Until the God speaks - Protean Uncertainty

There is a kind of confusion most of us inherit without noticing. We assume the future is hidden and that if we looked harder we would see it. We assume uncertainty is a fog and that good thinking, good data and good models will burn it off. We assume the world is something like a closed book we have not yet finished reading. I believe this is wrong.

Known Outcomes

The simplest kind is the uncertainty of a coin you are about to flip. You don't know whether it will land heads or tails. But you know there are two outcomes and that they are equally likely. You also know that if you flip the coin a thousand times the long-run average will sit close to fifty percent. The structure is fixed. Only the outcome of this particular flip is unknown.

Probability distributions, expected values, confidence intervals. The mathematics is beautiful and it is genuinely useful, when the structure is stable and the events are repeatable.

Knight's line

But there are also coin flips where the lights of probability are off.

You drill an exploratory hole in a basin nobody has touched. You cannot list the outcomes in any useful way, you cannot assign a real probability. But the oil is already there or already not there. The geology was settled millions of years before you arrived and it does not rearrange itself because you showed up with a drill.

Coming up with the money for drilling, in a technical sense, would not be a risk, as risk is only when you don't know the outcome but you do know the possible outcomes and their probabilities, like the coin flip. If the list of outcomes is unclear ​In this example the quantity of oil, the odds are unknowable and the situation is often a one-off you can't repeat. The economist Frank Knight called it uncertainty (Knight, 1921). It later took his name and is now understood as Knightian uncertainty.

Risk is measurable ignorance. Knightian uncertainty is unmeasurable ignorance. The odds are unknown but they exist, fixed somewhere out of sight, waiting to be theoretically found. Found if you could find the light switch. To go further we have to take even the light switch away.

The structure moves

The third level is different. This is the kind of uncertainty that governs markets, organisations, technologies, relationships, careers, lives. Kay and King (2020) call it radical uncertainty. The RAND Corporation, the American policy think tank that pioneered systems analysis during the Cold War, calls it deep uncertainty (Lempert, Popper, & Bankes, 2003). Knight himself, late in life, called it true uncertainty.

Three kinds of uncertainty

On the left the structure stands in full view and only the draw is hidden. In the middle the structure is sealed from sight but still there. On the right the structure will not hold still and there is nothing fixed left to uncover.

The descriptors stay diffuse. Deep, true, radical. Each names a quality and each misses the central thing, which is movement. So I want to introduce a different name, one that draws on an older lineage and foregrounds the actual character of the difficulty.

Proteus

In the Odyssey (Homer), Menelaos is stranded on the island of Pharos. To learn how to return home he must seize the sea-god Proteus and so the god yields his prophecy. But seizing Proteus is not an easy task, as he continues to slip away. First he becomes a lion. Then a serpent. Then a leopard, a boar, running water, a tree. Every new move Menelaos makes, Proteus uses to transform into a new form. Proteus uses new information to get in new formation. Eventually Menelaos only succeeds by holding through every metamorphosis until the god, having exhausted all his shapes, finally returns to himself and speaks his prophecy.

When we meet a world that continues to shift under our descriptions, that becomes something else exactly when we try to hold it, we feel that we have failed. Another reason why uncertainty is emotionally often not an enjoyable thing to deal with. But keep in mind, you simply cannot out-think something that rethinks itself in answer to your thinking.

I call it protean uncertainty. It is a property of the kind of world we are in and therefore an ontological rather than an epistemic uncertainty. Markets are not stable systems with hidden parameters. They are systems whose parameters change in response to the strategies participants use to navigate them.

War against an enemy can be the same. You take the city and the enemy dissolves into the population and becomes an insurgency. You adapt to the insurgency and it becomes a political movement. Iraq after 2003 is a great example, as removing Saddam Hussein did not reveal a fixed outcome waiting underneath, but released a sequence of new forms nobody could have listed, each one provoked by the last intervention. The enemy reshapes itself in answer to your strategy.

Endurance through transformation

That leaves the only question that matters once the hope of seeing ahead is gone. What do you do? The whole machinery of decision-making often runs on the faith that enough thought, early enough, lets you see round the next bend. In a protean world the road remakes itself as you walk.

What you can do instead is stay. Stay with a situation that keeps changing under your feet. Stay in a venture whose terms rewrite themselves as you build it. Stay with a person who becomes someone new across the years and acknowledge that you also become someone new. The skill is not foresight. It is endurance through transformation.