Uncertainty in Strategic Decision Making: Analysis, Categorization, Causation and Resolution

Acknowledgments
Contents
List of Figures
List of Tables
1 Overview of This Book on Strategic Decision-Making Under Uncertainty
	Why This Book on Uncertainty?
	Notable Takes on Uncertainty
	Further Preliminaries
	More Notable Takes on Uncertainty
	Uncertainty as Good or Bad or Both?
		Examples of the Bads of Uncertainty
		Examples of the Goods of Uncertainty
		Effective Management of Uncertainty
	Our Perspective (Business-Based, Applying Western/Democratic Values)
	Delineation from Risk (and Probability)
		Hence, Non-Mathematicalness
	The Heterogeneity of Uncertainty
	Decision-Making and Knowns
		Creating the Decision-Making Model
		Complications
	Big Questions
	Philosophy of Science
	Goals
	Resistance (…Is Eventually Futile)
	Why This Book Now
	Plan of Analysis
	References
2 Confusion over Uncertainty in Decision-Making
	Why Clarity Is Important
	What Confusion Exists
	What Terms Are Confused
	Sources of Confusion
	How to Unconfuse
	References
3 Definitions of Uncertainty (for Decision-Making)
	Why Definitional Precision Is Important
	Classic Definitions
	Uncertainty as the Inability to Assign Probabilities
	Uncertainty as Unknown Cause-and-Effect Relationships
	Uncertainty-as-Unpredictability
	Knight’s Definition of Uncertainty
	Ellsberg’s Definition of Ambiguity
	Alternative Definitions of Uncertainty
		Uncertainty as Unknowability
		Uncertainty as Novelty
		Uncertainty as Non-Optimizability
		Uncertainty as Doubt
	Contrasts to Full Information
	The Amount of Uncertainty Question
	The Epistemological Question
	References
4 Sources of Uncertainty (in Decision-Making)
	Why the Causes of Uncertainties are Important
		Reminder—How a Cause’s Symptoms Can Manifest in a Decision to Make it Non-Optimizable
	Sources of Uncertainty Related to the Problem Itself
	Sources in the Problem Characteristics
		Novelty/Uniqueness
		Complexity of Phenomena
		Non-linear Dynamic Systems and Chaos
		Ill-Defined Problems
		Relationships with Time
		Other (Pointed) Issues
	Sources in the Problem’s External Context (Exogenous to the Decision-Maker)
		New Technology
		The Inherent Randomness of Nature
		Luck [as Randomness for Humans]
		Inconsistent (Often Rivalrous) External Human Behaviors
		Dynamic Aspects of Inconsistent External Human Behaviors (as Unpredictable Reactions)
		Conflicting External Reports
	Sources in the Problem’s Internal Context (Endogenous to the Decision-Maker)
		Change and Its Consequences (Inside)
		Communications Issues
		Personal Artefacts and Choices
		Biases and Errors in Statistical Analysis
		Blissful Ignorance and Dangerous Implicit Assumptions
	Limits of Analysis
	General Limits to Problem Analysis
		Laws and Regulations
		Measurement Error
		Computational Limits over Current Facts
		Mathematical Limits
		System-atic Errors
		Incomplete Modeling
		Empirical Non-Verifiability
	Organizational Limits to Problem Analysis
		Lack of Investigatory Time
		Lack of Other Investigatory Resources
		Human Limits
		Lack of Control
	Individual Limits to Problem Analysis
		Lack of Expertise
		Epistemic Issues/Decision-Maker Weakness
	References
5 Span of Effects of Uncertainty (in Decision-Making)
	The Impacts of Uncertainty
	Impacts on Entities
		On Survival
		On Feelings
		On Challenges
		On Organization
		On Compensation for Experiencing Uncertainty
		On Rational Behaviors and Choices
	Impacts on Entity Reactions
		On Behaviors to Reduce or Accept Uncertainty
		On Behaviors to Explore or Exploit Uncertainty
	Impacts on Understanding
	Impacts on Theorizing
	Impacts on Lab Studies
	Impacts on Communications and Measures
	References
6 Negative Effects of Uncertainty (on Decision-Making)
	Costly Uncertainties
	Negative Effects of Uncertainty
	Drivers of Negative Effects
	Contexts for Negative Effects
	Dealing with Negative Effects
	References
7 Positive Effects of Uncertainty (on Decision-Making)
	The Existential Positive Effects of Uncertainty
	Uncertainty as a Signal of Potential Rewards
	Conceptual Benefits from Uncertainty
	Real Benefits from Uncertainty
	Conditions for Benefits
	Who Benefits
	References
8 Optimal Uncertainty (in Decision-Making)
	Why a Goldilocksian ‘Amount’ of Uncertainty Can Exist
	At What Level of Analysis?
