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Fear of the Unknown

A major cause of anxiety in our lives is the uncertainty we all face in the future.

There are certain possibilities that we can predict and prepare for. Known risks, so to say.

However, fear of uncertainty is most severe where the possible distribution of outcomes is unknown or hidden (HT: Barry Ritholtz, Michael Mauboussin). Unknown unknowns, so to say.

Why does the latter produce so much anxiety in some people?

First, imperfect information makes prediction hard. Second, left to their own devices, systems become more random with time (related to the concept of entropy). We seek to impose order onto a world prone to disorder. Finally, many systems are metastable. That is, they should not be stable under given conditions, but somehow manage to stay unchanged. Think a precariously made house of cards. Smallest changes in the environment can bring down metastable systems. The weakness of these constructs may not be evident to people that depend on it. Perhaps the financial crisis of 2008–2009 is a great example of such systems.

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