Unknown known

Risk Anatomy™ →Go uptown There are six types of known. The Rumsfeld three: Known knowns: Things you do know you know; Known unknowns: Things you do know you don’t know; Unknown unknowns: Things you don’t know you don’t know; And the Jolly Contrarian three: Unknown knowns: Things you don’t know you do know. Not officially known: Things you know but the general public can’t prove. Knowable unknowns: Things you don’t know, but think you do know, for the time being, because computers. Risk | Fear | Ecosystem | Market | Government | Firm | Cartel | Individual | Trust | Audit | Complexity | Prisoner’s dilemma | Transaction | benign | brutishIndex: Click ᐅ to expand: Risk Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

“Those who cannot remember the past are condemned to repeat it.”

— George Santayana

The one type of unknown that doesn’t appear in Donald Rumsfeld’s taxonomy, but which should, since it is probably the source of more catastrophic events of our time than any of the others: unknown knowns are the things you do know, but you don’t know you know. Things that, courtesy of that tremendous fiction the corporate veil, an institution may be deemed to know, but about which none of its present representatives has the faintest clue; things which one might have once known but forgotten; things which one is in total denial about, and the unpleasant realities of our modern, complex world to which one is not, presently, facing up.

As Slovenian philosopher Slavoj Žižek eloquently puts it: “the disavowed beliefs, suppositions and obscene practices we pretend not to know about, even though they form the background of our public values”.

Unknown knowns are a source of catastrophic risk, as the repeal of the Glass-Steagall Act in 1999 by the Financial Services Modernization Act of 1999 — hello, global financial crisis — and the continued use, even now, of the Black-Scholes option pricing methodology — goodbye, LTCM — which worked serviceably well to model the price of options except in times of market stress, when you most need it — ably demonstrates. Other variations:

• Outsourcing, which prioritises unit cost over organisational complexity, skill and experience, notwithstanding well-established principles of design and lean production management;
• 360° Performance appraisals, despite compendious research that it is ineffective, prone to abuse, widely resented, and as a promotion strategy suffers in comparison to promoting staff at random. Same applies pretty much everything a human resources department does, from force-ranking, compensation culture

See also

• Rumsfeld’s taxonomy
• Risk taxonomy
• LTCM
• Global financial crisis