross a busy street. You look both ways, estimate the speed of the cars, and decide when it’s safe to cross. This decision-making process is all about risk.
In statistics, risk refers to the probability that an event will occur. It all comes down to likelihood and odds. For instance, the risk of rain tomorrow can be predicted from forecast models. This probability helps us make informed choices.
The probability aspect of risk makes it relative. Different situations carry different levels of risk (e.g., crossing a street with a pedestrian light is less risky than crossing a highway).
In the world of statistics, calculating risk involves analyzing data and using mathematical models. For example, an insurance company might use risk assessment to determine the premium for a health policy by looking at various factors like age, lifestyle, and medical history.
Danger is an outcome.
Imagine the same busy street, but now you see a car speeding towards you, ignoring traffic lights. This scenario represents danger – an immediate threat that can cause harm.
Danger is more about the severity of an event rather than its likelihood. It emphasizes the potential for damage or harm if the event occurs. While risk quantifies the chance of something happening, danger focuses on the consequences.
Danger isn’t relative, it’s absolute. A situation can be inherently dangerous regardless of how likely it is to occur.
It has no relation to risk : a plane crash, although extremely dangerous, is unlikely.
Consider the decision to invest in a new startup company. Risk here refers to the probability that the startup might fail, based on market trends, financial forecasts, and other quantifiable factors. You might determine there’s a 40% chance the startup won’t succeed within its first year.
On the other hand, danger involves the potential consequences of that failure. If you’ve invested a large sum of money, the danger is the significant financial loss you’d incur if the startup goes under. Even if the risk is relatively low, the danger could be high because of the severity of the outcome.
To make a smart decision, you’d weigh both the risk (likelihood) and the danger (severity). This balance is the essence of strategic thinking in both personal and professional realms.
With this newsletter, we’ll cover a lot of topic that must be explained through the lens of risk/danger balancing.
And I hope you will be there to read the articles to come !
Until next time, stay tuned