Comparing adaptive management and real options: slides and PDF

Adaptive management and real options approaches for sequential decisions making have undergone significant evolution over the last two decades. Both approaches are based on stochastic optimal control and Markov decision processes. They evolved independently from each other and their developments were motivated by different needs.

Adaptive management was specifically developed to handle decision problems with imperfect knowledge of the dynamics of the system, and is known as ‘learning by doing’. On the other hand, real options analysis was introduced specifically to value the flexibility to change actions over time in response to the evolution of uncertainty, and represents both optimal sequential decisions under uncertainty and a capital budgeting methodology. Because of these different purposes, different analytic and numerical methods were developed to solve these problems.

In our recent MODSIM paper (Chades et al, 2015), we review and compare the concepts, applications and recent advances in the numerical and analytic techniques in adaptive management and real options methodologies. A large body of knowledge accumulated in both fields makes a comprehensive review impractical in the context of this paper. Therefore, our review focuses on the most recent developments, with the purpose to identify potential areas of new developments that would address new challenges in the environmental decision area.

I. Chadès, T. Tarnopolskaya, S. Dunstall, J.Rhodes, and A.Tulloch (2015). A comparison of adaptive management and real options approaches for environmental decisions under uncertainty. In Weber, T., McPhee, M.J. and Anderssen, R.S. (eds) MODSIM2015, 21st International Congress on Modelling and Simulation. Modelling and Simulation Society of Australia and New Zealand, December 2015. ISBN: 978-0-9872143-5-5. (PDF)

Simple interactive networks to represent complex strategies


I am fascinated by networks, what a great way of graphically representing anything you can think about that interacts somehow! In decision-making, networks can represent complex decision trees (or strategy), i.e. they graphically tell you what to do under specific conditions. The issue is, these networks can become too large to make sense of! I’ve investigated interactive ways of representing decision trees, and I was fortunate to stumble upon Gephi. Few days of programming led me to some interesting results, that I happily share with you. Here the nodes represent springs, that can be occupied or empty. There are about 10 springs, so if you follow a path from the root (bottom node) to a top node, you will find the optimal action to perform. It is a work in progress, and more can be done. I believe this is the future of publication by the way, interactive figures/graph/networks, they make communication so effective.

In summary, don’t be shy, use network! I have noticed that network theory communities can be protective of their tools. With a tendency of making simple things such as networks and their metrics seem overly complex. But really networks are quite simple and fun to play with and they can be whatever you wish, you just have to define them. 

Artificial Intelligence to the rescue of migratory shorebirds


Adaptive management or learning by doing, is praised as the best practice method to manage natural systems under uncertainty (see ESA’14 talk). Limited for a long time by our ability to solve adaptive management problems, our research now allows us to find the best adaptive management strategies when networks change over time. This was made possible thanks to our research in Artificial Intelligence (AI) and Conservation science.

What have we discovered in 2 steps?

1) Unlocking the beast. Being strategic about adaptive management means finding the best management strategy when we don’t know exactly what will happen in the future (structural uncertainty). Until very recently, finding the optimal strategy to such decision problems was possible for very small size problems, limiting the application of adaptive management principles. In 2012, we published a fundamental paper that demonstrates that adaptive management problems can be solved using a simplified POMDP (Partially Observable Markov Decision Process, see tiger paper). This is an important finding because modelling an adaptive management problem as a POMDP means we can use very fast algorithms from AI and solve very large adaptive management problems. On a side note, this paper was published at the top AI Conference (AAAI) and received “best paper award” (Computational Sustainability track, thanks for the support!).

2) Boldly go where no one has gone before. Our second step was to demonstrate the power of our findings on the most complex problem we could imagine. Thinking about it, the most difficult problems to solve in ecology are spatial problems (migratory networks) with changing dynamics over time (non stationarity, climate change) for which the consequences on species management are unknown (structural uncertainty, population dynamics). Well, we did it! Check our splendid paper in Proceedings B led by Sam Nicol that brings it all together. This work is amazing for so many good reasons: the shorebird application, the fundamental AI research, the writing, the figures, the authors, the journal and the 20-page supplementary information!

I hope you will enjoy it as much as we did.

Nicol, S., R.A. Fuller, T. Iwamura and I. Chadès (2015). Adapting environmental management to uncertain but inevitable change. Proceedings of the Royal Society B, 282(1808).

Sam also wrote a fantastic conversation article on the topic that explains the impact of our Proc B paper: We need to get smarter to save shorebirds from rising seas.


When do we need more data? Don’t miss the excel spreadsheet

Stefano Canessa and colleagues have recently published a much needed paper in Methods in Ecology and Evolution to help managers answer: when do we need more data?

Stefano provides an excel spreadsheet and also wrote a blog in MEE! Well done Stefano.

Canessa, S., Guillera-Arroita, G., Lahoz-Monfort, J. J., Southwell, D. M., Armstrong, D. P., Chadès, I., Lacy, R. C., Converse, S. J. (2015), When do we need more data? A primer on calculating the value of information for applied ecologists. Methods in Ecology and Evolution. doi: 10.1111/2041-210X.12423

I have found that thinking through what uncertainty really matters a rewarding process. For example, my last talk at ICCB 2015 also showed that critical uncertainty is often limited to a small number of unknown in Conservation. Go ahead fellow scientists, embrace uncertainty. If you were an economist you would say that uncertainty and associated decisions bring opportunities and perhaps flexibility!

On a side note, I’ve been recently thinking about a dynamic version of the Expected Value of Perfect Information – For example you can check out this paper.


Complementary strategies double the impact of cost-effective ranked strategies

Our manuscript on how complementarity can help saving more species per dollar spent is available online. If you are interested in cost-effectiveness analysis, PPP (Project Prioritisation Protocol), priority threat management, expert elicitations, or the Pilbara, have a look:

Chades, I., Nicol, S., van Leeuwen, S., Walters, B., Firn, J., Reeson, A., Martin, T. G. . and Carwardine, J. (2014), Benefits of integrating complementarity into priority threat management. Conservation Biology. doi: 10.1111/cobi.12413 (abstract) (request pdf)

In Tulloch et al (2013), we studied how complementarity could help choosing indicator species to improve our monitoring power, Chades et al (2014) explores further this idea in the context of priority threat management. Feel free to download the Pilbara report for details about the study.

Priority threat management process requires a strong collaborative team to be successful. This manuscript is a great example of a work that would not have been possible without the essential contribution of all authors.

Abstract:Figure2_manuscript_R1_with legend_rgb

Conservation decision tools based on cost-effectiveness analysis are used to assess threat management strategies for improving species persistence. These approaches rank alternative strategies by their benefit to cost ratio but may fail to identify the optimal sets of strategies to implement under limited budgets because they do not account for redundancies. We devised a multiobjective optimization approach in which the complementarity principle is applied to identify the sets of threat management strategies that protect the most species for any budget. We used our approach to prioritize threat management strategies for 53 species of conservation concern in the Pilbara, Australia. We followed a structured elicitation approach to collect information on the benefits and costs of implementing 17 different conservation strategies during a 3-day workshop with 49 stakeholders and experts in the biodiversity, conservation, and management of the Pilbara. We compared the performance of our complementarity priority threat management approach with a current cost-effectiveness ranking approach. A complementary set of 3 strategies: domestic herbivore management, fire management and research, and sanctuaries provided all species with >50% chance of persistence for $4.7 million/year over 20 years. Achieving the same result cost almost twice as much ($9.71 million/year) when strategies were selected by their cost-effectiveness ranks alone. Our results show that complementarity of management benefits has the potential to double the impact of priority threat management approaches.