A century ago, the economist Frank Knight argued in a book entitled Risk, Uncertainty and Profit that while some historical eras are shaped by measurable risks, others are plagued with unfathomable uncertainty.
It is a distinction that has haunted the World Economic Forum this week. The Davos elites are generally skilled at measuring economic and financial risks. Some model environmental ones too, such as extreme weather. But few feel ready for the current domestic and geopolitical uncertainty, which is being exacerbated by unprecedented technological change.
Just ponder what has happened in the past few days: US President Donald Trump started by threatening to invade Greenland, and slapping on tariffs; then he seemed to back down; and now he has unveiled a rather baffling “Board of Peace”.
“We don’t see any end to this turmoil,” lamented the risk officer of a major pharmaceutical company. “In fact, we expect it to increase.”
So how can chief executives or investors parse all this uncertainty? Judging from the chatter at Davos — which often felt akin to a C-suite therapy session — there are four key lessons to absorb.
The first, and most obvious, is to heed Mark Carney, the Canadian premier, who declared this week that we face geopolitical “rupture”. In practice, that means that the three “P’s” of populism, protectionism and extreme patriotism (or nationalism) have reappeared in ways that are reminiscent of the turbulent interwar years, as Christine Lagarde, head of the European Central Bank, told the WEF.
This has already prompted a reshuffling of supply chains, as protectionism has a significant impact on traded goods. But nationalism could affect finance, too. History shows that trade wars often turn into capital wars, as Ray Dalio, founder of Bridgewater, also observed this week.
Consumer markets may shift, as well. A new survey from the Edelman public relations group, for example, shows that global consumers increasingly trust domestic brands more than foreign ones.
A second lesson is that we should also brace for rising government intervention, framed as patriotic and populist capitalism. Trump exemplifies this: although the Greenland issue grabbed most attention from his speech in Davos, what was striking was that he celebrated plans to impose new controls over US real estate investment and credit card fees.
This follows recent White House moves to meddle in the mortgage-backed securities market, as well as the mining, energy and defence sectors, for populist and national security reasons respectively. “This is state capitalism to the power of two. We are becoming like China!” laments the economist Nouriel Roubini, who argues this exceeds anything promised by Zohran Mamdani, the self-style “socialist” mayor of New York.
European countries are not aping Trump quite yet. But this variant of patriotic and populist capitalism could easily spread. Companies thus urgently need to know how to get both a “government and popular licence” to operate, as Ngaire Woods, head of Oxford’s Blavatnik School of Government, tells me.
The third lesson for CEOs is that nobody can afford to stay in a cosy echo chamber. Consider, by way of one example, the tale of wind turbines. Back in 2021, Tucker Carlson, the Maga TV host, made a documentary lambasting turbines as an evil European invention.
Few liberal elites paid any attention or indeed even knew about it (as I noted at the time); our information systems today are tribal. But on Wednesday Trump himself ranted about those turbines, shocking those present. The lesson? Do not ignore anything political figures say, however weird or distasteful it might seem.
Or, to cite Woods again: while humans naturally cling to people like themselves in uncertain times, we need to do the opposite, and embrace more intellectual diversity, not less.
The fourth lesson, however, is that we shouldn’t be consumed by pessimism, even if this is another natural human reaction to uncertainty. For executives or investors, ignoring upside risks is as dangerous as discounting downside ones.
Consider the US, once again. When Trump unleashed policy “rupture” a year ago, it sparked gloomy economic predictions. However, as the president crowed at Davos, the American economy is booming in 2026, due to a mixture of monetary, fiscal and regulatory stimulus.
More striking still, American officials told the Davos crowd that annual growth would soon top 5 per cent. This may be wildly over-optimistic; many CEOs are now muttering about a slowdown later this year. But the pattern shows the risks of ignoring upside scenarios.
That is why almost no corporate executive I spoke with this week plans to shun the US, whatever they think about the politics. And it is why big investors tell me they won’t dump dollars, even if they hedge with gold.
To put it another way: the only rational response to the turmoil unleashed by Trump this week in Davos is to diversify madly, leave your echo chamber and embrace imagination about the future. And then dip into Risk, Uncertainty and Profit to remind yourself that this is not the first time humanity has experienced this challenge — and survived.