Risk, Uncertainty and Innovation September 02, 2025

These 3 articles from Vaughan Tan ¹ about (formal) risk, uncertainty and innovation are great:

1. How to think more clearly about risk - Vaughn Tan
2. Innovation and not-knowing - Vaughn Tan
3. A not-knowing synthesis - Vaughn Tan

They are well-considered pieces, dense with ideas but nonetheless accessibly written.

Précis:

• Situations of formal risk as defined by Tan, are quite rare. If you think about a situation of uncertainty only in terms of risk, you will misunderstand it. This may make you complacent, or it may mean you miss opportunities. Financial services professionals should be particularly interested in this point.
• Attempts to stimulate innovation usually understand innovation very narrowly, and in particular don’t pay enough attention to the notion of context in innovation. Innovation and uncertainty/’not-knowing’ are intrinsically linked, and so the best way to stimulate innovation is to develop organisational comfort with not-knowing.
• Uncertainty/not-knowing can be usefully broken down into 4 types (about actions, outcomes, causation and value). Knowing which type of uncertainty you’re dealing with enables you to use appropriate mental tools.

Tan decries organisations that ape structures and processes from large tech firms as a means to produce innovation - I agree - and recommends instead developing an ‘uncertainty mindset’. He’s authored a book to help you do this.

However I’m reminded of something from my days as a marketing manager. Marketing is also described as a mindset, but clearly there is more to how marketing works than just mindset. Marketing managers who move between firms will find familiar processes and structures, etc. Likewise, it seems to me probable that there’s useful management work to do on innovation beyond cultivating mindset. There may even be processes and structures that are transferable between firms.

What we are talking about here is practical epistemology, the techniques we use to come to know things. Sifting through an uncertain and changing morass of information is a skill you learn studying the humanities. This is the thesis of the entertaining and informative blog A Collection of Unmitigated Pedantry - I’d recommend Collections: What Do Historians Do? – A Collection of Unmitigated Pedantry to see this expounded, or Collections: How Many People? Ancient Demography – A Collection of Unmitigated Pedantry to see it in action.