American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.
During the past 10 years or so there has been a concerted effort within our industry to expand the use of new quantitative evaluation methods in the analysis of how to invest capital in exploration and production operations. This effort has taken the form of many articles in our literature, numerous short courses and management seminars on decision making under uncertainty, and countless after-dinner speakers extolling the virtues of the new decision-analysis methods. In the process we have been exposed to a whole new vocabulary of terms such as risk analysis, expected value concept, conditional probability, EMV, decision trees, utility theory, Monte Carlo simulation, Bayes' theorem, bid strategies, etc. The common thread running through all of these new ideas has been the argument that, if we change from our traditional (and largely intuitive) ways of deciding how and where to invest capital and, instead, base our decisions on these new approaches, we will do a better job in the long term of investing capital under conditions of uncertainty.
The new decision-analysis methods involve quantitative statements of the degree of risk and uncertainty. Many involve complex, hard-to-grasp statistical concepts. And, outwardly at least, many of the methods suggest or imply that "scientific decision making" is really a very simple, impersonal review of a bunch of numbers. On the other side of the coin is the feeling of many managers that decision making is a very personal, intuitive, subjective, and emotional personal, intuitive, subjective, and emotional process that does not lend itself to any form of process that does not lend itself to any form of quantification by a staff of statisticians or management scientists.
Thus, it is not surprising that recent proposals to convert the decision-making process proposals to convert the decision-making process over to the new methods have caused much consternation, frustration, and skepticism on the part of many managers. Some have rebelled at the suggestion to change from the ways they have been using (successfully?) over the years. Others have concluded that the new quantitative analysis methods clearly offer important new insights about how best to invest money under conditions of uncertainty. But probably the large majority of decision makers are undecided about it all and are trying to assess the charges and countercharges being hurled back and forth between the "believers" and "nonbelievers." Their concern is whether to walk away from what they perceive to be the reasonably satisfactory (although largely intuitive) ways of making decisions they have been using for many years and embrace a new way of analyzing decisions that they only partially understand. partially understand.