Risk and Uncertainty in Leadership: 1-Dimensional Thinking
What is risk and uncertainty, anyway? • Spectral thinking is better than binary thinking • Fragility, robustness, and anti-fragility vs. risk
When we started the Leadership Land Consistency Challenge of publishing 10 articles in 10 weeks, our goal was to write about risk and uncertainty. We’re finally here! It only took seven meandering articles to arrive at the main topic! Adventures in Leadership Land: putting the “suck” in succinct since 2022 😅.
We could’ve been (much) less wordy, but we also think the first six articles were necessary for establishing the conceptual groundwork for what comes next:
Articles 1 and 2 discussed avoiding career failure and Nassim Taleb’s trifecta of fragility—robustness—antifragility.
Articles 3 through 6 explored the limits of our knowledge (epistemology) and provided tools for studying anti-knowledge.
In other words: articles 1 – 6 laid down the metaphorical foundation and articles 7 – 10 will build our understanding of risk and uncertainty on top of it.
What is Risk & Uncertainty?
Risk and uncertainty are amorphous concepts that elude precise definition. The Wikipedia page on risk gives almost 20 different definitions! In the context of Leadership Land, here’s what we mean by the concept of risk and uncertainty:
Risk ≈ Danger
You needn’t define risk to know how it feels: like danger. Examples of risk and uncertainty in leadership could be:
Getting lost in the Desert of Good Intentions and swallowed up by an unintended consequence lurking beneath the sands
Steering one’s team into the Straits of Conflicting Interests and capsizing in the maelstroms within
Catching a dysfunctional organizational disease from the Plague Plateau like employee theft, slacker culture, and “everyone else is doing it-itis”
Desecrating the Altar of Psychological Safety within the Temple of Trust, allowing the shadowy demons of mistrust to invade your organization
Your vulnerability to the volcanic eruptions on Executive Mountain, which could force you to crash-land in the Career Swamp and sink into the Silent Graveyard
Uncertainty ≈ Opacity
The Fog of Uncertainty shrouds every part of Leadership Land in an opaque gray veil1. The uncertainty of the Fog is proportional to its opacity, which varies by location (just like the density of real-life patchy fog). The Fog of Uncertainty afflicts all of us – from the mailroom intern up to the Fortune 500 CEO – with an incurable, myopic blindness.
If the Fog of Uncertainty didn’t exist, there would be far fewer risks (dangers) in the practice of leadership. No one would ever wander into the Desert of Good Intentions. No benevolent gatekeeper in the Interview Mountains would ever hire a psychopath who drop-kicks puppies for fun. Everyone could see when they’re headed toward the Straits of Conflicting Interests or the Career Swamp, allowing them to change course before they reach the point of no return.
But leaders do stumble into the Desert, Straits, and Swamp. We do sometimes hire puppy-kicking jerkholes despite our best efforts. The Fog of Uncertainty is blank and opaque, preventing us from seeing more than a few steps ahead. The opacity of the Fog is why we often meet destiny on the path we take to avoid it.
Why characterize the concepts of risk and uncertainty as “danger” and “opacity”?
We could’ve just picked one of those 20 definitions from Wikipedia and rolled with it. But those those definitions feel…incomplete. Slippery. Unmemorable. The formal definitions of risk and uncertainty, once sterilized of all emotional impact, become estranged from the experience of taking personal risks and making decisions under uncertainty.
For example, here’s the ISO 31073 definition of risk, which was distilled from the wisdom of several thousand experts from 30+ countries:
The effect of uncertainty on objectives.
Note: An “effect” is a deviation from the expected. It can be positive, negative, or both.
This definition is technically correct, brilliantly concise…but not very useful (like many things created by blue-ribbon committees stuffed full of smart people). The definition is too watered-down to be practical. Too abstract to be mentally sticky. Shartford Business School students might have the mental horsepower to grasp such an esoteric definition, but we (the authors) are mere mortals who remember concepts better when they’re intuitive enough to get through our thick neaderskulls.
We re-characterized risk and uncertainty for the same reasons we write Adventures in Leadership Land: the concepts are stickier (and less boring) when expressed in metaphor and allegory. Fog is oppressive and anxiety-inducing, serving to de-abstractify the concept of uncertainty while also conforming with the spirit of ISO 31073. “Risk and uncertainty in business” is not a compelling narrative, in contrast with the vivid story of C-suite inhabitants forced to flee the lava flows of Executive Mountain.
For our one-dimensional introduction to risk and uncertainty, it’s enough to characterize “risk ≈ danger” and “uncertainty ≈ blinding fog” without providing precise definitions. Once we progress to risk and uncertainty in 2-D and 3-D, we’ll refine our description of risk and uncertainty to include probability, secrecy, and anti-knowledge.
Binary Conduct ≠ Binary Thinking
From a one-dimensional perspective, many people think in terms of “risky” and “not risky.” For 99% of decision-making, this is a perfectly adequate way to see the world.
In the practice of leadership, watch out for people who engage in binary thinking. To them, the world is made of teddy bears (not risky) and deadly dragons (risky), with nothing in between.
Many societies have laws that encourage binary behavior, but responsible adults should not engage in binary thinking. Some examples of binary thinking in risk and uncertainty:
Grocery stores tend to discard food after it reaches the expiration date. It’s partly for food safety, partly to reduce liability when a customer eats expired food and turns their tummyache into a lawsuit. A binary thinker believes that the food is teddy-bear safe (100% not risky) before the expiration date and becomes poisonous (100% risky) at midnight of the expiration date.
