Radical uncertainty: thriving in the new normal
Could understanding and accepting our inability to predict the future be the key to mapping our way out of the current economic crisis?
When John Kay and Mervyn King’s book Radical Uncertainty: decision-making for an unknowable future was published in early March, Financial Times reviewer Martin Sandbu described it as “an eloquent rant against the faux-precision of mathematical models”. It’s doubtful either he or the book’s authors could have foreseen just how much impact such mathematical models were about to have on the lives of the average citizen.
Throughout the COVID-19 crisis, the UK Government has consistently justified the measures it has taken with the explanation that they are ‘following the science’. What this actually means, to a large extent, is following the data provided by complex mathematical models about how the virus is likely to behave.
The problem with such models, as Kay and King point out, is that they teach us to crave certainties that do not exist, while offering estimates which can be wildly divergent.
Ironically, in their book Kay and King argue passionately against our ability to make accurate predictions about future events, suggesting that instead of treating probability as a science and inventing numbers to fill the gaps in our knowledge, we should be adopting strategies that will be robust to alternative futures and resilient to unpredictable events. According to these two titans of British economic policymaking, in this way we can turn uncertainty into a source of creativity, excitement and ultimately success.
While they may arguably be the most respected figures in financial circles to have written on the subject, Kay and King are certainly not the first to put forward the idea that an ability to survive and thrive in the face of unlikely events is more important than the ability to predict them. Nassim Nicholas Taleb has been developing a similar argument across a series of books over the past 20 years, the title of the most famous of which, The Black Swan, has entered the collective vocabulary as shorthand for the kind of apparently highly improbable events that are increasingly having a major impact on our daily lives.
Taleb’s 2012 book Antifragile is described by his publishers as “a blueprint for living in a Black Swan world”. In it, Taleb posits the concept of antifragility as going beyond resilience. His argument is that uncertainty is desirable, even necessary, and only by harnessing those elements which gain from volatility can we survive and thrive in an uncertain future.
While Taleb is something of an outsider and an iconoclast (he has suggested, for example, that the Nobel Prize for Economics be abolished), Kay and King are highly respected figures within the financial establishment. The publishing of Radical Uncertainty therefore arguably marked an important crossing over of the idea that formal mathematical models on their own should never be the final word when making important financial and economic decisions. Instead, argue Kay and King, we should be using narratives to explore multiple possibilities and judgement to help decide how to act. To do otherwise, in the words of the Prussian military officer Carl von Clausewitz, as quoted in the book’s final pages, is “to do violence to the facts”.