The concept acknowledges some fundamental degree of ignorance, a limit to knowledge, and an essential unpredictability of future events.
Whilst Frank Knight's seminal book[1] elaborated the problem, his focus was on how uncertainty generates imperfect market structures and explains actual profits.
[3][4] However, the concept is largely informal and there is no single best formal system of probability and belief to represent Knightian uncertainty.
Another position of the black swan theory is that appropriate preparation for these events is frequently hindered by the pretense of knowledge of all the risks; in other words, Knightian uncertainty is presumed to not exist in day-to-day affairs, often with disastrous consequences.
[5] Saras Sarasvathy has proposed effectuation as a way to manage Knightian Uncertainty, based on her study of serial entrepreneurs, and summarised her findings in five principles:Brian D Smith (2014-07-25).