Many societies allow their citizens to vote, become a soldier, or smoke their lungs into jerky once they become legal adults2. We pretend like an angel descends from the heavens to bless the adolescent with the Magic Wand of Maturity because they successfully survived 18 revolutions around the sun. A binary thinker will believe this legal fiction.
Beware of people who think in black-and-white. Our personal opinion (subject to change and open to persuasion) is that leaders should behave in black-and-white but think in shades of gray. We strive to be decisive in our decision-making but nuanced in our thinking. In our view, someone who thinks of risk and uncertainty in terms of “teddy bears vs. deadly dragons” is incapable of sound judgement3.
We’re especially wary of people who fixate on labels, titles, and highly-visible markers. Like the ones who say:
“I’ll start doing that once I have the job title and a salary to match.” Contrast that with someone who takes the initiative and becomes good enough to deserve the job title and salary.
“I’ll stop sleeping with hookers and gigolos once I’m married. Anyone up for a bachelor(ette) party?” Contrast that with someone who chooses to be loyal from the very beginning, thereby deserving lifelong fidelity in return.
We’ve noticed a high correlation between label-driven conduct and binary thinking. We don’t know if one causes the other; we only know that they tend to appear in clusters. If you hire label-driven people, we’re pessimistic about their ability to lead your organization through risk and uncertainty.
Thinking In Bets > Thinking in Binaries
One step up from binary thinking is spectral thinking. In between black and white, you have many shades of gray.
In terms of risk and uncertainty, spectral thinking allows you to fill in the space between teddy bears and deadly dragons. Most of the time, teddy bears are safe, but they occasionally explode. Sometimes, dragons happen to be deadly and friendly at the same time. Drinking expired milk puts you at greater risk of food poisoning but won’t necessarily imperil you. 20-year-olds are more mature than 16-year-olds in aggregate, but an individual 16-year-old can be more mature than someone twice her age.
Decision quality ≠ decision outcome
If you want to improve your spectral thinking, we recommend Annie Duke’s book Thinking in Bets. Her book introduced the fallacy of resulting, which is the fallacy of automatically giving credit for favorable outcomes and automatically assigning blame for bad outcomes. Resulting is fallacious because high-quality decisions can result in low-quality outcomes (i.e. unlucky), and low-quality decisions can result in high-quality outcomes (i.e. task failed successfully).
Resulting can lead to mistakes like:
Scapegoating good people, punishing good judgment, and overreacting to “mistakes” that aren’t really mistakes.
Erroneously attributing success to skills, talent, or some other form of superiority. The entire body of success literature (which includes millionaires, long-lived companies, and longevity) is the result of industrial-grade resulting.
Repeating bad decisions that turned out well, essentially playing Russian Roulette repeatedly.
Thinking Beyond “Risky ↔ Not Risky”
Earlier, we wrote that thinking in terms of “risky” and “not risky” is good enough for 99% of decision-making. Let’s talk about the remaining 1% of decisions where you’re reaching for more, instead of merely preserving what you have.
Risks are dangerous things lurking behind the Fog of Uncertainty. But while the Fog is capable of inflicting misery in the form of unpleasant surprises, it’s also the source of serendipity in the form of pleasant surprises. The opposite of risk is an unexpected windfall waiting to be discovered within Fog of Uncertainty.
In other words, the Fog of Uncertainty hides both risk and its opposite (anti-risk?).
Let’s flesh out the concepts of risk and uncertainty in one dimension using the terms we introduced in Anti-Fragility and Asymmetry: Leadership's Best-Kept Secret:
Quick refresher:
Fragile things have more to lose than to gain. Risky things are dangerous.
Robust things are resilient to loss. Not quite the same thing as “not risky,” more like a cousin once removed with shared family facial features.
Anti-fragile things have more to gain than to lose. Anti-risky things help you rather than harm you (anti-danger?).
Limitations of Risk and Uncertainty in One Dimension
If you’ve ever performed a SWOT analysis, you’ll recognize that the spectrum corresponds to the bottom half of the 2×2 matrix. That is, anti-risks are opportunities while risks are threats. SWOT analysis has its uses, but it has also attracted plenty of detractors. We consider both SWOT analysis and the one-dimensional spectrum of risk and uncertainty to be a starting point, not a means to an end.
Ultimately, one-dimensional thinking is too limited. For example, the spectrum doesn’t provide any room for ventures that are both extremely rewarding and extremely risky. Therefore, we’re going to abandon this framework in the next article when we move on to Risk and Uncertainty in Leadership: 2-Dimensional Thinking.
This is post #7 in the Leadership Land Consistency Experiment, Phase I. We’re building better writing habits by publishing weekly between 12/20/24 – 2/28/25, instead of once every someday. Are we compromising quality for increased quantity? Was this post any better or worse than usual? Please share your comments below or reply directly if you’re reading the newsletter!
Almost every part. The Institute of Conventional Wisdom is Fog-free. That’s why all the stuff you learn in self-help books and continuing-education courses seem like magic bullets to solve all your problems. Then you exit the Institute to put the theory into practice, and you discover that reality is far messier and uncertain than you were led to believe.
Typically 18-year-olds, can be 19-21 in some countries/regions and 16 or younger (!) in others.
We’re not saying the world is split between binary thinkers and spectral thinkers; that would be an example of the very thing we’re railing against! Some people think in black-and-white in one area but not in others. Some people outgrow binary thinking and progress to nuanced thinking. What’s important in leadership is to NOT be a binary thinker when dealing with risk & uncertainty.