What can we know? Let’s look at a well-known position of a well-known practical philosoper.
Donald Rumsfeld, when talking about the probability of Iraq having weapons of mass destruction, only left out one category: the category of unknown knowns; those relate to either denial or lies. In the case of Rumsfeld you may have your own opinion.
In turbulent times, the unknown unknowns rule. Black Swans, Nassim Taleb calls them. Highly improbable events increasingly dictate our lives. Things like planes crashing into skyscrapers.
Having worked as a financial trader Taleb knows it firsthand. Where we are taught that models can predict markets, ultimately and increasingly off-the-chart events crush predictions. Especially bell-curved probability calculations are misleading, as outliers become more probable in a globalized and fast-moving world.
We humans are badly equipped for dealing with what Taleb calls ‘Extremistan’ situations. We are good at making up stories to support observations of gradual change but are bad in dealing with the highly improbable. They are really different worlds. In the old world of ‘Mediocristan’, risks were moderate, inequality was low. In todays Extremistan the winner takes it all. For every extremely wealthy – and often lucky – say best-seller author, there exist cemetries of losers who failed.
What to do?
First, differentiate between positive and negative Black Swan contingencies. Protect yourself against negative Black Swans (i.e. your country going bankrupt), while agressively exposing yourself to the possibility of encountering a positive Black Swan (like your investment in a biotech venture booming in a global market). Aim for serendipity.
Second: “Seize any opportunity, or anything that looks like [it]“.
Third: Decide with focus on consequences rather than probability, because consequences you can foresee but under circumstances vulnerable to extreme improbability, you just can not predict. “I will never get to know the unknown since, by definition, it is unknown. However, I can always guess how it might affect me, and I should base my decisions around that.”.
And Rumsfeld? I guess if he thinks of Black Swans they must be exposure to crude oil.