A Story of Risk Management, and Flying to the Moon

Risk management is a key part of many endeavors, from space travel to investment management. In either case, achieving one’s goals requires awareness of what could go wrong, as well as careful attention to details in often-changing conditions to ensure the smoothest possible journey. Tilak Lal, vice president, Performance Analysis & Investment Risk at Franklin Templeton Investments, describes what risk is within the investment space, and how risk management is essential to success.

Flying to the moon is hard. Flying to the moon using 1960s tools and technology? Seemingly impossible.

Consider the computers the US National Aeronautics and Space Administration (NASA) used during the Apollo program nearly 50 years ago. While cutting edge at the time, by today’s standards they were archaic. The Massachusetts Institute of Technology (MIT) designed the Apollo guidance computer, which was considered an engineering marvel in 1969 but only possessed a mere 64kb of memory. It contained 12,300 transistors running at a speed of 43 KHz, and it performed 41 instructions per second.

Sloth-like relative to current computer processing speeds.

Apollo Guidance Computer. Source: National Aeronautics and Space Administraion

For a frame of reference, let’s compare the Apollo computer to the smartphones in our pockets today. An iPhone contains approximately 1.6 billion transistors, runs at 1.4 GHz and performs roughly 3.36 billion instructions per second. That’s 3.36 billion for today’s pocket-sized phone versus 41 for the clunky Apollo!

The “computers” of the Apollo era—and this isn’t hyperbole in our view—were essentially on par with today’s key fobs or digital coffee makers in terms of power. And yet despite these limitations, NASA successfully landed men on the moon and returned them safely to earth, 48 years ago! How was this incredible feat accomplished?

Flight directors and engineers of the time have said that in addition to sheer will and relentless determination, perhaps the most significant attribute contributing to the success of Apollo was the culture of risk management that permeated the program. Risk management was central to every aspect of the mission.

As author Andrew Chaikin observed in his book A Man on the Moon, (Penguin Books, 1994) “when putting humans on top of a 400-foot rocket that burns 15 tons of high explosive propellant a second … using slide rules to send them to a place where there is a 450-degree temperature difference between sunlight and shade… needless to say you better have some pretty solid risk-management protocols in place.”