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#420 - The Many Uses Of Risk Assessment, 14-Dec-1994

The computer industry revealed an illuminating use of risk assessment
this month. On November 24th, the NEW YORK TIMES announced discovery of
a bug in the Pentium computer chip, the flagship product of the giant
Intel Corporation, the nation's premier chip maker. A few days later,
Intel confirmed a flaw in its Pentium microprocessor, the chip that
serves as brain for millions of the spiffiest desktop "PC compatible"
computers. An estimated 6 million new desktop computers rely on the
Pentium chip. Now it turns out that the Pentium cannot do arithmetic
correctly. For example, the Pentium gets a wrong answer if you tell it
to divide 4195835 by 3145727.[1]

A Pentium processor (the chip itself) sells for roughly $300. (The
computer surrounding the chip sells for 6 to 15 times that much.) Since
6 million Pentium processors have been sold, that's about $1.8 billion
worth of flawed chips already built into high-end desktop computers.
(Of these, 3 to 4 million have been sold; the remainder are still in
stores and warehouses.) Even for a large company like Intel, $1.8
billion is serious money. What should Intel do? Bite the bullet and
offer to replace all those chips? You might think of that as the old
fashioned approach. A more modern approach --the one Intel adopted --is
to maintain silence and do a risk assessment.

Intel said it had discovered the problem in June but revealed nothing
publicly (and continued selling Pentiums) until the NEW YORK TIMES
broke the story November 24.[2] After the story got out, Intel waited a
week, then published results of an internal risk assessment showing
that "average" computer users would only get wrong answers once every
27,000 years of normal computer use. A "heavy user," such as an
accountant or financial analyst, might see an error once every 270
years, Intel's risk assessment concluded.[3] "The flaw is not
meaningful for the vast majority of commercial PC [personal computer]
applications [computer programs]," Intel said in a press statement
December 1.

On December 13, IBM announced it was halting all sales of IBM personal
computers built around the Pentium chip.[4] IBM said its own risk
assessment had shown Pentium could cause an error once every 24 days
for average users, not once every 27,000 years. William R. Pulleybank,
director of mathematical sciences at IBM's Watson Research Center in
Yorktown, N.Y., said a large company running 500 Pentium-based
computers might get 20 errors every day.[5] Thus IBM's risk assessment
concluded that the Pentium problem was roughly 400,000 times worse than
Intel said it was. (27000 years x 365 days divided by 24 days =
410,625; this calculation was performed on a $15 Radio Shack
calculator, which does arithmetic flawlessly.) A scientist might say
that the risk assessments by the two companies differed by more than 5
orders of magnitude --a large difference indeed.

In reporting this story, the NEW YORK TIMES acknowledged that both
Intel's and IBM's risk assessments are possibly colored by what
economist Thorstein Veblen used to call "pecuniary exigencies," the
lure of loot. In announcing IBM's decision to halt sales of Pentium-
based machines, the TIMES headline included this information: "I.B.M.
Halts Sales of Its Computers With Flawed Chip; A Blow to Maker, Intel;
But Industry Analysts Note I.B.M. Has Rival Product and See Mixed
Motives." IBM will soon market its own microprocessor, called the Power
PC, which will compete with the Pentium, so IBM has a business interest
in making the Pentium look bad. (Recent Macintosh computers are already
using the Power PC; no Macs have ever used Pentiums.) On the other
hand, Intel has business reasons for wanting the Pentium to look good;
they don't want to replace $1.8 billion worth of brain-damaged chips,
so it just seems natural for them to deny the problem --and what better
vehicle for denying a problem than a risk assessment? The TIMES quoted

Professor Vaughan Pratt, a Stanford University computer scientist, who
said he had investigated the Pentium independently and had found its
error rate "significantly higher than what Intel had reported."

Who are we to believe? If two of America's most resourceful
corporations, analyzing a well-defined arithmetic problem in a computer
chip measuring about one inch square, get answers that differ by a
factor of 400,000, what hope is there for reaching agreement on the
hazards posed by a huge, complex machine like a solid waste
incinerator, a nuclear power station, or a petrochemical processing
plant? Clearly, risk assessment is not a tool for reaching true and
reliable conclusions; it is just one more weapon that businesses can
wield in their never-ending battle to increase market share and
maintain profitability.

A similar conclusion must be drawn from a major study of risk
assessment conducted by 11 European governments during the period 1988-
1990, and published by the Commission of the European Communities as
European governments (Netherlands; Greece; Great Britain; Denmark;
Italy; Germany; France; Belgium; Spain; Finland; and Luxembourg)
established teams of their best scientists and engineers and set them
to work on a single problem: analyzing the accident hazards of a small
ammonia storage plant. Private companies like Rohm & Haas, Solvay,
Battelle, and Fiat contributed experts as well. The results were
stunning: the 11 teams varied in their assessment of the hazards by a
factor of 25,000 --a difference of more than 4 orders of magnitude.
Analyzing the hazards of a single, small plant handling only one
chemical, these world-class experts reached wildly different
conclusions. For example, the individual risk at the "refrigerated
storage site" was calculated by one group of experts to be one-in-400,
but by another group of experts to be one-in-10-million. (Figure 3.5,
pg. 58 of the Benchmark study.)

