Donald Rumsfeld was mocked for it. Back in 2002, during a Department of Defense news briefing, he started rambling about things we know we don't know and things we don't even know we don't know. The press thought he was being cryptic or just plain weird. Honestly? He was just describing the core reality of risk management.
Life isn't a straight line.
Most of us live in a world where we think we have a handle on the variables. We check the weather, we look at our bank accounts, and we assume the "knowns" are all that matter. But the real damage—the kind that topples businesses and ruins projects—usually comes from the stuff that isn't even on your radar. We're talking about known unknowns and unknown unknowns, a framework that helps us categorize the blind spots that actually dictate our success.
The Matrix of Ignorance
To understand this, you have to look at the "Johari Window" or the "Rumsfeld Matrix." It’s basically a four-quadrant map of human knowledge.
First, you’ve got the Known Knowns. These are the boring facts. If you’re a baker, you know that if you put flour, water, and yeast together, you’ll get bread. No surprises there. Then you have the Known Unknowns. This is where the risk starts to get spicy. You know there is a gap in your knowledge. For instance, you know the price of wheat might go up next month, but you don't know by how much. You’ve identified the risk; you just haven’t quantified it yet.
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Then it gets scary.
The Unknown Unknowns are the black swans. These are the events that are so outside your frame of reference that you can’t even imagine them happening. Think about the 2008 financial crisis or the way a global pandemic shut down every coffee shop on Earth in 2020. Before those things happened, most small business owners weren't sitting around planning for a "total global economic freeze." They didn't know they needed to be worried about it. That's the danger. It’s the punch you don't see coming that knocks you out.
Why Your Brain Hates This Concept
Human beings are wired for certainty. We crave it. Our ancestors survived because they could predict that a rustle in the bushes might be a predator. But the modern world is way more complex than the savannah.
Psychologists often talk about "overconfidence bias." We tend to overestimate how much we actually understand about the world. Nassim Nicholas Taleb, who wrote The Black Swan, argues that we spend too much time trying to predict the future based on the past. We treat the future like a lottery where we know all the numbers on the wheel. But in reality, the wheel is constantly changing shape, and sometimes the wheel isn't even there.
Dealing with the Known Unknowns
When you identify a known unknown, you're actually in a great position. You’ve done the hard work of admitting you’re ignorant. Now you can hedge.
In business, this looks like "contingency planning." If you are launching a new software product, you know there will be bugs. You don't know which bugs, but you know they’re coming. So, you set aside a "buffer" in your budget. You hire extra support staff for the first week. You’ve turned a gap in knowledge into a line item on a spreadsheet.
It’s about insurance.
If you're traveling to a country where you don't speak the language, the language barrier is a known unknown. You don't know exactly what problems it will cause, but you can bring a translation app. You've prepared for the ambiguity.
Real World Example: NASA and the Mars Climate Orbiter
NASA is the king of managing known unknowns and unknown unknowns. But even they mess up. In 1999, the Mars Climate Orbiter was lost because one team used metric units and another used English units.
The "known unknown" was the precise trajectory needed to enter the atmosphere. They knew they needed to calculate it. The "unknown unknown" was that two highly sophisticated engineering teams were using different measurement systems for years without anyone noticing. It was a failure of communication so basic that nobody thought to check for it. It wasn't even on the checklist of things that could go wrong.
The Stealthy Threat of Unknown Unknowns
How do you prepare for something you can't imagine?
You don't. At least, not directly. You can't plan for a meteor strike if you don't believe meteors exist. Instead of planning for the event, you have to build a system that can survive any event. This is what Taleb calls "Antifragility."
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If your business relies on a single supplier in one specific city, you are incredibly vulnerable to unknown unknowns. If a freak flood hits that city, you're done. You didn't know a flood was coming, and you didn't know that specific city was a single point of failure. To combat this, you diversify. You get three suppliers in three different countries.
You aren't predicting a flood. You're just making sure that whatever happens, you don't break.
The Problem with "Expert" Predictions
Most experts are terrible at spotting unknown unknowns. Why? Because experts specialize. They look deeper and deeper into a smaller and smaller hole. A macroeconomist might be an expert on interest rates but have zero clue about how a new breakthrough in battery technology (a technological unknown unknown) will disrupt the oil market.
We often mistake "complicated" for "complex."
A car engine is complicated. It has many parts, but if you understand them all, you can predict exactly what the engine will do.
The global economy is complex. It’s like a forest. You can understand every tree, but you still can't predict how the whole ecosystem will react to a drought or a new invasive species.
Strategy: Turning the Unknown into the Known
The goal of any high-performing team should be to move things from the "unknown" quadrants into the "known" quadrants.
Red Teaming: This is a military tactic where you hire people specifically to find flaws in your plan. Their whole job is to think of the "unknown unknowns." They ask, "What if the power goes out?" "What if our CEO gets kidnapped?" "What if our main product is declared illegal tomorrow?" It sounds paranoid. It is. But it works.
Pre-Mortems: Before you start a project, imagine it has already failed. Gather your team and say, "It’s one year from now and this project was a total disaster. What happened?" This psychological shift allows people to speak freely about risks they were subconsciously aware of but didn't want to mention. You're surfacing the "unknowns."
Small Bets: Instead of going all-in on one giant idea, run small experiments. If you're wrong—if there was an unknown factor that makes the idea fail—you only lose a little bit of money. This is how Silicon Valley operates. It’s "failing fast." Each failure reveals a previously unknown unknown.
The Role of Curiosity
Honestly, the best way to handle known unknowns and unknown unknowns is just to stay curious. People who think they know everything are the most vulnerable. They have the largest "blind spot" quadrant.
The most successful people are usually the ones who are constantly asking "Why?" and "What else?" They read outside their field. They talk to people they disagree with. They are actively hunting for the things they don't know yet.
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Actionable Insights for Your Next Project
Stop trying to be a psychic. You aren't going to predict the next global shift. Instead, focus on building a life or a business that can handle the "unknown."
- Build a Margin of Safety: Whether it’s 20% extra time on a deadline or six months of cash in a savings account, you need a buffer. This buffer is your shield against the unknown.
- Audit Your Dependencies: List the top five things your success depends on. If one of them disappeared tomorrow due to a "freak accident," would you survive? If the answer is no, you’ve found a dangerous unknown unknown. Fix it now.
- Encourage Dissent: If everyone in your circle thinks the same way, your collective blind spot is massive. Find a "devil's advocate."
- Admit Ignorance Early: The sooner you say "I don't know how this works," the sooner you can start investigating it. Ego is the biggest protector of unknown unknowns.
Managing risk isn't about having all the answers. It’s about having the humility to realize you don't even know all the questions yet. Start by looking at your current "bulletproof" plan and asking yourself: "What am I assuming to be true that might not be?" That’s where the real work begins.
Shift your focus from "predicting" to "preparing." The world is messy, unpredictable, and full of surprises. You can't stop the surprises from happening, but you can definitely stop them from being the end of your story.