Blog: The Goalie's Dilemma-Increasing Uncertainty to Reduce Risk

I've posted before about the difference between true uncertainty and risk. Most people think the two are synonymous, even though they are not exactly the same thing. And while both are about the unknown, there is also an almost counter-intuitive, negative relationship between the two. Oddly, you can reduce your risk by introducing uncertainty, particularly in strategic games. Understanding this unusual property can help us with investment strategies, and possibly understanding Fed policy.