Unknown-unknowns-2014-v2.pdf - Creating value from...

Creating value from uncertainty
Broadleaf Capital International Pty Ltd
ABN 24 054 021 117
© Broadleaf
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Discussion paper:
Unknown unknowns
In the ten years since the United States Secretary of
Defense at that time, Donald Rumsfeld, brought the
term “unknown unknowns” to prominence, its use
has spread throughout the risk management
community. The term itself and the confusion it
creates will never go away but that very lack of
definition presents an opportunity to think about
what we leave out of our risk assessments. There
may be things we can do to reduce these gaps and
improve the quality of our assessments and the final
results.
This material was initially published, in two parts, in
Risk Management Today issues 32 and 33, August
and September 2013.
Version 2, 2014

Unknown unknowns
© Broadleaf Capital International
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Contents
1 Unknown unknowns 3
2 How do we interpret the words? 3
3 What do we know? 4
4 Generalising 5
5 Extending 7
6 Searching 8
7 Early detection 8
8 Conclusions 13
9 Acknowledgements 14
10 References 14
Figures
Figure 1: Known and unknown 5
Figure 2; Cynefin framework 10

Unknown unknowns
© Broadleaf Capital International
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1 Unknown unknowns
In the ten years since the United States Secretary of Defense at that time,
Donald Rumsfeld, brought the term “unknown unknowns” to prominence, its
use has spread throughout the risk management community. Specialists and
novices drop it into conversation and puzzle over what it means for them. It
has absorbed large amounts of time in casual and professional discussions
where opinions about unknown unknowns and interpretations of the term
differ widely.
The term itself and the confusion it creates will never go away but that very lack
of definition presents an opportunity to think about what we leave out of our
risk assessments. There may be things we can do to reduce these gaps and
improve the quality of our assessments and the final results. Some of these are
discussed here.
2 How do we interpret the words?
No attempt will be made here to provide a sound definition of unknown
unknowns as this has absorbed a lot of energy for many years with no clear
resolution in sight. Rather than try to lay that challenge to rest, the effect it has
on the way we think about risks will be examined to see if we can learn
anything from the ideas it stimulates.
One interpretation of unknown unknowns is that they are things we haven’t
thought of that could affect us, that is there are limitations to our knowledge or
awareness. It is more or less assumed that, if we haven’t given these
unidentified factors any thought and they could affect us, it will be bad for us if
they do occur although we can’t be certain because we are not sure wh at they
are.