What we ignore has enormous power, because the reality around us continues to exist whether we see it or not; those variables that we do not take into account can radically alter the course of history and the effects of our plans. The result of this phenomenon is an uncertainty that makes us vulnerable, but at the same time opens the door to opportunities to prosper.
These reflections are prompted by the recent passing of Donald Rumsfeld, Secretary of Defense during the first six years of the Bush administration and widely recognized as one of the principal designers of American strategy during the second invasion of Iraq, which toppled the tyrant Saddam Hussein… and then mired the U.S. military in a quagmire of Islamic fundamentalists, local guerrillas, and rogue warlords.
In 2002, to a journalist’s question regarding the lack of evidence of a link between the Baghdad regime and terrorist organizations, Rumsfeld answered “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns the ones we don’t know we don’t know.”
The latter is probably the most dangerous. If it is difficult in itself to prepare ourselves to deal with those things of whose ignorance we are aware, it is much more difficult to take action in the face of those other factors that we are not only unaware of, but do not even have on our radar, so we are blind to them.
Ironically, Rumsfeld’s own team and the Bush administration, in general, were unable to adequately prepare for those “unknown unknowns” that awaited them in the invasion of Iraq and that took the American government from a premature celebration under the slogan of “mission accomplished” in 2003, to an uncomfortable counterinsurgency scenario that lasted for more than a decade and whose consequences have yet to be revealed.
This does not only matter for grand geopolitical analyses. Being aware of what we know, what we ignore, and what we disregard has become increasingly relevant for businesses (large and small) and even for our individual life projects, as the growing complexity of our environment opens up greater spaces of uncertainty.
Three reflections on the power of what we don’t know
First: the importance of humility. For many years, planning was the realm of intelligence and also of arrogance. Well-trained and experienced strategists and analysts distilled the existing factors into a menu of scenarios and offered a series of conclusions so that your company or government would have a clear long-term course. To contradict them was heresy.
Back then, however, the world was different: the participants and the factors to be taken into account when designing the future were fewer in number and moved more slowly.
Our grandparents, for example, could start a business or enter a company with the reasonable expectation that they would remain dedicated to it for the rest of their lives. If anything, their uncertainty was limited to how far they could scale.
Similarly, companies (General Electric‘s “long-range planning” was the best example) could project their future with the peace of mind that, for the next 10 to 20 years, their product portfolio and their ecosystem of suppliers, customers, and competitors would remain largely unchanged.
This is not the case today. The complexity of scenarios, the diversity of options and the number of factors at play have exponentially increased the number of elements we are unaware of when making a decision. As a result, the arrogance of planners, which even in simpler circumstances was already questionable, has now become suicidal.
Our times call for agility, but above all humility, aware that, no matter how advanced our academic degrees, how complex our plans or how expensive our consultants, we cannot afford to go out on the street with the idea that the plans we carry under our arm will work and it is enough to “apply the recipe.”
Rather than a navigational chart, our plans are now a mere sketch that inspires us rather than commands us. Otherwise, we inevitably fall into the risk posed by Nassim Nicholas Taleb, when he explains that strategic planning is a mere “superstitious bubble” and can even be counterproductive because it leads organizations to become blind to options and prevents them from adopting a course of action that takes advantage of opportunities as they arise.
Second: uncertainty makes us vulnerable, and this is exploited by politicians. The wave of deregulation and technological and competitive modernization that our economies have experienced since the 1980s generated the most prosperous era in human history, but this dynamism is inevitably accompanied by complexity and uncertainty, which frightens us and opens up spaces for governments to take advantage.
The growing calls (from both ends of the political landscape) for governments to increase their intervention in digital markets are a clear reflection of this phenomenon. We feel, for example, vulnerable to the uncertainty represented by the advance of virtual currencies, and therefore call for government to standardize them.
Similarly, we worry about the increasing complexity of medical services or the labor market, and societies react by becoming more favorable to social security schemes that monstrously expand the reach of government, in exchange for the promise that we will not face the uncertainty of becoming unemployed, falling ill or facing some such hardship.
However, history shows us, time and again, that governments only eliminate uncertainty in discourse. In practice they increase costs, decrease service innovation and in the long run “standardize” and “make predictable” poor quality care. And this doesn’t only happen in developing countries. It happens even in America, as the veterans’ hospital scandal during the Obama administration reminds us.
The painful truth is that uncertainty, those “known unknowns” and “unknown unknowns” to which Rumsfeld referred, is an inevitable fact of life. Escaping it by taking refuge in the bureaucratic clutches of government is a self-defeating pretense because, to put it bluntly: no amount of money can buy full certainty for the whole of society, even in America.
Third: uncertainty also has advantages, and we must use them in our benefit. Ludwig von Mises explained that profits “appear only where there is a maladjustment, a divergence between actual production and production as it should be in order to utilize the available material and mental resources for the best possible satisfaction of the wishes of the public.”
Now, an economy as dynamic, complex and full of uncertainty as ours multiplies the number of these mismatches and, along with them, the opportunities to correct them through new products or business models. And something even better: that same complexity reduces the competitive advantage of large corporations in terms of planning.
Given the power of what we do not know, even the best-developed plan under the direction of the most brilliant experts will have more room for error. In English: large companies will make more mistakes, leaving room for small companies with an agile mindset and a culture focused on seizing opportunities as they arise.
Of course, seizing these advantages is not easy. It requires perseverance, creativity and the backing of a capital structure to shape business ideas; but the good news is that we are not doomed to a future defined only by large corporations. The same uncertainty that makes us vulnerable also protects us from the absolute tyranny of the big planners.
In his book, Risk Intelligence Dylan Evans explains that “we can never really know how much relevant information we have failed to take into account.” The “unknown unknowns” are both an unavoidable condemnation and an indispensable opportunity in our world. To live with them we need humility, courage, and optimism. Only in this way will we take advantage of the power of what we don’t know.