Adding a “margin of safety” is not even wrong…
I just came across a blog post A Margin of Safety: How to Thrive in the Age of Uncertainty via the weekly High Scalability post. But, the advice there is wrong in a subtle way.
Basically, the author claims that if only engineers designing levees and flood walls added a “margin of safety” than a tragedy of flooding brought on by Katrina could have been avoided. I didn’t do the research that the author did on this, so I’m leaving that unchallenged. “Margin of safety” is actually a good advice for a specific context. The problem is when the author extrapolates it to how to use “margin of safety” in “real life.”
The author bundles together domains with completely different characteristics and applies the same heuristic as general advice across all of them. This is a mistake. While lifting weights may have properties where adding a margin of safety is reasonable, it is so because the failure mode and the range of lifting weights fits into normal probability distribution of things. You aren’t going to ever squat the weight of the Moon, or you are very unlikely to hurt yourself executing a movement with no weight if you’ve trained that same movement with weights before. The failure domain is for the most part predictable. Investing, on the other hand, is, for the most part, unpredictable, and has no bounds on what is likely and what is unlikely given enough time. No amount of safety margin will prevent you from ruin of the investment you make. Similarly, in the domain of project management itself (also mentioned by the author), there are predictable projects and unpredictable projects. A “margin of safety” will do nothing for you if you’ve attempted the impossible, and, for example, in the software world, it is not always easy to distinguish if what is being attempted is possible or will ever work as intended, especially if it’s novel. And while “margin of safety” sounds great in wildlife management, when there is existential risk involved, sometimes no margin is sufficient to prevent catastrophe.
Closing out along with the author’s closing point, “leave room for the unexpected” only points out that you are leaving room for the unexpected that you expect. There’s the unexpected unexpected (also more commonly referred to as the unknown unknown), which is a property of a complex system. “Margin of safety” doesn’t do much there, being able to react quickly and reinforce or dampen effects is much more important heuristic in such environments because the “margin of safety” is unknown at the time you have to decide what it is.