Analysis of the decision-making methods without use of numerical values of probability (exemplificative of the investment projects).

In practice situations are often found when it is difficult enough to estimate the value of probability of an event. In such cases methods are often times applied which do not involve using numerical values of probabilities: maximax - maximization of the maximum result of the project; maximin - maximization of the minimum result of the project; minimax - minimization of maximum losses; compromise - Gurvitz's criterion: weighing of minimum and maximum results of the project. For decision-making on realization of investment projects a matrix is built. Matrix columns correspond to the possible states of nature, i.e. situations which are beyond of control of the head of an enterprise. Lines of the matrix correspond to possible alternatives of realization of the investment project - strategies which may be chosen by the director. The matrix cells specify the results of each strategy for each state of nature. Example: The enterprise analyzes the investment civil-engineering design of a line for the production of new kind of product. There are two possibilities: the construction of a high power capacity line or to construct low power line. Net present value of the project depends on the demand for production, whereas the exact volume of demand is unknown, however, it is known that there are three basic possibilities: absence of demand, average demand and great demand. The matrix cells (see table 1) show net present value of the project at a certain state of nature, provided that the enterprise will choose the appropriate strategy. The last line shows what strategy is optimum in each state of nature. The maximax decision would be to construct a high power capacity line: the maximum net present value will thus be 300 which correspond to the great demand situation. The maximum criterion reflects the position of the enterprise director - the optimist ignoring possible losses. The maximin decision, i.e. to construct a low power line: the minimum result of this strategy is the loss of 100 (which is better than possible loss of 200 in case of construction of a high power capacity line). The maximin criterion reflects the position of the director who is in no way disposed towards taking risk and is notable for his/her extreme pessimism. This criterion is quite useful in situations where risk is especially high (for example when the existence of an enterprise depends on the results of the investment project). Threat is determined by two components: possibilities and intention of the contestant.

Table 1.

Example of construction of the matrix of strategy and states of nature for the investment project.

To apply the minimax criterion let us construct “a matrix of regrets” (see table 2). The cells of this matrix show the extent/value of “regret”, i.e the difference between actual and the best results which could have been achieved by the enterprise at the given state of nature. “Regret” shows what is being lost by the enterprise as a result of making wrong decision. The minimax decision corresponds to the strategy, whereby the maximum regret is minimal. In our case of low power line maximum regret makes 150 (in great demand situation) and for a high power capacity line - 100 (in the absence of demand). As 100 <150, the minimax decision would be to construct a high power capacity line. The minimax criterion is oriented not so much towards actual as possible damages or loss of profit.

Table 2.

Example of structure of the “matrix of regrets” for minimax criterion

Gurvitz's criterion consists in that minimum and maximum results of each strategy are assigned “weight”. Evaluation of result of each strategy equals to the sum of maximum and minimum results multiplied by corresponding weight.

Let's assume that the weight of the minimum result is equal to 0.5, the weight of the maximum result equals to 0.5 as well (it is the probabilistic characteristic; in this case probability of onset of any option of events = 50 %, as far as we have 2 options : 50 % + 50 % = 100 %; if there will be 3 options, then the ratio can be 33,33 (%) for each or, for example, 20 %, 25 % and 55 %). Then the calculation for each strategy will be the following:

Low power line: 0.5 х (-100) + 0.5 х 150 = (-50) + 75 = 25;

High power capacity line: 0.5 х (-200) + 0.5 х 300 = (-100) + 150 = 50.

Gurvitz's criterion testifies in favor of the construction of high power capacity line (as 50> 25). Advantage and simultaneously disadvantage of Gurvitz's criterion consists in the necessity of assigning weights to the possible outcomes; it allows taking into account specificity of situation, however, assigning weights always implies some subjectivity. As a result of the fact that in real situations there is often lack of information on the probabilities of outcomes the use of the above methods in engineering of investment projects is quite justified. However, the choice of concrete criterion depends on the specificity of situations and individual preferences of an analyst (the company's strategy).