	For What Ends?
	How to Generate It
	References
9 Measures of Uncertainty (in Decision-Making)
	The Importance of Measuring Uncertainty and Its Characteristics
	Approaches to Measurement
	Practical Measures
	Conceptual Measures
	Immeasurability
	References
10 Multi-Dimensionality of Uncertainty
	Why Uncertainty Is Multi-Dimensional
	Which Dimensions?
	Bases for These Dimensions
	Dealing with Multi-Dimensionality
	References
11 Uncertainty’s Connections to Entrepreneurship
	Why Uncertainty Connects to Entrepreneurship
	Which Uncertainties and Activities?
	Drivers of the Entrepreneurship Connection
	The Context of the Entrepreneurship Connection
	Managing the Entrepreneurship Connection
	References
12 Uncertainty’s Connections to Strategy
	Why Uncertainty Connects to Strategy
		Uncertainty and Theories of the Firm (and of Firm Rents)
		Top Management’s Focus on Uncertainty
		Uncertainty and Contracting
		Deeper into Uncertainty
	Drivers of the Strategy Connection
	The Context of the Strategy Connection
	Uncertainties and Activities
	Managing the Strategy Connection
	References
13 Uncertainty’s Connections to Creativity, Art, and Music
	Connecting Uncertainty to Creativity
	Connecting Uncertainty to Art and Music
	Why the Connections Exist
	Philosophical Questions Raised
	References
14 Uncertainty’s Connections to Spirituality/Religion
	Connecting Uncertainty to Spirituality and Religion
	Connecting Spirituality to Decision-Making under Uncertainty
	Importance of Uncertainty in Religion
	Drivers of Uncertainty in Religion
	Offering Some Balance
	References
15 Uncertainty’s Connections to Curiosity, Neurobiology, and Evolution
	Connecting Uncertainty to Curiosity
	Connecting Uncertainty to Neurobiology
	Connecting Uncertainty to Cognition
	Connecting Uncertainty to Evolution
	Drivers of the Connections
	Philosophical Implications
	References
16 Past Failures to Engage with Uncertainty
	Identifying the Failures to Engage
	Drivers of the Failures
	Why Probability-Based Approaches Fail
		How That Failure Extends to Subjective Expected Utility
	Alternatives
	References
17 A New Typology of Uncertainty (for Decision-Making)
	Introduction to a New Typology
	Reminders About the Main Assumption and Definition
	The Plan for This Chapter
	Past Uncertainty Types and Labels
		Incomplete Information
		Knightian Uncertainty
		Ellsbergian Ambiguity
		Ignorance
		Aleatory Uncertainty
		Unknown Unknowns
		Equivocality
		Vagueness
		Epistemic Uncertainty
		Other Potential Types
	The New Primary Typology
		Cleaning Up the Minor Issues Involved
	The Relevant Secondary Typology
	Step One—Assessing the Background Facts
		State Uncertainty/ Uncertainty about the Present Reality
		Uncertainty about the Past
	Step Two—Understanding the Goals
	Step Three—Identifying the Stakeholders
	Step Four—Recognizing All Possible Relevant Options/Choices
	Step Five—Identifying All Possible Outcomes (Relevant to the Choices)
	Step Six—Calculating the (Monetary) Payoffs of the Outcomes
	Step Seven—Considering the Ethics and Values of the Outcomes [separated from Goals]
	Step Eight—Calculating the (Overall) Worth of the Outcomes [Utilities]
	Step Nine—Assigning Probabilities to the Uncontrollable Outcome-Affecting Events
	Step Ten—Including Any Timing Issues Involved in the Process
	Step Eleven—Applying the Relevant Constraints
		A Line of Demarcation in the Decision-Making Process
	Step Twelve—Identifying the Dynamic Links in the Extended Process
