The Uncertainty Mindset 2019-2020

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risk vs. uncertainty

Vaughn Tan6th January 2021 at 5:28pm

"Risk" and "uncertainty" both refer to the state of not-knowing, but (and this is important) risk is not the same as uncertainty.

In a risky situation, the exact outcomes are not known but the range of possible outcomes and their respective probabilities are known. In a truly risky situation, it's possible to choose actions in advance to optimise the outcomes in expectation. Throwing dice or flipping a coin is a risky situation, but most not-knowing situations are not actually risky.

Frankly, most not-knowing situations in real life are uncertain, not risky. In an uncertain situation it isn't possible to choose actions in advance to optimise outcomes in expectation because one or more of the following (at least) are true:

  1. All the possible outcomes are known but their probabilities are not,
  2. Not all the possible outcomes are known,
  3. The connection between actions taken and outcomes achieved is not fully known,
  4. Preferences for different outcomes are not fully known.

In a truly uncertain situation, acting as if the situation is risky (i.e. can be calculatedly optimised) is not only inappropriate, it can also be lethal. I call this the risk mindset, and in the global coronavirus response we have recently seen widespread evidence of the dire consequences of individuals, organizations, and governments applying the risk mindset to an uncertain situation.

Obviously, the better way is to develop and apply the uncertainty mindset instead. In uncertain situations, this also increases adaptability, resilience, and innovation—all very handy for an increasingly complex, interconnected, and interdependent world.

See also: delusion, inefficiency, negative capability, open-endedness, preference uncertainty, self-therapy, strategy.