” . . . . My goal has never been to quantify every aspect of every decision; that would be impossible. Instead, my yellow pad has become both metaphor and means, a way of applying a questioning mind-set and incorporating probabilistic thinking into the real world. There are, of course, decisions throughout my life that looking back I should have made differently. But the yellow pad has served me well, allowing me to think in disciplined ways about risks, probabilities, costs and benefits, and substantially increasing my odds of making the best possible choice. What’s more, I believe the yellow-pad approach can be beneficial for everyone.
For example, applying probabilistic thinking to real-world events changes the way one thinks about risk. Too often, decision makers trying to anticipate a risk focus on a single potential outcome, or perhaps a small handful of outcomes. Probabilistic thinkers, on the other hand, recognize that risk is a wide range of possibilities.
Consider the standoff over the debt ceiling currently taking place in Washington. While many leaders are appropriately concerned about the risks, I fear that other leaders — and the markets — have grown complacent. The United States has always found a way to honor its debts in the past, including during the serious debt-ceiling standoff that occurred when I was secretary of the Treasury. Even the lawmakers threatening it today seem to view default as unimaginable. I myself view default as highly unlikely.
But highly unlikely is not the same thing as impossible. In the short term, government, business leaders and investors should make their decisions taking into account the small but real risk that debt-limit brinkmanship can lead to severe economic consequences. In the long term, policymakers must recognize that even if the risk associated with any one debt-ceiling standoff is low, allowing repeated standoffs will drive the cumulative risk ever higher.
To me, this probabilistic assessment of risk seems reason enough to eliminate the debt limit entirely, and to allow lawmakers to debate priorities during the budget process — including fiscal discipline, which I believe is critical to our economic success — without reneging on the full faith and credit of the United States to meet commitments already made.” . . . . .