The pursuit of certainty is a natural human desire. Until the beginning of the 20th century, mathematicians and philosophers were convinced that if the facts were correctly recorded and analyzed, then it would be possible to predict the future. The Swiss mathematician Jacob Bernoulli said in the 17th century that everything has a specific reason. The French mathematician and physicist Pierre-Simon Laplace at the beginning of the 19th century, like most others, assumed that humanity was on the verge of comprehending cause-and-effect relationships in all sciences, by analogy with astronomy, mechanics, and geometry. It was expected that the uncertainty was about to disappear. And social and economic events can be predicted and determined in the same way as the locations of celestial bodies. But at the end of the 19th century, the French scientist Henri Poincaré was one of the first to somewhat soften the expectations of the scientific world, saying that although everything has its own reason, mere mortals are not able to comprehend all the reasons for the events taking place. And after the catastrophe of the First World War and the revolution in Russia, the dreams that humanity will someday know everything there is to know, and certainty will replace uncertainty, finally disappeared. Instead, the explosive growth of knowledge has made life even more uncertain and the world more difficult to understand. Mathematicians and philosophers have had to admit that reality presents whole sets of problems that people have not previously thought about. The probability distribution in this reality no longer fitы into Blaise Pascal's triangle pattern. It broke the symmetry of the bell-shaped Gaussian distribution curve and converged to means that were much less stable than Francis Galton had assumed. More and more researchers have become interested not щтдн in how probabilistic laws work or how to collect all the initial information in order to predict events in the future, but how people make decisions in conditions of uncertainty and what consequences this leads to. In the 20th century, approaches to decision-making in conditions of risk and uncertainty began to be born. However, these two concepts are often confused. The fact is that back in the 1920s, the American economist Frank Knight proposed a very convenient definition of risk - this is a measurable part of uncertainty. That is, this is the part of the uncertainty that can be quantified. And everything that is immeasurable or difficult to measure is uncertainty. There are two types of terms for situations with an unknown income: risk and uncertainty. A situation is called a risk choice when the possible outcomes are known, and some of these outcomes are more favorable than others. For example, when flipping coins, throwing dice, or any card game, the probability of winning can be calculated mathematically. Unlike having a choice under conditions of risk, choice under conditions of uncertainty implies an unknown set of outcomes. Most of the events in our life can be attributed to uncertainty. Photo: Frank Knight. In1927 - 1955 he worked at the University of Chicago. Author of one of the most prominent works in the history of economic thought, devoted to the problems of entrepreneurship and perfect competition, "Risk, Uncertainty and Profit" (Risk, Uncertainty and Profit, 1921). He considered the market mechanism to be the main one in the economic system and was opposed to state intervention in the economy. Thus, in the 17th century, the creators of the Theory of Probability presented to mankind the possibilities of statistical thinking, but they touched only the simplest aspect of uncertainty - the area of known risk or simply risk. To make the right decisions in this case, it is enough to use statistical thinking, mathematics and logic. However, most of the time we live in a changing world, about which we do not know everything, and in which we are faced with unknown risks, or rather with uncertainty. Knight was one of the first to say that reality is much more complicated than it seems at first glance, and it is impossible to describe it with formulas. He called for the search for opportunities for making optimal decisions precisely in conditions of uncertainty. After all, it is in roulette, in card games or tossing a coin, you can estimate the probabilities and their distribution. But not in life. He believed that the cause of the problem of uncertainty in economics and the social sciences is the future-oriented nature of the economic process itself and the participation of people in it. Such views were also held by one of the most prominent economists of the 20th century, John Keynes, who condemned the assumption of classical economics about the rationality and rationality of man. Being also a successful investor in stocks, he knew better than anyone else about the irrationality of human behavior. This is his famous saying: "The market can remain irrational longer than you can remain solvent." Forecasts in the economy and financial markets, in his opinion, should not depend on the frequency of such events in the past. In his writings, Keynes rejected the advisability of forecasting based on past events when it comes to the system in which a person is involved, and advocated forecasts based on assumptions and estimates. In general, Keynes's reflections on economics have always revolved around the concept of uncertainty. He made it clear that people are simply not given to significantly advance in knowledge about the future. John Maynard Keynes and his wife Lydia Lopukhova, the Russian ballerina of the Diaghilev enterprise, whom he met during the first post-war seasons in London. Keynes was a successful investor. After the stock market crash of 1929, he was on the verge of bankruptcy, but soon managed to recover capital. At the time of his death in 1946, his investment portfolio was estimated at 400 thousand pounds (today approximately 11 million). The economic trend that emerged under the influence of Keynes's ideas was later called "Keynesianism". Keynes is considered one of the founders of macroeconomics as an independent science. In 1999, Time magazine ranked Keynes as one of the most important people of the century, arguing that "his radical idea that governments should spend money they don't have can save capitalism." Knight and Keynes were among the first to recognize the critical importance of the uncertainty factor and became critics of the equilibrium approach to economics and optimization models. In their understanding, the problem of uncertainty was supposed to become a bridge connecting economics, philosophy, psychology, and everything related to approaches to human decision-making. In the next article I'd like to talk more about practical implications of the risk & uncertainity theory in trading.