Tuesday, February 5, 2013

Entrepreneurs, Risk Managers, and Uncertainty

Hyman Minsky offered profound thoughts about the economic dialectic between, as he characterized it, ‘entrepreneurs and bankers.’
Thomas Stanton’s 2012 study of comparative organizational performance during the great 21st-century financial crisis, Why Some Firms Thrive While Others Fail, cites Frank Knight’s 1921 classic, Risk, Uncertainty, and Profit. I consider Stanton’s theme to be how to address the unavoidable reality stated thus by Knight: “Uncertainty is one of the fundamental facts of life. It is … ineradicable from business decisions.”1
As Stanton says, "Knight long ago distinguished risk, which can be quantified, from uncertainty, which requires judgment. Successful firms used judgment to add more protection than quantitative modeling would have suggested."2

Read more: http://www.american.com/archive/2013/february/entrepreneurs-risk-managers-and-uncertainty

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