I was asked by a reader to post for a neat insurance media startup, insnerds.com. Somehow an organization with nerds in the name didn’t have any actuaries involved. Well, I’m happy to put an end to that! Here is my contribution. One excerpt:
In any negotiation, you are introducing a seriously high risk of human fallibility, and the shareholders of these organizations have very strong preferences for the kinds of errors they want their organizations to make. Risk taking organizations want fewer false positives (doing fewer bad deals), and sales organizations want fewer false negatives (ditching fewer good deals). They fight it out to correct for cognitive bias.
Please do read the whole thing.