Uncertainty Drivers
06/23/2024
Forces that contribute to the increase in uncertainty in a scenario. Accordingly, there are at least two kinds of uncertainty drivers, with each driver increasing uncertainty within a specific type of scenario. These drivers are
- Dilution. This is an uncertainty driver in what I call concentrated scenarios - i.e. scenarios where the potential outcomes are controlled to very few possibilities, thus allowing for relative certainty as to the outcome. With dilution, alternate potential outcomes are added to the scenario, thereby diluting the potential outcomes. For example, let's say you have a bag of three blue marbles. The probability of pulling a blue marble is 1, which means you can be 100% certain that you will pull a blue marble. Add a red marble to the bag, and now that probability goes down to 0.75. You are less certain of the result than you were before.
- Disruption. This is an uncertainty driver in what I call patterned scenarios - scenarios where the potential outcomes are predictable due to the information regarding the patterns by which those outcomes occur. With disruption, the pattern becomes interrupted or altered - either purposefully or accidentally or a mixture of both - such that the potential outcomes become unknown. An example would be if you had a deck of cards that were arranged in a specific order. If you had memorized this arrangement and spread out the cards such that only the back of the card was visible, you could still determine what the face of a given card was without seeing its face. However, if someone were to shuffle the deck before spreading it out, your certainty of the face of the card would diminish incredibly.
Each uncertainty driver opens one up to a specific risk. So dilution opens one up to what I call opportunity loss. This is the risk of not being selected for a particular opportunity. For example, let's say you are in a concentrated scenario where you are poised to become promoted because your manager is retiring and you are the manager's only subordinate. However, the higher ups have decided that they want to open up the position to the public, thereby diluting the pool of potential candidates. The risk you face is opportunity loss, since someone else can be selected for the opportunity.
With disruption, the risk is what I call edge loss. When one understands, that is, has some degree of control or predictability over, a pattern that produces desirable outcomes, one has, in a sense, an edge. When the pattern is disrupted, such that one loses this degree of control or predictability, the edge is lost. For example, let's say you run a business in a particular field, a field you have been in for decades. This gives you an edge in that field. But let's say a new technology comes that disrupts the business. The same rules no longer apply; what worked in the past doesn't seem to be as effective now. New players are coming on to the scene that understand this new technology and are applying it in ways you didn't even know was possible. You have essentially lost your edge.
The presence of both uncertainty drivers affect your positioning, which can be thought of as your ability both to stay competitive and to easily tackle opportunities that come your way. As such, it is important to understand first what kind of scenario are you in and what are the potential uncertainty drivers that may impact this scenario.