Gigerenzer makes a distinction between risk and uncertainty. He uses the term risk “for a world where all alternatives, consequences, and probabilities are known… Most of the time, however, we live in a changing world where some of these are unknown: where we face unknown risks, or uncertainty. The world of uncertainty is huge compared to that of risk… We have to deal with ‘unknown unknowns.’”
Agility: How to Navigate the Unknown and Seize Opportunity in a World of Disruption
by Leo M. Tilman and Gen. Charles Jacoby (Ret.)
“The need for agility in business, government and warfare arises precisely from the uncertainty and complexity of the competitive environment.”
I imagine both co-authors of Agility have some battle scars—Tilman from Bear Stearns during the 2008 financial industry crisis and Jacoby from his career in the U.S. Army where he achieved the rank of 4-star general. Kidding aside, this book goes beyond military metaphors and presents a fusion of military and business thinking about risk intelligence and uncertainty as well as a leadership approach that emphasizes truth (as opposed to assumptions), trust, clear communication, and executional dexterity throughout the organization.
Complex adaptive systems “are constantly changing and evolving. They lack centralized control. They are inhabited by a multitude of stakeholders driven by distinct objectives, risk tolerances and modes of operation. These players interact in dynamic tension with one another, alternating between the urge to recoil from and engage in risk-taking and aggression. Their actions and adaptations lead to entirely unpredictable patterns and outcomes.”
The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty
by Sam L. Savage
This is a book about how to manage in a world of uncertainty. The beginning section presents a number of statistical concepts in simplified language; more sophisticated techniques follow. The author discusses how these concepts apply in a wide variety of contexts including oil exploration, pharmaceutical R&D, the stock market, the housing bubble, weather, climate change, health care, gene pools, the war of terror, and supply chains. He also describes some illogical accounting rules required by the FASB and the SEC.
Rethinking Risk Management: Critically Examining Old Ideas and New Concepts
by Rick Nason
Rick Nason challenges the status quo of risk management which mindlessly follows third-party frameworks and does too little independent thinking. He argues that risk management acts as “The Department of No” while ignoring upside risk. He envisions risk management as a strategic player in value creation rather than a cost center.
The Key Point 