By Chris Cook (cookchr321(at)

Risk: The Unknown…Unknowns

Casinos. Places where risk is synonymous with winning big. Risk your money for the chance at a lifestyle you have always dreamed of.

Projects. Events where risk strategies become part of the daily acumen. You say you can perform the work for x dollars at the chance to generate y dollars.

Why do I mention both casinos and projects? While both have risks involved, the type of risks varies drastically. Casinos have known risks. You sit down at the poker table, receive your cards, and the betting starts. The percentages of winning the hand vary on which seat position you hold, which cards you have in your hand, and which cards appear for the table to play. At each stage of the game, these percentages can be calculated with relative accuracy. Very few times does a poker game get interrupted with flooding resulting in losing your bankroll and you go home empty handed.

The uncertainties are defined in a casino. Take blackjack for instance. Your two cards are showing. The dealer has one card showing while a round of betting occurs. The odds of you winning is based upon the dealer’s known card. Of course, there are idiosyncrasies to play blackjack more expertly, but the uncertainty and risk remain obvious. Again, there is not an immediate loss of funding in the middle of a hand that will cancel the game.

Nassim Nicholas Taleb (NNT) coined the term ‘ludic fallacy.’ Ludic comes from ludus, Latin for games. He argues “that gambling has sterilized and domesticated uncertainty.” Knowing the odds makes for easier decisions. If you have a 20 in blackjack and the dealer is showing a 6, your odds of winning are pretty high. There is not a decision to be made. All of the factors of your decision making are right in front of you. However, this does not guarantee success. All of the correct decisions can be made and you still lose. That is called luck. Some have it, most do not.

Again, what does all this casino talk have to do with projects? I give you the casino idea because it is used to describe risks more often than not. Gambling is risky so people use it as a classic example to define risk. The problem with this relation is project risks have to be discovered. They are not known like casino risks are. Imagine having to make a decision on a project where you could calculate the odds of being correct and those odds would not change given the same decision at a different location. Wouldn’t that make a project manager’s job easier?

NNT is the author of The Black Swan: The Impact of the Highly Improbable. Black Swan events are the unknown unknowns of the world. No computer simulation modeled these events in their projections. No C-Suite executives predicted their presence. Yet, these events cause the greatest impacts. Project management software saves project managers time with all its capabilities. Press a button, tasks move, the schedule gets adjusted, and we move on. What this software does not do is predict anything outside of what we give it. Garbage in, garbage out. If we do not provide as much information as possible, the software can only do so much.

The case in which information can be forgotten is analogous estimating. Since we have seen similar projects, we enter information as if it is the same project. Again, we are perceiving the risks and uncertainties as known. This will cause unknown unknowns to have an even greater impact.

So what are some examples of unknown unknowns? I worked construction for many years. Old cities have dated plans. When reconstructing a road, underground utilities are a major concern. If you hit one, the project gets shut down until it is fixed and your reputation as a contractor gets questioned. Many of the newer utilities get marked but some older can get overlooked because no one has a location, plan or as-built drawing. Other examples are flash floods, acts of God, terrorism, accidents, and so on. While we think we are prepared, these events come out of nowhere and have greater impacts than any risk we accounted for.

Risk registers allow project managers to brainstorm all the events that could impact the project. There could be an endless list with endless strategies to avoid, mitigate, transfer, share, accept, exploit, and enhance risk. But what if that risk is unknown? How can we strategize for something we cannot see coming?

We should be aware that unknown unknowns exist. We cannot identify them, but that does not mean we can ignore them. Remember, the biggest impacts on projects will be the unforeseen risk.

More information is not always better. It can cloud your judgment and lead to overthinking. The more angles you see, the more hypotheses you can draw leading to more conclusions. I tend to think of the replay systems in professional sports. They add more cameras to get more angles yet calls remain incorrect.

Gambling examples of risk and uncertainty do not translate to project management. The risks are known, odds can be calculated, and “correct” decisions can be made prior to outcomes. Project managers need to be thinkers, not calculators. Relying on models and extrapolated data will increase the effect of a Black Swan greatly impacting your project. Unknown unknowns do not get realized in the projections of your model.