The difference between risk and uncertainty – without using the coin example

Risk and uncertainty are undoubtedly linked, but uncertainty is not the same as risk. We know this but sometimes, to not think deeply about it, we repeat the coin script when asked about the difference:

Imagine you flip a coin 100 times. If the coin were perfectly balanced, the final tally would read 50/50. However, since coins are not perfect, in real life you’re more likely to get something like a 49/51 distribution. Your lack of knowledge about the coin’s imperfections is the uncertainty that keeps you from calculating results perfectly.

The example is obviously useful. However, it leaves the impression that situations in life have a lot of risk and, only, a little uncertainty. Sometimes, however, uncertainty can be far more ubiquitous.

It would be interesting to see if different examples help highlight other aspects of uncertainty. So, let’s give this a try.

Here’s my explanation of the difference between risk and uncertainty without using the coin example. A game of Russian roulette, with a twist:

Russian roulette entails a 1/n – ε possibility of death, where ‘n’ is the number of chambers in the gun and ‘ε’ the room for a malfunction. This situation is more about risk than about uncertainty. However, if players have no knowledge of the number of chambers or bullets in the gun, and/or ability to conceptualise chances, the game becomes a situation of uncertainty.

The Russian roulette example is a little more complex than the coin example. It is, also, certainly scarier. However, I like that it highlights not only that it is impossible to gauge risk not the but also that uncertainty can be all-encompassing.