109ONE CELL, TWO WORLDS
Range Compression: Five Buckets, a Thousandfold Gap
Range compression discards differences within a category. Here, fictional annual risks with probabilities 1,000 times apart share one score under explicitly chosen bins.
THE BINS THROW AWAY THE MAGNITUDE
The cutoff decides what remains distinguishable
These are chosen bins, not an industry standard. Remaining probability ranks 2–5 are (10⁻³, 10⁻²], (10⁻², 0.1], (0.1, 0.5], and (0.5, 1]. Loss ranks 1–4 are €0, €1m), [€1m, €10m), [€10m, €50m), and [€50m, €100m). The [frequency-impact matrix retains the category but discards each value's position within it.
- Rare, rank 1: 0 ≤ annual probability ≤ 10⁻³
- Catastrophic, rank 5: loss ≥ €100m
- Both selected ranks produce 1 × 5 = 5
A SEPARATE INVERSION
Cox supplies a separate example of reversed ranking
In Cox's 2008 paper, §2, pp. 499–501, the pair (p = 0.10, c = 0.65) is medium, with product 0.065. The pair (0.37, 0.38) is low, with product 0.1406. Here the rating reverses the product ranking. The fictional euro pair above merely ties.
- A normalized 2 × 2 matrix splits each axis at 0.5
- On p = 0.75 − c, a medium-rated point can have smaller p × c than a low-rated point
WHAT'S WRONG WITH RISK MATRICES?
What's Wrong with Risk Matrices?
Louis Anthony (Tony) Cox, Risk Analysis, 2008
Cox's Theorem 1 (§3.5, pp. 504–505) concerns coloring under weak consistency, betweenness, and consistent coloring. It places the left column and bottom row in the lowest-priority category and excludes the highest-priority category from the next column and row. That theorem is separate from §2's comparison with random choice.
A THOUSANDFOLD GAP, FOLDED FLAT
A score of five conceals a tenfold expected-loss difference
The probability gap is 1,000×; the consequence gap runs the other way at 100×. Their product leaves A's expected loss ten times B's. Expected loss need not settle a decision about catastrophic harm, affordability or constraints. This arithmetic shows why the cell is not a decision.
- A: 10⁻³ × €100m = €100k per year
- B: 10⁻⁶ × €10bn = €10k per year
- Both ordinal scores: 1 × 5 = 5
The coin comparison requires its own decision problem
In Cox's §2 construction, choose one of two risks to eliminate, prefer the higher matrix category, and break category ties randomly. When the line p = 0.75 − c puts one risk in medium and another in low, the matrix selects the smaller product for elimination. A fair coin does better in expected loss removed. Negative correlation alone does not establish that result; the joint distribution, bins and decision rule need inspection. This model comparison does not demonstrate a particular avoided loss. Return to the decision behind the cell.
THE WORDS DON'T MEAN THE SAME THING
A shared word can hide different numerical cutoffs
Budescu, Broomell and Por's 2009 experiment found that interpretations of probability terms in 2007 IPCC sentences deviated from the guidelines even when readers could consult them. Ball and Watt report persistent assessor scatter for public-leisure hazards. These findings do not supply the illustration's cutoffs. Hubbard and Evans, pp. 2:4–2:5, distinguish ordinal ranks from ratio measurements.
- Ask what probability interval each label denotes
- Record the definition and the assessment horizon
- Numerical definitions still need evidence
ANY BIN IS A DECISION
A boundary can hide distinctions without anyone intending it
The relationship to a three-option menu is an analogy. Categorization and exclusion are different operations, but both deserve visible rules. Choice framing can affect an available comparison; agenda control concerns what can enter it. A familiar format alone proves neither intent nor a hidden verdict.
- A category merges values
- A shortlist excludes alternatives
- Inspect the rule that produced each summary
REOPEN THE INPUTS
Return to the inputs before drawing a finer picture
A curve cannot recover distinctions already discarded by a score. Revisit the original evidence, use supported ranges, and leave gaps open where evidence is missing. A quantitative model still needs a criterion and an accountable decision. Continue to The Cell Is Not a Decision.
- Recover source records and their assumptions
- Check probability, consequence, horizon and dependence
- Show what changes under plausible alternatives