Radical Uncertainty - we are living it, so learn to deal with it

The best book for the year and should be on anyone's pandemic reading list is Radical Uncertainty by John Kay and Mervyn King. It tackles a timely problem that keeps any academic or practitioner up at night, uncertainty. Managing uncertainty, not risk, has been the leading challenge across my career. How do you make effective decisions when faced with uncertainty, not measurable risk? Uncertainty was one of the key issues for Keynes, Frank Knight, and many of the leading statistical minds of the last century.    

This book is a wide ranging discussion, yet it is not a cookbook that will give you answers for how to solve problems of uncertainty. It presents the many facets that are associated with measuring or forming expectations on events that are not easily measurable and cannot be counted. The countable or frequency of events allows for a measure of risk, but reality is filled with ambiguity and vagueness given the uniqueness of future events. Nassim Taleb has focused on the extreme unknown unknown, but there are also more situations closer to home which can be imagined but difficult to handicap. We can obtain measures of price movement like standard deviations, but these does not help us with thinking through events that are not countable and require subjective measures in order to form actionable decisions.  

Radical uncertainty, measuring hard to assess future events, requires a deeper understanding of scenarios and choices that cannot be merely expressed by numbers. We often have to imagine and form narratives and stories that are logically consistent to handicap and prepare for the future. The successful investors during this pandemic were able to imagine  radical futures not seen by others. It is a skill that is necessary and can be learned.