“Data mining”, getting/acquisition of information (it should be noted that many modern “data mining” techniques focus mainly on search of information based on key parameters (words, images, matrixes, algorithms), but in that way we will only be able to bring out ties/links that have already been exposed by someone else). According to the theory of information (Stanislav Yankovsky), requisite condition of activity of intellectual (higher) system is the redundancy of incoming and generated information, read and think “to lay up in store/as a reserve”, accumulate “assets” which expands your possibilities and get rid of “liabilities” which reduce your potential. Any phenomenon should be analyzed from the view point of what it gives to you and what it takes from you. Even two most universal resources - money and information (sometimes “time” is added thereto) - also limit to some extent the possibilities of their holder. A very important point in the evaluation of information is reliability of the source of information and credibility of data itself. Specific code of marking information carriers is applied for this purpose. Reliability of source: A - absolutely reliable source; B - usually reliable source; C - quite reliable source; D - not always reliable source; E - unreliable source; F - reliability of source cannot be defined. Credibility of data: 1 - credibility of data is proven by data from other sources; 2 - data are probably correct; 3 - data are possibly correct; 4 - doubtful data; 5 - data are improbable; 6 - credibility of data cannot be established. It should be noted that many elements of scientific, research and analytical activity are weakly formalizable, in which connection practical experience in the concrete field of activity gains great importance.

Issues recommended for independent study: the Game theory, the theory of fields, the theory of crises, the chaos theory, the theory of relativity, the management, strategy and tactics theories, basics of logic and statistics - concepts, substance/essence, stereotypes, paradoxes. See also: Software “Archivarius 3000” http://www.likasoft.com - highly effective searcher in database on the basis of keywords.

Now, be prepared, it is going to be a little bit difficult.

