How to Measure Anything: Finding the Value of Intangibles in Business

by Douglas W. Hubbard

Uncertainty: The lack of complete certainty, that is, the existence of more than one possibility. The “true” outcome/state/result/value is not known. Measurement of Uncertainty: A set of probabilities assigned to a set of possibilities. For example: “There is a 60% chance this market will more than double in five years, a 30% chance it will grow at a slower rate, and a 10% chance the market will shrink in the same period.” Risk: A state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome. Measurement of Risk: A set of possibilities each with quantified probabilities and quantified losses. For example: “We believe there is a 40% chance the proposed oil well will be dry with a loss of $12 million in exploratory drilling costs.”