The only constant is change itself.
- Heraclitus
When news of the COVID pandemic began to emerge at the end of 2019, we had no idea how it would impact our lives and the economy. Today, the economic and social consequences that artificial intelligence could have in the next decade are still a hotly debated topic; predicting the effects of quantum computers is virtually impossible. The historic increase in the use of the phrase "unprecedented times" in books after 2020 is one of the most concrete indicators reflecting the perception of our current era.

Throughout history, scientific and technological leaps, geopolitical tensions, and wars have redrawn the boundaries between risk and uncertainty. Just as the late arrival of zero in the West revolutionized computing and commerce, the epidemics, wars, and new technologies we face today force us to confront pure uncertainty, beyond foreseeable risks. For Western civilization, the discovery of zero was a belated gift. For centuries, mathematical calculations, astronomy, and trade bore the brunt of this shortcoming. Calculations without zero were cumbersome, trade was limited, and financial systems were insecure. However, with the arrival of Hindu-Arabic numerals and zero in Europe via Islamic scientific circles, a completely different era began.

This adventure, which began with the translation of Indian works by Arab scholars in the 8th-10th centuries, accelerated with the contributions of figures like al-Khwarizmi. In the 13th century, zero and the Hindu-Arabic numeral system were introduced to Europe with Fibonacci's Liber Abaci. This not only facilitated calculations; it also expanded trade, developed banking, and strengthened the foundations of financial systems. Thus, one of the cornerstones of the modern economy was established. The late arrival of zero in the West delayed not only trade but also probability theory. The concept of "probability being zero" allowed the definition of impossible events. Thanks to the decimal system, risk measurement became possible in a wide range of areas, from gambling to insurance calculations, from financial modeling to investment decisions. Many of the risk management tools we use today actually emerged from the mathematical and conceptual revolution of zero. However, the point is not simply to quantify risks; it is to correctly understand the difference between risk and uncertainty.

If we turn from here to the present day, it wouldn't be wrong to describe the current era as an "age of uncertainty." This is precisely the concept emphasized by US Federal Reserve Chairman Jerome Powell in his speech on May 15, 2025: uncertainty. Powell spoke of the uncertainty inherent in forecasts and the economy's vulnerability to shocks.
The critical distinction here begins with the definition offered by Frank H. Knight in his 1921 book, Risk, Uncertainty, and Profit. Knight draws a sharp line between "risk" and "uncertainty":

Risk is the state in which probabilities are known and measurable. We know that the probability of rolling a six when a dice is thrown is 16.6%. Uncertainty, on the other hand, is the state in which even the probabilities themselves are unknown and unmeasurable. For example, the societal impacts of artificial intelligence or how the US-China rivalry will evolve. Classic risk management tools—probability distributions, scenario analyses, models—fail at this point. Because we can't even predict which scenarios might materialize. Uninsurable risks and unprotected positions emerge. This is called "Knightian uncertainty."

In such periods, the only path for companies, investors, and even governments is strategic flexibility and agility.
Scenario diversity: Creating alternative sources instead of relying on a single supply chain.
Liquidity buffer: Maintaining strong cash reserves to withstand shocks.
Institutional trust: The need for transparent, independent, and predictable institutions increases. This is why the independence of central banks is invaluable.
Behavioral dimension: During periods of uncertainty, risk appetite decreases, investments are postponed, and the search for safe havens increases. While this puts pressure on growth, it is also a survival reflex.
Policy limits: Interest rate cuts, fiscal stimulus, or insurance systems work against classic risks; but they may be ineffective in the face of geopolitical conflicts or technological revolutions.
Opportunities: Knight's point is this: Uncertainty is also a source of entrepreneurship and innovation. Where no one has the answers, new ideas and new business models emerge.

The real challenge facing companies, banks, insurers, portfolio managers, and leaders today is "managing uncertainty" where risk management fails. This isn't about making precise predictions; it's about remaining agile, flexible, creative, and opportunity-focused. Just as the arrival of zero in the West built the modern economy, recognizing Knightian uncertainty offers today's leaders a new roadmap: Uncertainty cannot be eliminated, but it is possible to harness its power. Today's leadership isn't about trying to eliminate uncertainty; it's about learning to live with it, transforming it into innovation and opportunity.