Part 2. Basics of general theory of systems (GTS) and systemic analysis

The world as a whole is a system which, in turn, consists of multitude of large and small systems. In the classical theory of systems one can single out three various classes of objects: the primitive systems, which structure is invariable (for example, the mathematical pendulum); analytical systems, which almost always have fixed structure, but sometimes undergo bifurcations - spasmodic changes of structure (simple ecosystem); chaotic systems continually changing their structure (for example, atmosphere of the Earth). Chaos is essentially an unstable structural system. In this sense chaos is a synonym of changeable, internally inconsistent, unstable developing system which cannot be referred to analytical structures. Having established the general principles of management in any systems, one can try to determine how the system should be organized to work most effectively. This approach to research of problems of management from general to particular, from abstract to concrete is named organizational or systemic. Such approach provides the possibility of studying of a considerable quantity of alternative variants, the analysis of limitations and consequences of decisions made. “The system is a set of interacting elements”, said Berthalanfie, one of the founders of the modern General Theory of Systems (GTS) emphasizing that the system is a structure in which elements somehow or other affect each other (interact). Is such definition sufficient to distinguish a system from non-system? Obviously, it is not, because in any structure its elements passively or actively somehow interact with each other (press, push, attract/draw, induce, heat up, get on someone nerves, feel nervous, deceive, absorb, etc.). Any set of elements always operates somehow or other and it is impossible to find an object which would not make any actions. However, these actions can be accidental, purposeless, although accidentally and unpredictably, they can be conducive to the achievement of some goal. Though a sign of action is the core, it determines not the concept of the system, but one of the essential conditions of this concept. “The system is an isolated part, a fragment of the world, the Universe, possessing a special property emergence/emergent factor, relative self-sufficiency (thermodynamic isolation)”, said P. Etkins. But any object is a part or a Universe fragment, and each object differs from the others in some special property (emergence/emergent factor - a property which is not characteristic of simple sum of all parts of the given system), including a place of its location, period of existence, etc. And at that, each object is to a certain degree thermodynamically independent, although is dependent on its environment. Hence, this definition also defines not only a system itself, but some consequences of systemic nature as well. Adequate/comprehensive/ definition of the concept “system” is possibly, non-existent, because the concept “goal/purpose” has been underestimated. Any properties of systems are ultimately connected with the concept of goal/purpose because any system differs from other systems in the constancy of its actions, and the aspiration to keep this constancy is a distinctive feature of any system. Nowadays the goal/purpose is treated as one of the elements of behavior and conscious activity of an individual which characterizes anticipation/vision of comprehension of the result of activity and the way of its realization by means of certain ways and methods. The purpose/goal acts as the way of integration of various actions of an individual in some kind of sequence or system. So, the purpose is interpreted as purely human factor inherent only in human being. There's nothing for it but to apply the concept of “purpose/goal” not only to psychological activity of an individual, but to the concept of “system”, because the basic distinctive feature of any system is it designation for some purpose/goal. Any system is always intended for something, is purposeful and serves some definite purpose/goal, and the goal is set not only before the individual, but before each system as well, regardless of its complexity. Nevertheless, none of definitions of a system does practically contain the concept of purpose/goal, although it is the aim, but not the signs of action, emergence factor or something else, which is a system forming factor. There are no systems without goal/purpose, and to achieve this purpose the group of elements consolidates in a system and operates. Purposefulness is defined by a question “What can this object do?” “The system is a complex of discretionary involved elements jointly contributing to the achievement of the predetermined benefit, which is assumed to be the core system forming factor”. One can only facilitate the achievement of specific goal, while the predetermined benefits can only be the goal. The only thing to be clarified now is who or what determines the usefulness of the result. In other words, who or what sets the goal before the system? The entire theory of systems is built on the basis of four axioms and four laws which are deduced from the axioms: axiom #1: a system always has one consistent/invariable general goal/purpose (the principle of system purposefulness, predestination); axiom #2: the goal for the systems is set from the outside (the principle of goal setting for the systems); axiom #3: to achieve the goal the system should operate in a certain mode (the principle of systems' performance) - law #1: the law of conservation (the principle of consistency of systems' performance for the conservation of the consistency of goal/ purpose), law #2: the law of cause-and-effect limitations (the principle of determinism of systems' performance), law #3: the law of hierarchies of goals/purposes (the principle of breakdown of goal/purpose into sub-goals/sub-purposes), law #4: the law of hierarchies of systems (the principle of distribution of sub-goals/sub-purposes between subsystems and the principle of subordination of subsystems); axiom №4: the result of systems' performance exists independently from the systems themselves (the principle of independence of the performance result). Axiom #1: the principle of purposefulness. At first it is necessary to determine what meaning we attach to the concept “system”, as far as at first sight there are at least two groups of objects”: “systems” and “non-systems”. In which case the object presents a system? It is not likely that any object can be a system, although both systems and non-systems consist of a set of parts (components, elements, etc.). In some cases a heap of sand is a structure, but not a system, although it consists of a set of elements representing heterogeneity of density in space (grains of sand in conjunction with hollows). However, in other cases the same heap of sand can be a system. So, what is the difference then between the structure-system and the structure-non-system, since after all both do consist of elements? All objects can be divided into two big groups, if certain equal external influence is exerted upon them: those with consistent retaliatory actions and those with variable and unpredictable response action. Thus, if we change external influence we then again will get the same two groups, but their structure will change: other objects will now be characterized by the consistency of response actions under the influence of new factors, while those previously characterized by such constancy under the former influencing factors will have no such characteristics under the influence of new factors any more. Let us call the systems those objects consisting of a set of elements and characterized by the constancy/consistency of actions in response to certain external influences. Those not characterized by the constancy of response actions under the same influences may be called casual sets of elements with respect to these influences. Hence, the concept of “system” is relative depending on how the given group of elements reacts to the given certain external influence. The constancy and similarity of reaction of the interacting group of elements in respect of certain external influence is the criterion of system. The constancy of actions in response to certain external influence is the goal/purpose of the given system. Hence, the goal/purpose stipulates direction of the system's performance. Any systems differ in constancy of performance/actions and differ from each other in purposefulness (predestination for something concrete). There is no system “in general”, but there are always concrete systems intended for some specific goals/purposes. Any object of our World differs from another only in purpose, predetermination for something. Different systems have different goals/purposes and they determine distinction between the systems. Hence, the opposite conclusion may be drawn: if there any system exists, it means it has a goal/purpose. We do not always understand the goals/purposes of either systems, but they (goals/purposes) are always present in any systems. We cannot tell, for example, what for is the atom of hydrogen needed, but we can not deny that it is necessary for the creation of polymeric organic chains or, for example, for the formation of a molecule of water. Anyway, if we need to construct a water molecule, we need to take, besides the atom of oxygen, two atoms of hydrogen instead of carbon or any other element. The system may be such group of elements only in which the result of their general interaction differs from the results of separate actions of each of these elements. The result may differ both qualitatively and quantitatively. The mass of the heap of sand is more than the mass of a separate grain of sand (quantitative difference). The room which walls are built of bricks has a property to limit space volume which is not the case with separate bricks (qualitative difference). Any system is always predetermined for some purpose, but it always has one and the same purpose. Haemoglobin as a system is always intended for the transfer of oxygen only, a car is intended for transportation and the juice extractor for squeezing of juice from fruit. One can use the juice extractor made of iron to hammer in a nail, but it is not the juice extractor system's purpose. This constancy of purpose obliges any systems to always operate to achieve one and the same goal predetermined for them.

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