Uncertainty and Risk

The practical difference between the two categories, risk and uncertainty, is that in the former the distribution of the outcome in a group of instances is known (either through calculation a priori or from statistics of past experience), while in the case of uncertainty this is not true, the reason being in general that it is impossible to form a group of instances, because the situation dealt with is in a high degree unique.

Risk, Uncertainty and Profit
Frank Knight 1921

Risk of falling off your bike = known potential outcomes.

Uncertainty of the future of European Union government = unknown potential outcomes.

Risks are therefore the known unknowns.

Uncertainties are the unknown unknowns.

Startups operate in a world of uncertainty and they need to identify risks to their business model, address these risks and reduce uncertainty.

Subscribe to norrisnode.com

Don’t miss out on the latest issues. Sign up now to get access to the library of members-only issues.