Initial commit

skills/expected-value/resources/template.md

@@ -0,0 +1,338 @@
+# Expected Value Templates
+
+Quick-start templates for decision framing, outcome identification, probability estimation, payoff quantification, EV calculation, and sensitivity analysis.
+
+## Workflow
+
+```
+Expected Value Analysis Progress:
+- [ ] Step 1: Define decision and alternatives
+- [ ] Step 2: Identify possible outcomes
+- [ ] Step 3: Estimate probabilities
+- [ ] Step 4: Estimate payoffs (values)
+- [ ] Step 5: Calculate expected values
+- [ ] Step 6: Interpret and adjust for risk preferences
+```
+
+**Step 1: Define decision and alternatives** → Use [Decision Framing Template](#decision-framing-template)
+
+**Step 2: Identify possible outcomes** → Use [Outcome Identification Template](#outcome-identification-template)
+
+**Step 3: Estimate probabilities** → Use [Probability Estimation Template](#probability-estimation-template)
+
+**Step 4: Estimate payoffs** → Use [Payoff Quantification Template](#payoff-quantification-template)
+
+**Step 5: Calculate expected values** → Use [EV Calculation Template](#ev-calculation-template)
+
+**Step 6: Interpret and adjust for risk** → Use [Risk Adjustment Template](#risk-adjustment-template) and [Sensitivity Analysis Template](#sensitivity-analysis-template)
+
+---
+
+## Decision Framing Template
+
+**Decision to be made**: [Clear statement of the choice]
+
+**Context**: [Why are you making this decision? What's the deadline? What constraints exist?]
+
+**Alternatives** (mutually exclusive options):
+1. **[Alternative 1]**: [Brief description]
+2. **[Alternative 2]**: [Brief description]
+3. **[Alternative 3]**: [Brief description, if applicable]
+4. **Do nothing / status quo**: [Always consider baseline]
+
+**Success criteria**: [How will you know if this was a good decision? What are you optimizing for?]
+
+**Assumptions**:
+- [Key assumption 1]
+- [Key assumption 2]
+- [Key assumption 3]
+
+**Out of scope** (not considering):
+- [Factor 1 you're explicitly not modeling]
+- [Factor 2]
+
+---
+
+## Outcome Identification Template
+
+For each alternative, identify 3-5 possible outcomes (scenarios).
+
+### Alternative: [Name]
+
+**Outcome 1: Best case**
+- **Description**: [What happens in optimistic scenario?]
+- **Key drivers**: [What needs to go right?]
+- **Likelihood indicator**: [Rough sense: common, uncommon, rare?]
+
+**Outcome 2: Base case**
+- **Description**: [What happens in most likely scenario?]
+- **Key drivers**: [What's the typical path?]
+- **Likelihood indicator**: [Should be most probable]
+
+**Outcome 3: Worst case**
+- **Description**: [What happens in pessimistic scenario?]
+- **Key drivers**: [What needs to go wrong?]
+- **Likelihood indicator**: [How bad could it get?]
+
+**Outcome 4: [Other scenario, if needed]**
+- **Description**:
+- **Key drivers**:
+- **Likelihood indicator**:
+
+**Check**: Do these outcomes cover the full range of possibilities? Are they mutually exclusive (no overlap)?
+
+---
+
+## Probability Estimation Template
+
+Estimate probability for each outcome using multiple methods, then reconcile.
+
+### Outcome: [Name]
+
+| Method | Estimate | Notes |
+|--------|----------|-------|
+| **Base rates** (reference class) | [X%] | [Similar situations: N cases, frequency] |
+| **Inside view** (causal model) | [Y%] | [Key factors: p_A × p_B × p_C] |
+| **Expert judgment** | [Z%] | [Average of expert estimates] |
+| **Data/model** | [W%] | [Forecast, confidence interval] |
+
+**Final estimate**: [Weighted average] **Confidence**: [Range if uncertain]
+
+**All outcomes** (must sum to 1.0):
+- Outcome 1: [p₁], Outcome 2: [p₂], Outcome 3: [p₃]. **Total**: [p₁+p₂+p₃ = 1.0 ✓]
+
+---
+
+## Payoff Quantification Template
+
+### Outcome: [Name]
+
+**Monetary**: Revenue [+$X], Cost [-$Y], Savings [+$Z], Opp. cost [-$W]. **Net**: [Sum]
+
+**Non-monetary** (convert to $ or utility): Time [X hrs × $rate], Reputation [$Z], Learning [$W], Strategic [qualitative or $], Morale [qualitative or $]
+
+**Time horizon**: [When?] **Discount rate**: [r%/yr if multi-period]
+
+**NPV** (if multi-period): Yr0 [$X/(1+r)⁰], Yr1 [$Y/(1+r)¹], Yr2 [$Z/(1+r)²]. **Total NPV**: [Sum]
+
+**Total Payoff**: [$ or utility] **Uncertainty**: [Point estimate or range: low-high]
+
+---
+
+## EV Calculation Template
+
+Calculate expected value for each alternative.
