Use Your Imagination Risk Test
Challenge impossible-seeming assumptions before they become catastrophic failures
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 5
- Confidence
- 94%
The Use Your Imagination Risk Test converts an assertion that something cannot happen into a structured scenario worth examining. Begin by identifying the supposedly impossible outcome, then look for historical events that demonstrate how respected institutions, markets, or public systems can fail. Analyze more than numerical probabilities: include incentives, personalities, institutional history, political constraints, and existing weaknesses. Next, trace what would happen if the assumption proved false and identify preparations that remain worthwhile even if the event never occurs. The output is not a prediction that every disaster will happen; it is a broader and more realistic risk boundary, accompanied by proportionate contingencies. The method is especially useful when confidence rests on reputation, recent stability, or the belief that authorities will inevitably solve the problem.
Origin
Bethany McLean connects her investigations of Enron, the financial crisis, and COVID-19 through a lesson learned in kindergarten: use your imagination when evaluating what can go wrong.
Core principles
- 01Treat claims of impossibility as untested assumptions
- 02Study history for precedents that expand the range of plausible outcomes
- 03Include people, incentives, psychology, and institutional weaknesses in risk analysis
- 04Prepare for low-frequency events before their consequences become obvious
How to run it
- 1
Expose the impossible claim
Write down the outcome that people insist cannot happen and the assumptions supporting that confidence.
Pro tip Pay special attention to arguments based on prestige, institutional size, or recent stability.
Watch out Do not quietly replace the claim with a milder and easier scenario.
- 2
Search for precedents
Review comparable failures from other industries, countries, or historical periods. Use them to identify mechanisms that could make the scenario possible.
Pro tip Look for structural similarities rather than exact replicas.
Watch out A lack of recent examples does not prove that the risk is impossible.
- 3
Map the human system
Analyze the people, incentives, politics, psychology, and institutional history that could amplify or suppress the risk.
Pro tip Ask who benefits from denying the risk and who bears the consequences.
Watch out Do not reduce a complex failure to numerical forecasts alone.
- 4
Trace the failure path
Describe how the event could unfold from initial trigger through cascading consequences. Identify points where intervention remains possible.
Pro tip Include second-order effects and failures between institutions.
Watch out Avoid treating one dramatic trigger as the only possible route to failure.
- 5
Build proportionate contingencies
Choose preparations whose value justifies their cost, even when the event remains uncertain.
Pro tip Prefer reversible measures and capabilities useful across multiple scenarios.
Watch out Imagination should widen preparedness, not justify unlimited spending or panic.
In the wild
A manufacturer assumes its overseas semiconductor supplier cannot become unavailable because the relationship has operated reliably for years. Its team studies pandemic disruptions and geopolitical conflicts, maps the products dependent on that supplier, and qualifies a smaller backup source for the most critical components.
→ The company gains a viable continuity option without attempting to duplicate its entire supply chain.
An investor hears that a highly respected company cannot be fraudulent. Instead of accepting its reputation as evidence, she studies its incentives, accounting complexity, executive behavior, and dependence on continued market confidence.
→ The investor identifies warning signs that conventional financial ratios alone would have missed.
Common mistakes
Treating imagination as prediction
The framework explores plausible failure mechanisms; it does not claim that every imagined event is probable or imminent.
Looking only at quantitative risk
Numbers can conceal the roles of incentives, psychology, institutional culture, and political behavior.
Preparing for only the last crisis
A plan copied mechanically from a previous disaster may fail when the next event spreads or causes harm differently.
Is it for you?
Best for
It is best for leaders, investors, journalists, and planners evaluating systems vulnerable to rare but severe failures.
Not ideal for
It is not ideal for routine decisions where extensive scenario analysis would cost more than an error.
From the transcript
“if anybody ever says to you, oh, that can't happen, well, actually it can.”
“Everything can happen, So just remember, use your imagination.”
“It's people, it's history, it's predilections, it's all these things.”
From the episode
Bethany McLean on the Pandemic's Big Fail