	Step Thirteen—Assessing the Dynamics of Competition
		Unknown Effects on Rival Targets
		Unknown Responses of Targets
	Unknown Target Intensions
		Unknown Target Decision Constraints
	A Tertiary Typology
		Dimensions of Specifying What Is Uncertain
		Dimensions of Specifying Why the Uncertainty Exists
		Dimensions of Specifying Where the Uncertainty Exists
	Revisiting a Selection of Uncertainty Sources to Highlight the Separation from Types
		Measurement Uncertainty
		Model Uncertainty
		Environmental Uncertainty
		Endogenous Uncertainty and Knowable Unknowns
	Supplement on Knightian Uncertainty Issues
	Knight’s Model as a Theory of Rents
	The Three Dangers of the Knightian Model
		The Premise Danger
		The Implication Danger
		The Definition Danger
	Discussion
	References
18 Best Treatments and Approaches to Uncertainty Types (in Decision-Making)
	Introduction to Uncertainty Treatment
	Part One—Treating the Treatable Uncertainties
	Bucket One—Uncovering Unknowns via Discovery, Search, and Monitoring
	Bucket Two—Uncovering Unknowns via Experimentation, Experience, Analysis, and Modeling
		Experimentation
		Sensemaking and Modeling
		Experience and Alertness
		Inference from Big Data
		Other Active Learning Approaches
	Bucket Three—Uncovering Unknowns via Influencing the Outcome Through Social Construction and Preemption
	Bucket Four—Uncovering Unknowns via Scenarios and Simulations
	Bucket Five—Uncovering Unknowns via Adapting to Outcomes Through Flexibility, Options and Robustness
	Bucket Six—Uncovering Unknowns via Sharing the Burden with Cooperation and Insurance, or Through Diversification
	Part Two—Addressing the Untreatable Uncertainties (the Unknown-and-Unknowables)
		A Shift in Mentality
		The Four Approaches
	Bucket A-One—Addressing the Untreatable by Bearing the Irreducible Uncertainty
	Bucket A-Two—Addressing the Untreatable by Changing the Goal
		Heuristics in General
		Conditions for Heuristic Use
		Dangers of Heuristics
		Types and Examples of Heuristics
		Acting ‘As If’ the Unknown Is Known
		Acting on the Knowns Alone
		Altering the Knowns to Reduce Harms
		Modeling What Is Known
		Applying Information-Gap Theory
	Bucket A-Two-Plus—Addressing the Untreatable by Changing the Goal to a Relative One
	Bucket A-Three—Addressing the Untreatable by Changing the Focal Entity
		Playing No-Regrets, Conservative Moves
		Following Available Standard Procedures and Norms
		Expressing Dissatisfaction or Doubt
		Ignoring, Suppressing, or Denying the Uncertainty
		Trying to Delay the Decision or Action
		Avoiding the Uncertainty
	Bucket A-Four—Addressing the Untreatable by Altering the Game
	Part Three—Processing Issues in Decision Uncertainty Treatment/Approach
		The Awareness of Uncertainties
		Prioritization
		Context Matters—Big and Small
		The Costs of Addressing Uncertainties
		Combining Approaches
		On the Offense—Creating Uncertainties
	References
19 Conclusions of the Analysis of Uncertainty (as Everything)
	Summary
	Implications
	Philosophical and Scientific Issues
	Future Work
	(Almost) Final Thoughts
	References
20 Supplement on the Impact of Artificial Intelligence on Uncertainty
	Why This Supplement (Now)?
	Summary of AI’s Impacts on Uncertainties
	The Relevant Impact of AI Itself
	AI the Good
	AI the Bad
	The Uncertainties in the AI Box
	Mitigating Those (Treatable) Internal AI Uncertainties
	Estimating Those Uncertainties in AI
	Main Implications
	Wrapping IT Up—the Real and the F.ai.k
	References
Uncertainty Literature
Index