+
+### Alternative: [Name]
+
+| Outcome | Probability (p) | Payoff (v) | p × v |
+|---------|----------------|-----------|-------|
+| [Outcome 1] | [p₁] | [v₁] | [p₁ × v₁] |
+| [Outcome 2] | [p₂] | [v₂] | [p₂ × v₂] |
+| [Outcome 3] | [p₃] | [v₃] | [p₃ × v₃] |
+| **Total** | **1.0** | | **EV = Σ (p × v)** |
+
+**Expected Value**: [EV = p₁×v₁ + p₂×v₂ + p₃×v₃]
+
+**Variance**: Var = Σ (pᵢ × (vᵢ - EV)²)
+- (v₁ - EV)² × p₁ = [X]
+- (v₂ - EV)² × p₂ = [Y]
+- (v₃ - EV)² × p₃ = [Z]
+- **Variance** = [X + Y + Z]
+
+**Standard Deviation**: σ = √Var = [σ]
+
+**Coefficient of Variation**: CV = σ / EV = [CV] (lower = better risk-adjusted return)
+
+### Comparison Across Alternatives
+
+| Alternative | EV | σ (risk) | CV | Rank by EV |
+|-------------|-------|----------|-----|------------|
+| [Alt 1] | [EV₁] | [σ₁] | [CV₁] | [1] |
+| [Alt 2] | [EV₂] | [σ₂] | [CV₂] | [2] |
+| [Alt 3] | [EV₃] | [σ₃] | [CV₃] | [3] |
+
+**Preliminary recommendation** (based on EV): [Highest EV alternative]
+
+---
+
+## Sensitivity Analysis Template
+
+Test how sensitive the decision is to changes in key assumptions.
+
+### One-Way Sensitivity (vary one variable at a time)
+
+**Variable**: Probability of [Outcome X]
+
+| p(Outcome X) | EV(Alt 1) | EV(Alt 2) | Best choice |
+|-------------|-----------|-----------|-------------|
+| [Low: p-20%] | [EV] | [EV] | [Alt] |
+| [Base: p] | [EV] | [EV] | [Alt] |
+| [High: p+20%] | [EV] | [EV] | [Alt] |
+
+**Breakeven**: At what probability does decision flip? Solve: EV(Alt 1) = EV(Alt 2).
+
+**Variable**: Payoff of [Outcome Y]
+
+| v(Outcome Y) | EV(Alt 1) | EV(Alt 2) | Best choice |
+|-------------|-----------|-----------|-------------|
+| [Low: v-30%] | [EV] | [EV] | [Alt] |
+| [Base: v] | [EV] | [EV] | [Alt] |
+| [High: v+30%] | [EV] | [EV] | [Alt] |
+
+### Tornado Diagram (which variables have most impact on EV?)
+
+| Variable | Range tested | Impact on EV (swing) | Rank |
+|----------|-------------|---------------------|------|
+| [Var 1] | [low-high] | [±$X] | [1 (highest impact)] |
+| [Var 2] | [low-high] | [±$Y] | [2] |
+| [Var 3] | [low-high] | [±$Z] | [3] |
+
+**Interpretation**: Focus on high-impact variables. Get better estimates for top 2-3.
+
+### Scenario Analysis (vary multiple variables together)
+
+| Scenario | Assumptions | EV(Alt 1) | EV(Alt 2) | Best |
+|----------|------------|-----------|-----------|------|
+| **Optimistic** | [High demand, low cost, no delays] | [EV] | [EV] | [Alt] |
+| **Base** | [Expected values] | [EV] | [EV] | [Alt] |
+| **Pessimistic** | [Low demand, high cost, delays] | [EV] | [EV] | [Alt] |
+
+**Robustness**: Does the decision hold across scenarios? If different winners in different scenarios → decision is fragile, more info needed.
+
+---
+
+## Risk Adjustment Template
+
+**Risk profile**: Risk-neutral / Risk-averse / Risk-seeking? One-shot or repeated decision?
+
+**Utility function** (if risk-averse): U(x) = x (neutral), √x (moderate aversion), log(x) (strong aversion)
+
+### Expected Utility (if risk-averse)
+
+| Outcome | p | v | U(v) | p × U(v) |
+|---------|---|---|------|----------|
+| [Out 1] | [p₁] | [v₁] | [U(v₁)] | [p₁ × U(v₁)] |
+| [Out 2] | [p₂] | [v₂] | [U(v₂)] | [p₂ × U(v₂)] |
+| **Total** | **1.0** | | | **EU = Σ** |
+
+**Certainty Equivalent**: CE = U⁻¹(EU). **Risk Premium**: EV - CE.
