Predicting the Future - Understanding Risk and Uncertainty

In his book 'Leaders make the Future', Bob Johansen talks about a VUCA world. A world that is Volatile, Uncertain, Complex and Ambiguous. I thought so much of this book that I made it the 'Summit 2102 Leaders Library' selection. The Summit provided a copy to every delegate. Upon reflection, it seems to me that we need to understand the difference between risk and uncertainty to develop a good strategy for the future.

Nate Silver

Nate Silver in his book The Signal and the Noise: Why So Many Predictions Fail - but Some Don't (Penguin, 2012), shows that for the most part, the agencies we trust are either “unable or uninterested in appreciating the distinction between risk and uncertainty.” Silver suggests risk is something that can be calculated. You can put a price on risk. For instance, we often 'price in the risk' we face on a purchase or investment. Some even calculate the 'risk' of winning or losing while they gamble. 

By contrast, Silver shows that uncertainty has become a risk "that is hard" if not impossible to measure with  strict attention to mathematical models and predictive equations. According to Silver, “Risk greases the wheels of a free-market economy; uncertainty grinds them to a halt." In a day and age when marketers are asking us to trust their 'predictive models' and explore 'Big Data' can we be sure this is the path to a sustainable future? 

I think not. Perhaps we've arrived at a time and place where intuition, experience, common sense and the intellectual gifts humans possess may be the tools that prevail. If you have $20 to invest in your future, I suggest reading Silver's book. 

I'm a farm boy and uncertainty has always been part of agriculture. We till the ground and plant the seed but rely on a higher power for the sun and rain. Dealing with uncertainty involves understanding, expectation and faith. It seems to me these elements are states of mind or mindfulness which allow you to separate signals from noise and that is useful as you consider the future.

Thunder Ridge Farming