Rational behaviour is not defined by conformity with a set of axioms set down even by such distinguished thinkers as John von Neumann and Milton Friedman.

In conditions of radical uncertainty, subjective probabilities are necessarily sensitive to trivial information and details of problem specification, and it therefore makes little sense to formulate or act on them.

If the Duke and Marquis had planned to play one hundred games, then the Duke’s three to one advantage at an early stage of the evening would have counted for little. But if there were to be only five games, the Marquis would certainly have lost – the result of the fifth game would be irrelevant, and it might not even have been played.

And the third company, whose directors had spent half an hour watching ‘Quality is Free’, oblivious to its irrelevance to the water industry, had failed to recognise the difference between motivational proselytisation to employees – for which there is a role – and boardroom debate.

The second company, embarking on the acquisition of a German firm, had confused aspirations with strategy. That confusion naturally leads to the complaint that formulating strategy is easy: implementation is the problem.

The key to managing risk is the identification of reference narratives which have these properties of robustness and resilience.

Three main propositions run through this book. First, the world of economics, business and finance is ‘non-stationary’ – it is not governed by unchanging scientific laws. Most important challenges in these worlds are unique events, so intelligent responses are inevitably judgements which reflect an interpretation of a particular situation. Differen

The claim of the modern science of decision theory is that most mysteries can be reduced to puzzles by the application of probabilistic reasoning. Such reasoning can provide solutions to puzzles, but not to mysteries. How to think about and cope with mysteries is the essence of managing life in the real world and is what this book is all about.

A second requirement of rationality is an element of internal logic or consistency. The judgement or action is appropriate given the beliefs about the world which give rise to it. This proposition requires care in interpretation. It may be difficult to distinguish errors in reasoning from mistakes in belief.