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Riskthinking Overview

Posted in on
July 23, 2020

The future is always uncertain – just how uncertain really matters. It matters because the way we frame a problem or understand a solution will differ depending on how uncertain the data is.

We live in a complex world where nobody can be expected to be an expert in all of the details of every decision we face. The mortgage market is complex, yet we have to buy mortgages. Computers are complex, yet we may have to decide which ones to buy for our business. We debate what to do about climate change, but we have to make choices about the future that will be impacted by it, even though the science is complex and the data hard to understand.

Most management textbooks do not help either. They tell us a lot about how to execute, control, measure, etc., but do not account for the nature of the environment in which a business operates – in particular, if it is certain or uncertain. As it turns out, there is a fundamental difference between the type of management and decision-making required in an uncertain world versus the optimal solutions for situations in which the inputs are close to being certain.

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