cartoons, executives, change, uncertaintly

Handling Radical Uncertainty

Radical uncertainty is, if you steal the definition from Rumsfield, “the unknown, unknown” – or, if you steal the definition from an economist, “that which you cannot model for” because, in classic Keynesian form, “our knowledge of the future is fluctating, vague and uncertain…”.

Based on that, it would be easy for you to wonder why I titled this “handling radical uncertainty” if by definition, you do not know what you do not know and therefore cannot ‘handle’ it?  

I’ll explain in a short measure. But first, let’s visualize something:

uncertainty

Assume Green = things we know, Blue = things we know we don’t know, and Red = things we don’t know we don’t know. “Then” at some point in the beginning of time is when we were woefully ignorant of a lot of things, and “The Future” assumes that at some point from now (could be five seconds, could be five millennia) we will know all there is to know.

[Now, there are some that would posit that a fully known world is an impossible thing. I fall to the position of highly improbably, but not necessarily impossible, but for all intents and purposes, that does not matter].

Here is the hard part for us living today, are we:

  1. Hovering around the first circle?
  2. Between the first and second circle?
  3. Hovering around the second circle?
  4. Between the second and third circle?
  5. Hovering in the third circle?
  6. Between the third and last circle?

When you consider it that way, we don’t know … in fact, we don’t know what we don’t know in two ways:

  1. We don’t know at what point in time we are because we do not have an omniscient view of this, therefore
  2. We don’t know how much we don’t know at a single point in time ever.

That is radical uncertainty and every single person living today is living with that, whether or not they are aware of it.

So, back to the title of this, handling radical uncertainty, how do we do it? Some approaches:

  1. Ignore it.
  2. Be frozen by it.
  3. Account for it.

1. To ignore it means to pretend that all we know (both of what we know and what we know we don’t know) is enough to live a complete, fulfilling life. It’s not a terrible way to approach it; most people do. It also means accepting both negative surprises (e.g. financial crises and natural disasters, et al.), but also positive surprises (the great leap forward of the Information Age was not predictable by any means, nor was an iPhone).

2. Being frozen by it is a world a minority occupies but is a real one. It can be easy to become overwhelmed with fears: fears of worldwide disaster, fears of food shortages, fears of war, fears of germs, fear…and fear…and fear… What you don’t know can hurt you and there is very little you could do to stop it. So instead: don’t put yourself in “any” danger at all. Don’t live in the world, don’t make eye contact with the world, don’t engage with any of it. It’s a way to survive, certainly, but I wouldn’t call it a way to live.

3. Accounting for it in what I refer to as “ways serendipitous.” Now, I am not an advocate for prancing about the daises, as it were: one should attempt to manage risk and general uncertainty as best possible. Don’t attempt to walk on water: it won’t go well for you. But, also don’t get trapped into this idea that specificity in calculation means:

  • All things are accounted for (they are not)
  • This is a sure bet (in a certain context, perhaps, but doubtful)
  • Nothing can go wrong (anything can go wrong)
  • This is true (it is as true as the facts given are true)

When I do business case analysis, I make estimates. I make DCF models. I make assumptions and I attempt to quantify them. I make a guess. Is my guess perhaps better than the guess of someone who is just learning this? Perhaps. Is my guess not as good as someone who has been doing this for 30 years? Perhaps. That’s the confidence slider to apply to this — and most things — there’s a range, from 0 (knowing nothing) to 100 (knowing everything) and no matter what, all of us must assume that we are not at a 100.

Therefore, if (when) things don’t work out as intended, outside of gross negligence or absurdity in assumptions, there is no value in looking where to place blame. There is no value in creating excessive controls to ‘ensure’ something never happens again because that is not a real state, it is not a real goal.

Instead, accept that things happen and spend more time in learning how improve your ability to react to the results of radical uncertainty, how to quickly assess the new state of things as that next slice of knowledge has been provided, and then moving forward with neither crippling fear nor self-imposed indulgent ignorance.

And that is how you handle radical uncertainty.

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