The difference between risk and uncertainty

Risk and uncertainty are not interchangeable. They mean totally different things:

Risk: You have data. You can calculate odds. (And so can everyone else.)

Uncertainty: There’s zero data to calculate odds of anything. (Neither can anyone else.)

When clients tell me they are afraid of failing, they use these terms.

“It’s too risky.”

“There’s not enough information for me to make an informed decision.”

“There’s too much uncertainty around the outcome.”

Here’s what I want you to know:

  1. Re. risk: The scenario planning that goes on in your head when you’re determining risk and feeling the fear of potential failure is actually not real data. It’s your brain freaking out. You don’t actually know what the future holds. Using scenario planning as a basis for establishing risk is faulty logic. None of it has happened, so don’t treat it as real data.
  2. Re. uncertainty: You’re almost never working in a truly uncertain environment. Real data is often all around you. You have data to base some decision on, whether it’s actions and outcomes in your past, what others have done, or what you read, see, or hear. Information is out there. Uncertain means that something has never been done before, not that you, personally, haven’t done it before.

“I tried it before and I suffered negative consequences as a result and therefore, it’s too risky.” – This is a valid statement.

“I’m afraid of trying because I’ve never done it before, so it might turn out badly, and therefore, it’s too risky.” – Not a valid statement.

Side note: there’s a fun Freakonomics podcast episode about the difference, if you’re interested, where they use John Urschel, a former NFL player and brilliant MIT mathematician, as a case study. (Pardon my geek-out.)

1 thought on “The difference between risk and uncertainty”

  1. Pingback: Career risk: get to the other side | Strategic Career Coaching

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