The wisdom to distinguish risk from uncertainty
Toshiba Chairman Atsutoshi Nishida emphasized that CEOs must clearly distinguish between risk and uncertainty. He advised, "For instance, when pushing forward a new business, the risks that come with it can be anticipated, but uncertainty cannot be predicted at all." "For creating new value, taking on risk is necessary, but uncertainty should be avoided as much as possible." (p.106)
Risk and uncertainty are different. There are times when, for a worthwhile attempt, risk must be taken on. The result may be success or failure, but they are cases where you must fully prepare and then jump toward that "valley." If you hesitate in front of that "valley," paralyzed by a fully foreseeable risk, and execute nothing, that in itself is already failure.
On the other hand, there are cases where prediction itself is impossible. Uncertainty. Jumping into the "thick fog" of uncertainty is not fearlessness but recklessness. Such uncertainty should be avoided.
If I am hesitating in front of a "valley," I need to ask whether it is because of fear, and whether I am avoiding a challenge I truly need to take. And if I am about to jump into a "valley," I need to check whether it might be out of recklessness.
Running a business and living our lives, we often encounter cases like these. Taking on risk when needed, but avoiding uncertainty, and having the wisdom to distinguish between the two — these are elements we absolutely need.
▶ Yeh Byung-il's Economic Notes — Twitter: @yehbyungil / Facebook: www.facebook.com/yehbyungil
