I spent a fascinating three days at the STEPS Politics of Uncertainty Conference in July, and in the last few weeks have been mulling over what I have taken from the rich conversations we have had. I spent much of my time in a stream focused on uncertainty in the context of finance and banking.

A note on definitions

Inevitably, given the very wide range of disciplines and backgrounds, there was no consensus definition of ‘uncertainty’. Subsequently, at the symposium this word was used with a wide range of meanings. For some, risk and uncertainty were the same thing, while others made a clear distinction. Some used risk and uncertainty as terms primarily associated with dangers and hazards, others associated them equally with opportunities.

So, in this blog post, I want to be clear about how I will be using ‘uncertainty’, ‘risk’ and associated terms. Drawing on Frank Knight’s discussion of the distinction between risk and uncertainty, I will take risk to refer to situations where the range of possible outcomes is known and there is sufficient information to assign meaningful probabilities to these outcomes. In contrast, by uncertainty, I mean those situations in which the range of possible outcomes is at least partially unknown, and in which there is no meaningful basis to assign probabilities. I take risk and uncertainty to be both concerned with potential hazards and with potential opportunities.

Solidarity versus insurance

One of my key takeaways from these discussions came from multiple discussions about international development approaches to supporting developing countries that face uncertain natural hazards, such as flood and drought. As with developed countries, there has been an increasing trend of ‘financialization’, in which governments shift uncertainties to individuals by replacing solidaristic protections, such as state pensions, with market-driven solutions. In international development, there have been moves to replace more solidaristic approaches to natural disasters with marketized insurance approaches.

In these discussions, it struck me that important elements of the politics of uncertainty are the way in which, in this process of financialization, uncertainty a) creates opportunities for rent extraction for powerful economic actors, whilst b) shifting hazards to the least powerful.

Uncertainty, emotions and narrative

One theme which I felt was largely absent from discussions in the conference was the ways in which we engage emotionally with uncertainty.

In my own research I have carried out multiple studies of financial behaviour, including with traders in investment banks and wider publics. I have long been fascinated with how people think about uncertainty in the context of financial decisions, and in their emotional reactions to these uncertainties.

In the face of uncertainty, many traders develop illusions of control, comforting but poorly founded beliefs that defend them against the anxiety provoked by uncertainty. Other research also suggests that those traders who deal most effectively with uncertainty are those who understand and work with their emotions more effectively.

Work by David Tuckett and colleagues pays particular attention to the ways in which finance professionals faced with uncertainty construct ‘conviction narratives’; emotion-infused stories about the world which help them construct the conviction needed for action. An important facet of this work has been the attention paid to the mindset with which people approach threats and opportunities; noting the tendency to polarise information about either threats or opportunities, and to split off and repress emotions from the other pole.

This relates to points made by Richard Bronk at the conference. In his work with Jens Beckert, Richard points to the role of imaginaries and fictional expectations in engaging with an uncertain world. As Richard notes, these narratives about the future are no less useful for being fictional, but tend to be harmful if their provisional nature becomes reified as objective reality.

This point about the fictional nature of our stories about an uncertain future echoes an observation made by George Box the famous statistician:

“You have a big approximation and a small approximation. The big approximation is your approximation to the problem you want to solve. The small approximation is involved in getting the solution to the approximate problem.”

My own and other’s work on emotional engagement with uncertainty suggest that such fallacies of misplaced concreteness (as Alfred North Whitehead described them) have their roots in defensive avoidance of the anxiety invoked by uncertainty.

About the author

Mark Fenton-O’Creevy is Professor of Organisational Behaviour at The Open University Business School and Associate Dean of External Engagement. 

This article is one of a series of blog posts reflecting on the STEPS symposium The Politics of Uncertainty: Practical Challenges for Transformative Action.

Uncertainties can make it hard to plan ahead. But recognising them can help to reveal new questions and choices. What kinds of uncertainty are there, why do they matter for sustainability, and what ideas, approaches and methods can help us to respond to them?

Find out more about our theme for 2019 on our Uncertainty theme page.