uncertainty vs risk

This text is trying to explain a very important distinction between uncertainty and risk. It's saying that these two words, which we often use interchangeably, are actually quite different, and it's crucial to separate them properly.

Here's a simple breakdown:

* Uncertainty (the broad term): This is when you don't know what's going to happen. It's simply a lack of sure knowledge about future events. It can be something you can measure, or something you absolutely cannot measure.

* Risk (a specific type of uncertainty): This is a measurable kind of uncertainty. If you can calculate the probabilities of different outcomes, or assign some kind of numerical value to the potential gains or losses, then you're dealing with risk. Think of it like a dice roll – you don't know the exact outcome, but you know there's a 1 in 6 chance of rolling a specific number. That's a measurable uncertainty, or "risk."

The text emphasizes that "risk" is so different from "un-measurable uncertainty" that it's "not in effect an uncertainty at all" in the sense of a complete unknown.

Think of it this way with an example:

* Un-measurable Uncertainty: Imagine you're an explorer in an uncharted jungle. You have no map, no idea what animals live there, what plants are edible, or what the terrain is like ahead. You don't know if you'll find a river, a mountain, or a hostile tribe. You can't put numbers on any of these possibilities. This is pure, un-measurable uncertainty.

* Risk (Measurable Uncertainty): Now, imagine you're playing a game of poker. You don't know what cards your opponents have, but you know the probabilities of certain cards appearing, and you can calculate the odds of winning based on the cards you have. You're uncertain about the outcome, but it's an uncertainty that you can quantify and work with using probabilities. This is risk.

In summary, the key takeaway is:

* Uncertainty is the general state of not knowing.

* Risk is a specific type of uncertainty where you can measure the likelihood of different outcomes and their potential impact.

The text argues that it's vital to recognize this difference because how you deal with a situation where you can measure probabilities (risk) is very different from how you deal with a situation where you have no idea what could happen (pure uncertainty).