Risk and Uncertainty
A risk has a known probability. For example, gambling in casinos.
An uncertainty has no probability, because it is unknown. For example, the gold price increase prediction. Economic climate is volatile, there is no statistical inference that can be made about it.
But people intrinsically dislike the circumstances of not being able to attach a probability to an event. Therefore, uncertainty is often confused as risk:
- The risk of market capitalization collapse is x percent.
- The risk of major flood is x percent.
As a result, people irrationally engage in uncertainty, thinking that it is a calculated risk.
Start the conversation