The teams of experts disagreed on:

** Which kinds of accidents were most important to study. Some teams
ignored as unimportant accidents that other teams modeled fully;

** Behavior of a plume of ammonia after release; the scientists reached
different conclusions about where the chemical would go, and how fast;

** They disagreed about the possible consequences when ammonia left the
plant site and entered the surrounding environment;

** They could not agree on how rapidly the ammonia plant operator would
respond to the emergency. Some assumed response after a few minutes;
others thought the response might take half an hour.

** They disagreed on the probability of success of mitigation measures,
such as the ability of an operator to isolate a major ammonia release.

The experts analyzing this relatively simple problem reached vastly
different conclusions and, for them, it was a sobering exercise.

Many of the differences between the teams' results could be summed up
this way: differing assumptions. As their report said, "At any step of
a risk analysis, many assumptions are introduced by the analyst, [and]
it must be recognised that the numerical results are strongly dependent
on these assumptions."

Meanwhile on capitol hill in Washington, the Republicans have just
announced an entirely new use for risk assessment. As part of their
"Contract With America," they have unveiled a piece of legislation
called "The Risk Communication Act of 1995," which is Title III of
their proposed "Job Creation and Wage Enhancement Act of 1995."[7] This
legislation would require all government agencies to conduct a risk
assessment and a cost/benefit analysis for every proposed regulation
that would affect "more than 100 people" --in other words, just about
every regulation.

The procedure for risk assessment is spelled out in the proposed
legislation. As part of the procedure, government will be required to
assemble a "peer review panel" made up of "scientific experts in the
appropriate disciplines with recent professional experience with the
substance for which risk assessment and cost/benefit analysis is
conducted." In other words, only scientists employed by the regulated
industries are likely to meet the selection criteria as peer reviewers.
These "peer review panels" will analyze the risk assessments done by
the government and, if the peer review experts disagree with the
government's experts, the proposed regulation will be shelved until
government can convince the independent peer reviewers that the
government's analysis is right.

Let's see, now --what is the probability that industry-employed peer
reviewers will find reasons to disagree with the government's risk
assessors and thus bring the regulatory process to a standstill? Hint:
to answer that, you probably will do not need to do a risk assessment.
In all likelihood, common sense will suffice.

--Peter Montague


[1] For example, if you tell a Pentium to divide 4195835 by 3145727 it
gives the answer 1.3337391 but the correct answer is 1.3338204.
Likewise, the Pentium says 5505001 divided by 294911 = 18.66600093 but
the correct answer is 18.66665197. The differences may seem small but
if you then multiply the Pentium's wrong answers by any large number,
you get a large error.

[2] John Markoff, "Flaw Undermines Accuracy of Pentium Chips," NEW YORK
TIMES November 24, 1994, pg. D1.

[3] Intel, "Floating Point Flaw in the Pentium Processor," memo dated
December 1, 1994, available from Intel Corporation's "FaxBACK service."
Telephone 1-800-628-2283; in California, 1-916-356-3105. Request
document #7999.

[4] Lawrence M. Fisher, "Pentium Flaw Creates Confusion for PC Buyers,"
NEW YORK TIMES December 14, 1994, pgs. D1, D18.

[5] Peter H. Lewis, "I.B.M. Halts Sales of Its Computers With Flawed
Chip," NEW YORK TIMES December 13, 1994, pgs. A1, D6. And see IBM, "IBM
Halts Shipments of Pentium-Based Personal Computers Based on Company
Research," press release dated December 12, 1994; available from the
office of IBM staffer Peter Thonis; phone (914) 766-3770.

[6] Commission of the European Communities, BENCHMARK EXERCISE ON MAJOR
HAZARD ANALYSIS. 3 VOLUMES. (Luxembourg, Luxembourg: Commission of the
European Communities, 1991). To get the 3-volume Benchmark study, send
a fax to Mr. Caudio Carnivali in Ispra, Italy at telephone 011-39-332-
789007; the price is $300.00 U.S. dollars.

[7] "Contract with America" documents, including the text of the 10
proposed laws, accompanied by explanations, can be found on the
internet via gopher to una.hh.lib.umich.edu/socsci/Government/U.S.
Government: Legislative Branch/Republican Contract With America.

Descriptor terms: computers; intel; ibm; pentium processor; risk
assessment; thorstein veblen; new york times; ammonia storage;
accidents; spills; republicans; contract with america; risk
communication act of 1995; job creation and wage enhancement act of
1995; peer review;

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