You’ve probably heard the clip. It was 2002. Donald Rumsfeld, the U.S. Secretary of Defense, stood at a podium and dropped a piece of linguistic gymnastics that became an instant meme before memes were even a thing. He talked about "known knowns," "known unknowns," and "unknown unknowns." People laughed. Late-night hosts had a field day. But here is the thing: he was actually right.
Honestly, he wasn’t even the one who invented it. The concept traces back to the Johari Window, a psychological tool created by Joseph Luft and Harrington Ingham in 1955. It’s basically a way to map out what we know about ourselves versus what others know. In the world of high-stakes business and risk management, this framework is the difference between a successful pivot and a total bankruptcy. It’s about more than just trivia; it’s about survival in a world that is increasingly chaotic.
Breaking Down the Known Knowns
Let’s start with the easy stuff. Known knowns are the facts sitting right in front of you. They are the things you’re certain about. If you’re running a coffee shop, a known known is that you need beans to make espresso. If you’re a developer, a known known is that Python requires specific syntax to run.
It’s the data on the spreadsheet. The sun rises. Taxes are due in April.
But there’s a trap here. Complacency kills. When we think we have all the known knowns figured out, we stop looking for the cracks in the foundation. Nassim Nicholas Taleb, the author of The Black Swan, often argues that the most dangerous thing is a "known" that turns out to be wrong. You think your customer base is loyal because the data says so, but that data is six months old. Suddenly, your known known is a lie.
The Known Unknowns: Managing the Risks You See Coming
This is where strategy actually begins. A known unknown is a gap in your knowledge that you are at least aware of. You know the hole exists, you just don't know how deep it is yet.
Think about a company launching a new product in Europe. They know there are regulatory hurdles. They know there is a language barrier. They don't know exactly how the French public will react to their specific branding, but they are aware that they don't know it. So, they do market research. They hire consultants. They buy insurance.
Managing this quadrant is basically the entire job description of a Project Manager. You create a "Risk Register." You list the stuff that might go wrong.
- Will the supplier be late? Maybe.
- Will the interest rates rise? Probably.
- Will the lead developer quit for a crypto startup? It’s a possibility.
Because you know these things are risks, you can plan for them. You have a "Plan B." It’s calculated. It’s professional. It’s comfortable, in a weird way, because at least the monster has a name.
The Danger Zone: Unknown Unknowns
Now we’re in the deep water. The unknown unknown is the stuff that hits you from the side while you’re looking at your GPS. You didn't see it coming because you didn't even know it was possible for it to exist.
This isn't just a "risk." It’s a paradigm shift.
Before 2020, how many small business owners had "Global Pandemic that shuts down the entire world for two years" on their risk assessment? Almost none. That’s an unknown unknown. It’s the "Black Swan" event. These are the things that are so outside the realm of your current experience that they don't even enter your imagination until they are already happening.
In the tech world, this happens constantly. Kodak was so focused on the "known known" of film quality and the "known unknown" of digital resolution that they completely missed the "unknown unknown" of the smartphone. It wasn't just that people wanted digital photos; it was that they wanted to share them instantly on a social network that hadn't been invented yet.
How do you even prepare for that? You can’t. Not specifically, anyway.
You deal with unknown unknowns by building resilience, not just efficiency. If your business is so "lean" that a three-day shipping delay ruins you, you're vulnerable to the unknown. If you have a "buffer"—extra cash, a diverse skill set, a flexible culture—you might just survive the hit.
The Fourth Quadrant: Unknown Knowns
Wait, there’s a fourth one? Yeah. And it’s arguably the weirdest.
The "unknown known" is things you know, but you’ve buried them. Or, more commonly in a corporate setting, it’s things the organization knows, but the leadership refuses to acknowledge. It’s the "intuition" you ignored. It’s the whistleblower in the basement whose emails were deleted.
Think of the Challenger disaster. NASA engineers had data suggesting O-rings might fail in cold weather. It was a known fact at certain levels of the organization. But for the decision-makers, it was treated as an unknown, or worse, ignored. It was an unknown known—the truth was there, but it wasn't "known" by the people who needed to act on it.
Moving From Blindness to Strategy
If you want to actually use this framework, you have to be brutally honest about which box you’re standing in. Most people spend 90% of their time polishing their known knowns. It feels good. It makes you feel smart. But it's low-value work.
Real growth happens when you move things from one box to another.
- Research moves Unknown Unknowns into the Known Unknowns box. You start asking, "What am I missing?"
- Analysis moves Known Unknowns into the Known Knowns box. You get the data. You find the answer.
- Communication moves Unknown Knowns into the Known Knowns box. You break down silos. You listen to the "boots on the ground."
Practical Steps for Business Resilience
Stop trying to predict the future perfectly. It’s a loser’s game. Instead, try these shifts in your weekly routine.
Conduct a "Pre-Mortem"
Before you launch a project, sit the team down. Tell them: "It’s one year from now and this project has failed spectacularly. What happened?" This forces people to dig into their "unknown knowns" and brings hidden fears to the surface. It turns gut feelings into actionable data.
Build "Redundancy" into Your Life
Efficiency is the enemy of resilience. If you are 100% efficient, you have 0% room for error. The unknown unknown will destroy an efficient system. Keep "slack" in your schedule and your budget. That slack is your insurance policy against the things you can’t see coming.
Diversify Your Information Diet
If you only read industry news, you’re trapped in a bubble of shared known knowns. Read weird stuff. Read history. Read biology. Most unknown unknowns in business are actually just "known knowns" from a different field that haven't crossed over yet.
Listen to the Skeptics
Every office has that one person who is "negative." Sometimes they’re just grumpy, sure. But often, they are the ones spotting the unknown unknowns because they aren't blinded by the team's optimism.
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The goal isn't to eliminate the unknown. That’s impossible. The goal is to be the person who isn't paralyzed when the "unknown unknown" finally shows up at the door. Because it will. It always does.
Actionable Insights for Immediate Implementation
- Audit your "Certainties": Identify three things you consider "known knowns" in your career or business. Now, find one piece of evidence that contradicts each of them.
- The 10% Rule: Dedicate 10% of your budget or time to "exploratory" tasks that have no guaranteed ROI. This is your hedge against the unknown.
- Incentivize Bad News: Make it safe for employees to report "unknown knowns." If someone spots a flaw, reward them instead of punishing them for "not being a team player."
- Study Post-Mortems: Read the public reports on the 2008 financial crisis or the Boeing 737 Max issues. Look for the "unknown unknowns" and see how many were actually "unknown knowns" that were silenced.