+
+**Non-monetary factors**: Strategic value [$/qualitative], Alignment with mission [score 1-5], Regret [low/med/high]
+
+**Recommendation**: Highest EV [Alt X], Highest EU [Alt Y], **Final choice**: [Alt Z with rationale]
+
+---
+
+## Decision Tree Template
+
+For sequential decisions (make choice, observe outcome, make another choice).
+
+### Tree Structure
+
+```
+[Decision 1] → [Outcome A] → [Decision 2a] → [Outcome C]
+                                           → [Outcome D]
+             → [Outcome B] → [Decision 2b] → [Outcome E]
+                                           → [Outcome F]
+```
+
+### Fold-Back Induction (work backwards from end)
+
+**Step 1: Calculate EV at terminal nodes** (final outcomes)
+- Outcome C: [payoff = $X]
+- Outcome D: [payoff = $Y]
+- Outcome E: [payoff = $Z]
+- Outcome F: [payoff = $W]
+
+**Step 2: Calculate EV at Decision 2a**
+- If choose path to C: [p(C) × $X]
+- If choose path to D: [p(D) × $Y]
+- **Optimal Decision 2a**: [Choose whichever has higher EV]
+- **EV(Decision 2a)**: [max of the two]
+
+**Step 3: Calculate EV at Decision 2b**
+- If choose path to E: [p(E) × $Z]
+- If choose path to F: [p(F) × $W]
+- **Optimal Decision 2b**: [Choose whichever has higher EV]
+- **EV(Decision 2b)**: [max of the two]
+
+**Step 4: Calculate EV at Decision 1**
+- If choose path to A: [p(A) × EV(Decision 2a)]
+- If choose path to B: [p(B) × EV(Decision 2b)]
+- **Optimal Decision 1**: [Choose whichever has higher EV]
+- **Overall EV**: [max of the two]
+
+**Optimal Strategy**:
+1. At Decision 1: [Choose A or B]
+2. If A occurs, at Decision 2a: [Choose path to C or D]
+3. If B occurs, at Decision 2b: [Choose path to E or F]
+
+**Value of Information**: If you could know outcome before Decision 1, how much would that be worth?
+- EVPI = EV(with perfect info) - EV(current decision)
+
+---
+
+## Complete EV Analysis Template
+
+**Decision**: [Name]
+
+**Date**: [Date]
+
+**Decision maker**: [Name/Team]
+
+### 1. Decision Framing
+
+**Alternatives**:
+1. [Alt 1]
+2. [Alt 2]
+3. [Alt 3]
+
+**Success criteria**: [What are you optimizing for?]
+
+### 2. Outcomes and Probabilities
+
+| Alternative | Outcome | Probability | Payoff | p × v |
+|-------------|---------|------------|--------|-------|
+| **[Alt 1]** | [Outcome 1] | [p₁] | [v₁] | [p₁ × v₁] |
+|  | [Outcome 2] | [p₂] | [v₂] | [p₂ × v₂] |
+|  | [Outcome 3] | [p₃] | [v₃] | [p₃ × v₃] |
+|  | **EV(Alt 1)** | | | **[EV₁]** |
+| **[Alt 2]** | [Outcome 1] | [p₁] | [v₁] | [p₁ × v₁] |
+|  | [Outcome 2] | [p₂] | [v₂] | [p₂ × v₂] |
+|  | [Outcome 3] | [p₃] | [v₃] | [p₃ × v₃] |
+|  | **EV(Alt 2)** | | | **[EV₂]** |
+
+### 3. Comparison
+
+| Alternative | EV | σ (risk) | CV |
+|-------------|-------|----------|-----|
+| [Alt 1] | [EV₁] | [σ₁] | [CV₁] |
+| [Alt 2] | [EV₂] | [σ₂] | [CV₂] |
+
+**Highest EV**: [Alt X with EV = $Y]
+
+### 4. Sensitivity Analysis
+
+**Key assumptions**:
+- [Assumption 1]: [If this changes by X%, decision flips? Yes/No]
+- [Assumption 2]: [Breakeven value = ?]
+
+**Robustness**: [Is decision robust across scenarios?]
+
+### 5. Risk Adjustment
+
+**Risk profile**: [One-shot or repeated? Risk-averse or neutral?]
+
+**Recommendation**: [Alt X]
+
+**Rationale**: [Why this choice given EV, risk, strategic factors?]
+
+### 6. Action Plan
+
+**Next steps**:
+1. [Immediate action]
+2. [Follow-up in X days/weeks]
+3. [Decision review date]
+
+**Contingencies**: [If Outcome Y occurs, we will...]