Productive Uncertainty

Innovations usually come with uncertainties of one sort or another. Founders have to choose the subset of innovations where the uncertainty is productive.

What makes some uncertainties productive and others not? Every business must eventually mitigate the uncertainty it started with. How and when this mitigation unfolds determines whether the uncertainty is productive or not. At a high level, there are two basic sources of uncertainty a high growth potential technology startup faces, and they are mitigated differently. These two types are novelty uncertainty and complexity uncertainty.

When something has not been done before, it may be that no one can predict the outcome. Prediction relies on either inductive or deductive reasoning: the first requires data and the second requires an understanding of the process that produces the result. Novelty uncertainty results when we have neither. For example, with no well-understood theory of aerodynamics the Wright Brothers could not know if their 1903 Flyer would leave the ground until they tried it. This is novelty uncertainty.

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