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The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty by Sam L. Savage

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CHAPTER 28
Holistic Versus Hole-istic
It was the late 1980s in Chicago when I was still involved in the development and marketing of What’sBest!, the LINEAR PROGRAMMING software package discussed in Chapter 2. I was spending many Saturdays and evenings alone at the office trying to make up for lost time. On such occasions the rare phone call was usually a wrong number, but that afternoon a Texas drawl thick enough to spread with a knife said, “Hi, this is Ben Ball.” He got right to the point. “When people invest in portfolios of oil exploration sites, they rank the places to drill hole by hole, then start at the top and go down until they have exhausted their budget. Why don’t they do Markowitz style portfolio optimization instead? Can you help me do this with LINEAR PROGRAMMING?”
Although I had never spoken to Ben before, I knew the name, because he had been quoted in The Wall Street Journal as a user of our software. I remember being struck by three things that afternoon. First, it was a good question. Second, the tone in Ben’s voice indicated commitment. Third, the way he pronounced “oil” rhymed with his last name.
At the time, the top ten things I did not know about Ben were:
10. He started doing LINEAR PROGRAMMING at oil refineries in the early 1950s.
9. He had a bachelor’s degree in chemical engineering from MIT.
8. He had also a master’s in chemical engineering from MIT.
7. He had been vice president of strategy for Gulf Oil.
6. He had learned about portfolio optimization at ...

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