By Steven Weber

About the author: Steven Weber is a partner at the advisory firm Breakwater Strategy and a professor at the UC Berkeley School of Information.

When United Airlines put out not one but two separate profit guidances for the second-quarter on April 15, the company was "leaving it up to investors to choose their own adventure," Omar Sharif of Investor Insights said. That wasn't a compliment. Nor was The Wall Street Journal's comment comparing the dual guidance to Schrödinger's cat -- a famous thought experiment in quantum mechanics that even physicists have a hard time understanding intuitively.

I see United's guidance differently. The company's decision was courageous. It may not fit neatly into stock analysts' valuation models., But United's approach does something much more important: It demonstrates that the company's leadership understands the concept of radical uncertainty and the importance of building strategy for multiple scenarios at once.

Radical uncertainty is nothing like conventional risk. Business decision-making systems tend to leave leaders paralyzed when the world moves outside the boundaries of what we know from the past and the distribution of probabilities on plausible outcomes can't reasonably be estimated. People get deeply anxious. Markets gyrate. Leaders' confidence corrodes. You only have to look at collapsing consumer confidence numbers, dramatic moves in the S&P 500, the fall in capital expenditure plans, and other such indicators over the past month to see evidence of the impact of radical uncertainty across the economy.

This isn't a systemic crisis unfolding from unknown or poorly understood risk in financial markets like the 2007-2009 Great Recession -- at least not yet. It is a product of intentional decisions by President Donald Trump, which means it could be reversed -- or doubled-down on -- at the behest of a single person on any given day.

That isn't a partisan statement. It is simply a factual observation that profoundly shapes the business environment, regardless of whether you support or oppose the president or his administration's agenda.

It is also a fact that most businesses, like individuals and financial markets, crave the opposite: greater certainty about their operating environments. It is almost banal to hear a CEO say that their firm can adapt to almost any set of regulations or policies, so long as the rules and incentives are clear and consistent. That desire for clarity presents an obvious bargaining power arbitrage play for the side that is willing to accept greater uncertainty. If the party on the other side of the table wants something (certainty, in this case) much more than you do, then you are in a strong position to get that party to pay you an outsize amount (in money, or in other concessions) to get you to give it to them.

That is not illegitimate or coercion per se; it is just power negotiation.

Some of this is hard-wired in individual psychology. Behavioral economists have demonstrated that people will pay excessive amounts to reduce the probability of a bad outcome from small to zero (thus the pricing around deductibles in insurance). Some of this risk-aversion influences how leadership groups typically make strategic decisions. Firms like leaders and consultants with a strong point of view that they can anchor on and use to define the "best-practice" answer. Everyone can breathe a sigh of relief, get moving, and execute on the directive.

That is better than analysis paralysis. But if the leader's point of view turns out to be categorically wrong, then executing on a plan tied to that single point prediction about the future can be dysfunctional or even disastrous.

In the early 1970s, Royal Dutch Shell developed a methodology to do better. The 1973 oil shock threw energy markets into a state of radical uncertainty, where the price of oil, which had varied only at the margins and thus presented hedgeable risk for decades, suddenly shot outside that typical scope of risk. Pierre Wack, a Shell executive and the father of modern scenario thinking, took the view that if you couldn't reasonably predict the future, then the best response was to stop trying.

Instead, he developed a decision-making method that described multiple scenarios -- logically-derived causal narratives of what were different plausible worlds within which the price of oil would be determined. The goal, Wack said, should be preparation against a landscape that contained all those scenarios, not the prediction of which one would come to pass. And that preparation meant designing a strategy that was robust and adequate, regardless of where among those multiple scenarios the real world eventually landed.

Scenario thinking evolved over the course of the following decades outside of the energy sector and has been used by firms and governments around the world. Yet it remains a challenging practice for organizations, because it isn't easy or familiar for leaders to say, out loud, "we don't know."

What United signaled in its recent profit guidance was a better mind-set: we cannot and won't try to predict the state of the macroeconomy going forward, even though it is one of the most essential elements that shapes our business. Instead, we will prepare our business and our investors for multiple scenarios, track the incoming evidence in a disciplined way without indulging wishful thinking, deploy a strategy that is robust against the landscape of plausible outcomes, and be transparent with our shareholders about the rationale for that plan.

Good for United. More firms should do the same at this moment.

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April 25, 2025 01:30 ET (05:30 GMT)

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