From Barron’s (Paywall)
This Isn’t Your Usual Uncertainty. No One Can Predict Where the Economy Is Headed.
By Steven Weber
When United Airlines put out not one but two separate profit guidances for the second-quarter on April 15, the company was “leaving it up to investors to choose their own adventure,” Omar Sharif of Investor Insights said. That wasn’t a compliment. Nor was The Wall Street Journal’s comment comparing the dual guidance to Schrödinger’s cat—a famous thought experiment in quantum mechanics that even physicists have a hard time understanding intuitively.
I see United’s guidance differently. The company’s decision was courageous. It may not fit neatly into stock analysts’ valuation models., But United’s approach does something much more important: It demonstrates that the company’s leadership understands the concept of radical uncertainty and the importance of building strategy for multiple scenarios at once.
Radical uncertainty is nothing like conventional risk. Business decision-making systems tend to leave leaders paralyzed when the world moves outside the boundaries of what we know from the past and the distribution of probabilities on plausible outcomes can’t reasonably be estimated. People get deeply anxious. Markets gyrate. Leaders’ confidence corrodes. You only have to look at collapsing consumer confidence numbers, dramatic moves in the S&P 500, the fall in capital expenditure plans, and other such indicators over the past month to see evidence of the impact of radical uncertainty across the economy...
Steven Weber is currently an emeritus professor. He was the Associate Dean and Head of School for the School of Information, and Faculty Director for the Center for Long Term Cybersecurity.
