Although risk and uncertainty are different concepts, the paper argues that uncertainty could be regarded as a risk subset.
Risk is a situation when a companys decision might turn either into a win or a loss of its assets. The concept of uncertainty refers to the unpredictability of the future or the inability to calculate the outcomes of the knowable future (Liesch, Welch, and Buckley, 2014). The difference between risk and uncertainty is that the former can be measured, whereas the latter cannot. Since risks can be calculated, there are ways to develop a strategy to minimize them. At the same time, uncertainty could only be hedged when “it is reducible to risk” (Mousavi & Gigerenzer, 2014, p. 1671). The second difference between these two concepts stems from the first one. More precisely, risk could be minimized, whereas uncertainty – cannot.
Still, risk and uncertainty are interrelated. Koudstaal, Sloof, and Van Praag (2016) note that entrepreneurs take risks due to the operation in uncertain environments. Therefore, these two terms complement one another because they cannot exist separately and independently. Economic theory argues that entrepreneurs are willing to take risks and are not reluctant to uncertainty (Koudstaal et al., 2016). That is because the well-being of businesses depends on the results of the decision taken in uncertain and risky conditions.
Risk-taking is advantageous for entrepreneurs. Firstly, risk-taking pushes business people to develop detailed plans (Li & Ahlstrom, 2020). Secondly, risk-taking forces them to be more creative and benefit from novel opportunities (Faggian, Partridge, and Malecki, 2017; Liu et al., 2019; Antoncic et al., 2018). This way, even though uncertainty complicates entrepreneurs decision-making process, it allows them to reach new heights by taking chances.
Mark Zuckerberg is known for his strong advocacy for risk-taking (Fisk, 2016). The conflict between Greenpeace and Zuckerberg in 2010-2011 shows that sometimes innovative decisions might become a nightmare for the creators due to the unpredictability of the future. More precisely, Zuckerberg installed a new algorithm on Facebook that promotes popular posts. Afterward, this algorithm helped promote aggressive posts of Greenpeace activists aimed at Zuckerberg (Ott & Theunissen, 2015). The variables are the corporate reputation and the effects of the algorithm. Thus, innovation became a risk for the company because no one could predict such a scenario.
References
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